<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 1998
REGISTRATION NO. 333-46213
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<S> <C> <C>
LIFE RE CORPORATION DELAWARE 01-0437851
LIFE RE CAPITAL TRUST II DELAWARE TO BE APPLIED FOR
(EXACT NAME OF THE REGISTRANTS (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
AS SPECIFIED IN THEIR RESPECTIVE INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
CHARTERS)
</TABLE>
969 HIGH RIDGE ROAD
STAMFORD, CONNECTICUT 06905
(203) 321-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF EACH
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
W. WELDON WILSON
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
LIFE RE CORPORATION
969 HIGH RIDGE ROAD
STAMFORD, CONNECTICUT 06905
(203) 321-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE FOR EACH REGISTRANT)
------------------------
COPIES TO:
<TABLE>
<S> <C>
THOMAS A. ROBERTS ALAN J. SINSHEIMER
DAVID P. STONE WILLIAM D. TORCHIANA
WEIL, GOTSHAL & MANGES LLP SULLIVAN & CROMWELL
767 FIFTH AVENUE 125 BROAD STREET
NEW YORK, NEW YORK 10153 NEW YORK, NEW YORK 10004
(212) 310-8000 (212) 558-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
- ------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(1)(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units(3)..................................... 1,725,000 $66.50 $114,712,500 $33,840.50
- ---------------------------------------------------------------------------------------------------------------------------------
Quarterly Income Preferred Securities of
Life Re Capital Trust II(3)(4)...........
- ---------------------------------------------------------------------------------------------------------------------------------
Purchase Contracts of Life Re
Corporation(3)(5)........................
- ---------------------------------------------------------------------------------------------------------------------------------
Junior Subordinated Debentures of Life Re
Corporation(6)...........................
- ---------------------------------------------------------------------------------------------------------------------------------
Life Re Corporation Guarantee with respect
to the Quarterly Income Preferred
Securities of Life Re Capital Trust
II(7)....................................
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value, of Life Re
Corporation(8)............................... 1,725,000 $66.50 $114,712,500 $33,840.50
- ---------------------------------------------------------------------------------------------------------------------------------
Total.................................... $229,425,000 $67,681.00(9)
=================================================================================================================================
</TABLE>
(1) Includes 225,000 Units that the Underwriters' may purchase to cover
over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), under the Securities Act of 1933, as amended,
based upon the average of the high and low sales prices of Common Stock of
Life Re Corporation as reported on the New York Stock Exchange on February
10, 1998. The Stated Amount of the Units will be set to equal the last
reported sale price of the Common Stock on the New York Stock Exchange on
the date of such determination. Each Purchase Contract will be settled on
the Stock Purchase Date for up to one share of Common Stock based upon the
Settlement Rate.
(3) Each Unit consists initially of a QUIPS and a Purchase Contract.
(4) Each QUIPS represents a preferred undivided beneficial interest in the
assets of Life Re Capital Trust II.
(5) Each Purchase Contract obligates Life Re Corporation to sell, and the holder
thereof to purchase, on the Stock Purchase Date such number of shares of
Common Stock of Life Re Corporation equal to the Settlement Rate.
(6) The Junior Subordinated Debentures to be issued by Life Re Corporation will
be purchased by Life Re Capital Trust II with the proceeds of the sale of
the QUIPS, and may be later distributed among the holders of the QUIPS for
no separate consideration upon a dissolution of Life Re Capital Trust II and
the distribution of the assets thereof.
(7) No separate consideration will be received for the Guarantee of Life Re
Corporation.
(8) Such currently indeterminate number of shares of Common Stock (not to exceed
1,725,000 shares) as will be issued by Life Re Corporation upon settlement
of the Purchase Contracts.
(9) Previously paid.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 10, 1998
1,500,000 UNITS
LIFE RE CORPORATION
LIFE RE CAPITAL TRUST II
% ADJUSTABLE CONVERSION-RATE EQUITY SECURITY UNITS
[LIFE RE CORPORATION LOGO]
------------------------
Each Unit will have a Stated Amount of $ (equal to the last reported per
share sale price of the Common Stock on the New York Stock Exchange on the date
of this Prospectus). Each Unit will initially consist of (a) a Purchase Contract
under which the holder will purchase from the Company on the Stock Purchase Date
of , 2001, for cash in an amount equal to the Stated Amount, between
of a share and one share of Common Stock (depending on the Applicable Market
Value of the Common Stock on the Stock Purchase Date, as described herein),
subject to adjustment in certain circumstances, and (b) Quarterly Income
Preferred Securities ("QUIPS"(SM)*) of the Trust having a QUIPS Liquidation
Amount equal to the Stated Amount, a QUIPS Distribution Rate of % per annum
and a QUIPS and Debenture Maturity Date of , 2003, subject to a Call
Option granted by the holder of the Unit to the Call Option Holder under which
the Call Option Holder will be entitled to acquire such QUIPS. For so long as
any Purchase Contract remains in effect, such Purchase Contract and the QUIPS or
other Pledged Securities securing it (and, for so long as the Call Option
relating to such Pledged Securities is exercisable, the obligations of the
holder to the Call Option Holder thereunder) will not be separable and may be
transferred only as an integrated Unit. See "Description of the Units".
For the period from the date of issuance of the Units to the Stock Purchase
Date, each holder of a Unit (other than a Stripped Unit) will be entitled to
receive cash payments of % of the Stated Amount per annum, payable in
arrears on the Quarterly Payment Dates of , ,
and of each year (unless deferred as described herein). Such payments
will consist of payments on the QUIPS or other Pledged Securities plus Contract
Fees payable by the Company or net of Contract Fees payable by the holders, as
the case may be. If a holder of a Unit does not provide cash to settle the
underlying Purchase Contract in the manner described herein on the Stock
Purchase Date, cash proceeds from the QUIPS or other Pledged Securities
underlying such Unit will be applied on the Stock Purchase Date to the purchase
of Common Stock pursuant to such Purchase Contract. See "Description of the
Units".
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE UNITS.
Concurrently with the offering made hereby, the Company and certain selling
stockholders are offering shares of Common Stock for sale. The Common Stock
Offering is being made by a separate prospectus. Neither the Common Stock
Offering nor the offering made hereby is conditioned on the consummation of the
other offering.
Prior to the offering made hereby there has been no public market for the
Units. Application has been made to list the Normal Units on the NYSE under the
symbol "LRN". The last reported sale price of the Common Stock, which is listed
under the symbol "LRE", on the NYSE on March 9, 1998 was $64 3/4 per share.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC PROCEEDS
OFFERING FROM SALE OF UNDERWRITING PROCEEDS TO
PRICE OF UNITS(1) CALL OPTIONS DISCOUNT(2) COMPANY(1)(3)
----------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
Per Unit....................................... $ $ $ $
Total(4)....................................... $ $ $ $
</TABLE>
- ---------------
(1) Plus accrued distributions on the QUIPS and plus or net of accrued Contract
Fees, if any, from , 1998.
(2) The Company and the Trust have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $ payable by the Company.
(4) The Company and the Trust have granted the Underwriters an option for 30
days with respect to an additional 225,000 Units, solely to cover
over-allotments. If such option is exercised in full, the total initial
public offering price of Units, proceeds from sale of Call Options,
underwriting discount and proceeds to Company will be $ ,
$ , $ and $ , respectively. See "Underwriting".
------------------------
The Units offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the Units
will be ready for delivery in book entry form only through the facilities of The
Depository Trust Company in New York, New York, on or about , 1998,
against payment therefor in immediately available funds.
- ---------------
*QUIPS is a servicemark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES
CORPORATION
------------------------
The date of this Prospectus is , 1998.
<PAGE> 3
FORWARD-LOOKING STATEMENTS
The statements included or incorporated in this Prospectus regarding future
financial performance and results and the other statements that are not
historical facts are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Such statements may include, but are not limited to, projections of
earnings, revenues, income or loss, capital expenditures, plans for future
operations and financing needs or plans, as well as assumptions relating to the
foregoing. The words "expect", "project", "estimate", "predict", "anticipate",
"believes" and similar expressions are also intended to identify forward-
looking statements. Forward-looking statements are inherently subject to risks
and uncertainties, some of which cannot be predicted or quantified. Future
events and actual results, performance and achievements could differ materially
from those set forth in, contemplated by or underlying the forward-looking
statements. Such factors include, but are not limited to, the uncertainties
relating to general economic and business conditions which may impact the need
and/or financial ability to obtain reinsurance, insurance or retrocessional
reinsurance; changes in laws and government regulations applicable to the
Company; the ability of the Company to implement its operating strategies
successfully; the ability of the Company to execute Administrative
Reinsurance(SM)transactions and the amount, timing and returns therefrom;
material fluctuations in interest rate levels; material changes in mortality and
morbidity experience; material changes in persistency; material changes in the
level of operating expenses; and the success or failure of certain of the
Company's clients in premium writing, and other risks and uncertainties
described in this Prospectus and in the Company's other filings with the
Securities and Exchange Commission (the "Commission"). Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those indicated.
------------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE UNITS OR
THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".
------------------------
The Company owns, directly or indirectly, all of the outstanding voting
securities of its insurance subsidiaries, TexasRe Life Insurance Company
("TexasRe"), Life Reassurance Corporation of America ("Life Reassurance") and
Reassure America Life Insurance Company ("REALIC"), and 79% of the outstanding
voting securities of its insurance subsidiary, American Merchants Life Insurance
Company ("AML"), which are domiciled in Texas, Connecticut, Illinois and
Illinois, respectively. Under the Connecticut, Illinois and Texas insurance
laws, unless (i) certain filings are made with the Connecticut Insurance
Department, the Illinois Department of Insurance or the Texas Department of
Insurance, as the case may be, (ii) certain requirements are met, including, in
the case of Texas, a public hearing and/or (iii) approval or exemption is
granted by the applicable insurance commissioner, no person may acquire any
voting security or security convertible into a voting security of an insurance
holding company, such as the Company, which controls a Connecticut insurance
company or an Illinois insurance company or a Texas insurance company, or merge
with such a holding company, if as a result of such transaction such person
would "control" the insurance holding company. "Control" is presumed to exist in
Connecticut, Illinois and Texas if a person directly or indirectly owns or
controls 10% or more of the voting securities of another person. Any purchase of
shares of the Company's Common Stock, par value $.001 per share (the "Common
Stock"), that would result in the purchaser's owning 10% or more of the voting
power of the Company will be presumed to result in the acquisition of control of
the Company's insurance subsidiaries. Such an acquisition of Common Stock would
require prior regulatory approval unless
i
<PAGE> 4
the insurance commissioner in each state in which the Company's insurance
subsidiaries are domiciled or deemed to be commercially domiciled determines
otherwise. In addition, many state insurance regulatory laws contain provisions
that require prenotification to state agencies of a change of control of a
non-domestic insurance company licensed in that state in the event specified
market concentration thresholds are triggered by an acquisition. See
"Business -- Regulation -- Insurance Holding Company Regulations".
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the Commission's regional offices at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and copies may be obtained
at prescribed rates from the Public Reference Section of the Commission at its
principal office in Washington, D.C. In addition, such reports, proxy statements
and other information may be accessed electronically at the Commission's site on
the World Wide Web at http://www.sec.gov. The Company's reports are also on file
at the offices of the New York Stock Exchange ("NYSE"), 20 Broad Street, New
York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits, referred to herein as the
"Registration Statement") filed by the Company and the Trust (as defined herein)
with the Commission under the Securities Act with respect to the Units (as
defined herein). This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain parts of which are omitted as permitted by the rules and regulations of
the Commission. For further information with respect to the Company, the Trust
and the securities being offered hereby, reference is made to the Registration
Statement which can be inspected at the public reference facilities at the
offices of the Commission set forth above. Any statements contained herein
concerning the provision of any document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission or incorporated by reference
herein are not necessarily complete, and, in each instance, reference is made to
the copy of such document so filed for a more complete description of the matter
involved. Each such reference is qualified in its entirety by such reference.
No separate financial statements of the Trust have been included herein.
The Company and the Trust do not consider that such financial statements would
be material to holders of the QUIPS because (i) all of the voting securities of
the Trust will be owned, directly or indirectly, by the Company, a reporting
company under the Exchange Act, (ii) the Trust is a newly formed special purpose
entity, has no operating history or independent operations and is not engaged in
and under the terms of the Declaration (as defined herein) is prohibited from
engaging in any activity other than holding the Junior Subordinated Debentures
(as defined herein) and issuing securities representing undivided beneficial
interests in its assets and investing the proceeds thereof in the Junior
Subordinated Debentures and (iii) the Company's obligations described herein
under the Declaration (including the obligation to pay expenses of the Trust),
the Indenture (as defined herein) and any supplemental indentures thereto, the
Junior Subordinated Debentures issued to the Trust and the Guarantee (as defined
herein) taken together, constitute a full and unconditional guarantee by the
Company of payments due on the QUIPS. See "The Trust", "Description of the
Units -- Description of the Junior Subordinated Debentures" and "Description of
the Units -- Description of the Guarantee".
The Trust is not currently subject to the information reporting
requirements of the Exchange Act. The Trust will become subject to such
requirements upon the effectiveness of the Registration Statement, although the
Trust intends to seek and expects to receive an exemption therefrom.
ii
<PAGE> 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company (File No. 1-11340) with the
Commission pursuant to the Exchange Act are incorporated by reference herein and
made a part hereof:
(1) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(2) Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 1997, June 30, 1997 and September 30, 1997;
(3) Current Reports on Form 8-K filed with the Commission on June 10,
1997 and February 13, 1998; and
(4) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the
Commission on August 13, 1992, including any amendments or reports
filed for the purpose of updating such description.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the securities being
offered hereby shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents,
unless any such document shall expressly state that it is not to be incorporated
by reference.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein) modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or any amendment
or supplement hereto.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents incorporated herein by reference,
other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into such documents. Requests for such documents
should be directed to: Life Re Corporation, 969 High Ridge Road, Stamford,
Connecticut 06905, Attention: W. Weldon Wilson, Esq., Legal Department,
telephone number: (203) 321-3000.
iii
<PAGE> 6
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information, including the information set
forth under the caption "Risk Factors" and the Company's consolidated financial
statements and notes thereto, appearing elsewhere in this Prospectus or
incorporated herein by reference. The information presented in this Prospectus
assumes that the Underwriters' over-allotment option is not exercised. Life Re
Corporation ("Life Re" or the "Company") was organized as a Delaware corporation
in 1988 to serve as a holding company for all of the common stock of TexasRe, a
Texas insurance company, which in turn owns all of the common stock of Life
Reassurance, a Connecticut insurance company, which in turn owns all of the
common stock of REALIC, an Illinois insurance company. Life Re also owns 79% of
the common stock of AML, an Illinois insurance company. Unless the context
otherwise requires, references in this Prospectus to the "Company" or "Life Re"
shall mean Life Re, TexasRe, Life Reassurance, REALIC and AML, collectively, and
the term "Subsidiaries" shall mean TexasRe, Life Reassurance, REALIC and AML,
collectively. For an index of certain defined terms used herein, see "Index of
Defined Terms" on page 93.
THE COMPANY
Life Re, through its principal wholly-owned subsidiary, Life Reassurance,
is a leading provider of life reinsurance in the United States, with over $145
billion of Life Reinsurance in force and assets of $3.7 billion at December 31,
1997. Management believes the Company is the largest independent publicly traded
Life Reinsurer in the United States, and that it ranks fifth overall among U.S.
Life Reinsurers as measured by life reinsurance in force. The Company's
operating strategy has been to focus on two core lines of business: (i)
Traditional Life Reinsurance, which involves the transfer to the Company of
mortality risks on new sales from primary (or ceding) insurers of ordinary and
group life insurance policies and (ii) Administrative Reinsurance(SM), which
involves the acquisition of blocks of life insurance in force and, frequently,
the assumption of administrative responsibility for life insurance in force by
the Company. During the five year period ending December 31, 1997, the Company's
operating earnings per share and book value per share (excluding realized and
unrealized investment gains and losses) have grown at 19% and 16% compound
annual growth rates, respectively, and return on average equity (excluding
realized and unrealized investment gains and losses) has averaged 15%.
Management estimates that between 1993 and 1996, new ordinary insurance in
force ceded to the life reinsurance market grew from $166 billion to $343
billion, representing a 27% compound annual growth rate. In addition, over the
same period, management believes there has been an expansion in the number of
opportunities to acquire blocks of life insurance in force. The Company believes
that certain dynamics in the life insurance industry have contributed to the
Company's growth over time in Traditional Life Reinsurance and Administrative
Reinsurance. These dynamics include: (i) an increasing use of life reinsurance
by primary companies as a means of managing risk-based capital pressures by
shifting mortality risk and distribution costs to reinsurers and (ii) an
increasing focus by primary companies on asset accumulation products and a
desire to eliminate or minimize mortality risk taking. Moreover, primary
companies increasingly are seeking to sell blocks of life insurance in force in
order to realize value and release capital embedded in non-core businesses or to
ease administrative burdens and costs associated with maintaining outdated or
inefficient systems.
The Company derived approximately 62% of its revenues for the year ended
December 31, 1997, and the majority of its pre-tax operating income for the same
period, from Traditional Life Reinsurance. The Company provides life reinsurance
primarily for mortality risk with respect to both ordinary and group life
insurance products on an automatic treaty basis. Substantially all of the
Company's Traditional Life Reinsurance business is marketed directly by the
Company without the use of intermediaries. Between 1993 and 1996, the Company's
new sales of ordinary life reinsur-
1
<PAGE> 7
ance, as measured by insurance in force assumed, grew at a compound annual
growth rate of 29%. The Company's first year premium growth, another measure of
new life insurance sales, has grown consistently over the past several years,
from $13 million in 1993 to $61 million in 1997.
The Company derived approximately 18% of its revenues for the year ended
December 31, 1997 from Administrative Reinsurance. Management expects the
Administrative Reinsurance line of business to be an important source of
additional growth in the Company's pre-tax operating income. Through
Administrative Reinsurance, the Company is able to benefit from the increasing
consolidation in the life insurance industry by focusing on acquiring non-core
or smaller blocks of life insurance in force. In July 1995, the Company acquired
REALIC, which served as its initial platform for Administrative Reinsurance.
With the acquisition of REALIC, the Company obtained primary insurance licenses
and began outsourcing administrative services for acquired blocks of insurance
in force on a variable cost basis. Since 1995, the Company has acquired or is
under contract to acquire a total of 10 blocks of life insurance in force,
representing in excess of $2.0 billion in assets.
In 1997, the Company made a strategic decision to withdraw from the group
accident and health and special risk reinsurance business. This line of business
provided approximately 20% of revenues for the year ended December 31, 1997. The
decision to exit this line of business primarily was motivated by the need for
additional capital in its Traditional Life Reinsurance and Administrative
Reinsurance lines of business and the deterioration in accident and health
morbidity experience. The Company does not expect this line of business to
affect materially future results.
Life Re was founded in 1988 by Rodney A. Hawes, Jr., Douglas M. Schair and
Jacques E. Dubois, each of whom has over 25 years of insurance industry
experience, for the purpose of acquiring Life Reassurance from General
Reinsurance Corporation. Life Re currently has a rating of A+ (Superior) by A.M.
Best Company, Inc. ("A.M. Best"). A.M. Best ratings are based upon an insurance
company's financial strength regarding its ability to pay obligations to
policyholders and are not directed toward the protection of investors.
Life Re maintains its principal executive offices at 969 High Ridge Road,
Stamford, Connecticut 06905, and its telephone number is (203) 321-3000.
BUSINESS STRATEGY
The Company has established the following strategic priorities which the
Company believes will allow it to maximize stockholder value:
CAPITALIZE ON CONTINUED GROWTH IN TRADITIONAL LIFE REINSURANCE. The
Company believes that aggregate life reinsurance assumed, as a percentage of new
ordinary life insurance face amount written in the United States, grew from
approximately 15% in 1993 to approximately 30% in 1996. The Company expects that
the life reinsurance market will continue to grow as primary insurers seek to
manage risk-based capital levels and redeploy capital away from
mortality-related businesses and into their core lines of business, which
increasingly include asset accumulation businesses such as annuities and
universal life insurance.
INCREASE PENETRATION IN TRADITIONAL LIFE REINSURANCE. The Company has
experienced strong growth in first year life premiums, which have increased from
$13 million in 1993 to $61 million in 1997. The Company believes it has been
able to achieve this growth through its increased focus on marketing for new
treaties. Toward this end, in January 1996 the Company created its Office of
Life Marketing, a coordinated team of actuarial, legal, marketing and
underwriting professionals, in order to increase its focus on life reinsurance
growth. The Company intends to leverage its relationships within the life
insurance industry to further penetrate existing accounts and to expand its
customer base. Of the aggregate of $61 million of first year life premiums
assumed by the Company in 1997, approximately 50% was assumed pursuant to
treaties with seven of the largest 25 life insurance companies in the United
States, as measured by total premiums written for the year ended
2
<PAGE> 8
December 31, 1996. The Company continues to focus on enhancing existing
relationships as well as pursuing new clients for sources of first year premium
growth.
PARTICIPATE IN CONSOLIDATION OF LIFE INSURANCE INDUSTRY. The Company
expects to capitalize upon the consolidation of the life insurance industry
through the acquisition of insurance companies and/or reinsurance of life
insurance in force as insurers seek to dispose of non-core businesses. Through
Administrative Reinsurance, since 1995 the Company has acquired or is under
contract to acquire a total of 10 blocks of life insurance in force, including
three since December 1997. The Company believes that its success in this line of
business is due to its experience in identifying and executing transactions as
well as its market knowledge and contacts. Further, the Company believes that
its strategy of outsourcing administrative services for direct insurance in
force allows it to efficiently integrate acquisitions and to retain the capacity
to pursue multiple acquisition opportunities simultaneously.
RECENT DEVELOPMENTS
RESULTS OF OPERATIONS
On February 12, 1998, the Company announced its unaudited financial results
for the fourth quarter of 1997 and the year ended December 31, 1997. The
Company's unaudited financial results indicate that for the year ended December
31, 1997, operating earnings (net income excluding after-tax realized investment
gains) totaled $46.6 million, or $3.28 per share, compared to $38.3 million, or
$2.75 per share in 1996, representing a 19% increase on a per share basis. Net
income for the yearly periods totaled $49.5 million and $54.2 million,
respectively. After-tax realized investment gains were $2.9 million in 1997 and
$15.9 million in 1996, with 1996 gains including a $13.5 million gain resulting
from the sale of a strategic investment.
Fourth quarter operating earnings totaled $13.5 million, or $.94 per share,
compared to $12.2 million, or $.88 per share in last year's fourth quarter,
representing a 7% increase on a per share basis. For the same periods, net
income totaled $14.6 million, or $1.01 per share, and $13.2 million, or $.95 per
share. After-tax realized investment gains were $1.1 million and $1.0 million in
each of the respective quarterly periods.
ADMINISTRATIVE REINSURANCE TRANSACTIONS
Since December 1997, the Company has entered into three Administrative
Reinsurance transactions in which the Company has acquired or expects to acquire
approximately $1.1 billion in assets and approximately 385,000 policies for
administration. In December 1997, the Company (a) entered a coinsurance
transaction whereby the Company and Employers Reassurance Corporation ("ERAC")
will coinsure a block of life insurance and annuity business from Allianz Life
Insurance Company of North America ("Allianz"), with the Company's portion of
business reinsured increasing from 20% to 60% over the term of the agreement,
and (b) entered into an agreement to acquire Mission Life Insurance Company
("Mission Life") for a purchase price of approximately $60 million. Mission
Life's business is concentrated in life insurance policies designed to meet
final expenses. In February 1998, the Company entered into an agreement to
acquire Lincoln Liberty Life Insurance Company ("Lincoln Liberty") and First
Delaware Life Insurance Company ("First Delaware"), for an aggregate purchase
price of approximately $50 million. Lincoln Liberty's and First Delaware's
businesses primarily consist of traditional and universal life insurance
policies. These transactions had no impact on the Company's 1997 results of
operations, but are anticipated to contribute to 1998 results of operations.
For additional information with respect to the above recent developments,
see "Recent Developments".
3
<PAGE> 9
THE TRUST
Life Re Capital Trust II (the "Trust") is a statutory business trust
created under the laws of the State of Delaware pursuant to (i) a declaration of
trust, dated as of February 10, 1998, executed by the Company, as sponsor (the
"Sponsor"), and certain of the trustees of the Trust (the "Issuer Trustees") and
(ii) the filing of a certificate of trust with the Secretary of State of the
State of Delaware on February 10, 1998. Such declaration of trust will be
amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Declaration will be
qualified as an indenture under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Trust exists for the exclusive purposes of (i)
issuing the Trust Securities (as defined herein) representing undivided
beneficial interests in the assets of the Trust, (ii) investing the proceeds of
the Trust Securities in the Junior Subordinated Debentures and (iii) engaging in
only those other activities necessary or incidental thereto. Accordingly, the
Junior Subordinated Debentures will be the sole assets of the Trust and payments
under the Junior Subordinated Debentures will be the sole revenue of the Trust.
All of the Common Trust Securities (as defined herein) will be directly or
indirectly owned by the Company. See "The Trust".
THE OFFERING
THE UNITS
Securities Offered......... % Adjustable Conversion-rate Equity Security
Units (the "Units", as more fully defined below).
Issuers.................... Life Re Corporation and Life Re Capital Trust II.
Stated Amount.............. $ per Unit (the "Stated Amount").
Payments on the Units...... For the period from the date of issuance of the
Units to the Stock Purchase Date (as defined
herein), each holder of a Unit (other than a
Stripped Unit (as defined herein)) will be entitled
to receive cash payments of % of the Stated
Amount per annum, payable in arrears. Such payments
will consist of payments on the QUIPS or other
Pledged Securities (as defined herein) plus
Contract Fees (as defined herein) payable by the
Company or net of Contract Fees payable by the
holders, as the case may be.
Quarterly Payment Dates.... , , and
of each year (the "Quarterly Payment
Dates"), subject to the deferral provisions
described below.
Stock Purchase Date........ , 2001 (the "Stock Purchase Date").
If a holder of a Unit does not provide cash to
settle the underlying Purchase Contract (as defined
herein) in the manner described herein, cash
proceeds from the QUIPS or other Pledged Securities
underlying such Unit will be applied on the Stock
Purchase Date to the purchase of Common Stock
pursuant to such Purchase Contract.
Settlement Rate............ The number of shares of Common Stock issuable upon
settlement of each Purchase Contract (the
"Settlement Rate") will be between of a
share and one share of Common Stock (subject to
adjustment under certain circumstances). More
specifically, the Settlement Rate will be
calculated as follows, subject to adjustment in
certain circumstances:
(a) if the Applicable Market Value (as defined
herein) is greater than or equal to $ (the
"Threshold Appreciation Price") (i.e.,
4
<PAGE> 10
approximately % higher than the Stated
Amount), the Settlement Rate will be ;
(b) if the Applicable Market Value is less than the
Threshold Appreciation Price but greater than the
Stated Amount, the Settlement Rate will equal the
Stated Amount divided by the Applicable Market
Value (i.e., the Settlement Rate will be calculated
so that the Applicable Market Value of the Common
Stock purchasable under each Purchase Contract
would equal the Stated Amount payable therefor);
and
(c) if the Applicable Market Value is less than or
equal to the Stated Amount, the Settlement Rate
will be one.
"Applicable Market Value" means the average of the
Closing Prices (as defined herein) per share of
Common Stock on each of the twenty consecutive
Trading Days (as defined herein) ending on the last
Trading Day immediately preceding the Stock
Purchase Date.
Relationship of Units to
Common Stock............... Cash payments on the Units that are not Stripped
Units (consisting of payments on the QUIPS plus or
net of Contract Fees) will accrue at a rate per
annum that is greater than the current dividend
yield on the Common Stock. However, since the
number of shares of Common Stock issuable upon
settlement of each Purchase Contract may decline by
up to % as the Applicable Market Value
increases, the opportunity for equity appreciation
afforded by an investment in the Units is less than
that afforded by a direct investment in the Common
Stock.
Components of the Units.... Each Unit will initially consist of:
(a) a Purchase Contract ("Purchase Contract") under
which (i) the holder will purchase from the Company
on the Stock Purchase Date, for cash in an amount
equal to the Stated Amount, a number of shares of
Common Stock equal to the Settlement Rate, and (ii)
the Company will pay to the holder or the holder
will pay to the Company (as specified in the final
Prospectus for the offering made hereby) contract
fees ("Contract Fees") on the Stated Amount at the
rate of % of the Stated Amount per annum (the
"Contract Fee Rate"), and
(b) Quarterly Income Preferred Securities
("QUIPS"(SM), which term may refer to a single
security or more than one security as the context
may require) of the Trust having a QUIPS
Liquidation Amount (as defined herein) equal to the
Stated Amount, a QUIPS Distribution Rate (as
defined herein) of % per annum and a QUIPS and
Debenture Maturity Date (as defined herein) of
, 2003,
subject to a call option ("Call Option") granted by
the holder of the Unit to Goldman, Sachs & Co. (in
its capacity as the holder of the Call Options, the
"Call Option Holder") which (when aggregated with
the Call Options underlying all other Units) will
entitle the Call Option Holder to acquire the QUIPS
underlying the Units (or the Junior Subordinated
Debentures substituted therefor), on or before
, 2001 (the "Call Option Expiration
Date",
5
<PAGE> 11
which is 90 days before the Stock Purchase Date),
in exchange for a package of consideration (the
"Aggregate Consideration Deliverable on Exercise of
the Call Options") which will include U.S. Treasury
Securities ("Treasury Securities") that will
provide payments matching the aggregate
distributions due on the QUIPS through the Stock
Purchase Date and Treasury Securities that will
provide payments equal to the aggregate Stated
Amount of the Units on the Stock Purchase Date.
The QUIPS underlying a Unit will be pledged to
, as collateral agent for the Company
and the Call Option Holder (together with any
successor thereto in such capacity, the "Collateral
Agent"), to secure the holder's obligations to the
Company and the Call Option Holder under the
Purchase Contract and Call Option underlying such
Unit. The QUIPS, or any securities substituted
therefor as securities pledged to the Collateral
Agent to secure such obligations, are herein
referred to as "Pledged Securities". If Treasury
Securities are exchanged for Pledged Securities
upon exercise of the Call Options or Junior
Subordinated Debentures are distributed in respect
of Pledged Securities upon dissolution of the
Trust, the Treasury Securities so exchanged or the
Junior Subordinated Debentures so distributed will
automatically be substituted as Pledged Securities
in place of the securities that theretofore had
been Pledged Securities.
The obligations of the holders of Units under the
Purchase Contracts, if not paid in cash by such
holders, will be funded out of payments made in
respect of the Pledged Securities.
For so long as a Purchase Contract remains in
effect, such Purchase Contract and the QUIPS or
other Pledged Securities securing it (and, for so
long as a Call Option relating to such Pledged
Securities is exercisable, the obligations of the
holder to the Call Option Holder thereunder) will
not be separable and may be transferred only as an
integrated Unit.
Formation of the Units..... At the closing of the offering made hereby, the
Underwriters specified herein (the "Underwriters")
will (a) enter into Purchase Contracts with the
Company and (b) purchase QUIPS from the Trust for
cash. The Underwriters will fund that cash in part
by the sale of the Units offered hereby to the
initial investors thereof and in part by the sale
of Call Options (on behalf of such initial
investors) to the Call Option Holder. The Trust
will use that cash to purchase Junior Subordinated
Debentures from the Company. The QUIPS will then be
pledged to the Collateral Agent as contemplated
above.
The rights to purchase Common Stock under a
Purchase Contract, together with the QUIPS or other
Pledged Securities pledged to secure the
obligations referred to in (a) and (b) below,
subject to (a) the obligations owed to the Company
under such Purchase Contract, (b) the obligations
owed to the Call Option Holder under the Call
Option relating to such QUIPS or other Pledged
Securities and (c) the pledge arrangements securing
the foregoing obligations, are collectively
referred to herein as a "Normal Unit".
6
<PAGE> 12
Each holder of Normal Units will have the right to
substitute, as Pledged Securities, Treasury
Securities that will generate payments matching
such holder's obligations under the underlying
Purchase Contracts, in return for the securities
that theretofore had been the Pledged Securities
underlying such Normal Units. For so long as the
Call Options underlying such Normal Units remain
exercisable, such right of substitution may be
exercised only if the holder obtains an instrument
from the Call Option Holder releasing its security
interest in the Pledged Securities securing such
Call Options and agreeing that such Call Options no
longer underlie such Normal Units (or the Stripped
Units they become). The holder might obtain such an
instrument by separately documenting such Call
Options with the Call Option Holder (and, if
required by the Call Option Holder, entering into
credit support arrangements satisfactory to the
Call Option Holder backing such Call Options),
paying the Call Option Holder to cancel such Call
Options or otherwise. However, the Call Option
Holder will be under no obligation to deliver such
an instrument, and there can be no assurance that a
holder will be able to induce the Call Option
Holder to do so. If a holder of Normal Units
exercises such holder's right to substitute
Treasury Securities as Pledged Securities in the
manner described herein, the securities that
theretofore had been the Pledged Securities
underlying such Normal Units will be released from
the pledge arrangement described herein and
delivered to such holder, and such holder's
remaining rights and obligations under the Normal
Units will thereupon become "Stripped Units" that
will no longer generate cash payments to such
holder and that will no longer be listed on the
NYSE or be fungible with Normal Units.
The Normal Units and any Stripped Units are
collectively referred to herein as the "Units".
Contract Fees.............. The holders of Units may be required to pay
Contract Fees to the Company, or the Company may be
required to pay Contract Fees to the holders of
Units, as specified under "Description of the
Units -- General".
Any obligation of the holders of Units to pay
Contract Fees to the Company will be funded out of
payments made in respect of the Pledged Securities.
If payments made in respect of the Pledged
Securities are insufficient to cover the obligation
of the holders of the Units to pay Contract Fees,
such obligation will be deferred until the earlier
of the date sufficient cash is available and the
Stock Purchase Date.
Any obligation of the Company to pay Contract Fees
to the holders of Units will be unsecured and
junior in right of payment to all Senior
Indebtedness (as defined herein) of the Company.
The Company will generally have the right to defer
the payment of Contract Fees at any time or from
time to time for a period not extending beyond the
Stock Purchase Date.
Any deferred Contract Fees payable by the holders
of Units or the Company will bear additional
Contract Fees at the rate of %
7
<PAGE> 13
per annum (the "Deferral Rate") (compounding on
each succeeding Quarterly Payment Date) until paid.
Termination................ The Purchase Contracts (including the right to
receive and the obligation to pay accrued or
deferred Contract Fees and the right and obligation
to purchase Common Stock) will automatically
terminate upon the occurrence of certain events of
bankruptcy, insolvency or reorganization with
respect to the Company. Upon such termination, the
Call Options will terminate and the Collateral
Agent will release the Pledged Securities held by
it to the Unit Agent for distribution to the
holders.
THE QUIPS
The Trust.................. The QUIPS will be issued by the Trust, a Delaware
statutory business trust. The Junior Subordinated
Deferrable Interest Debentures due ,
2003 (the "Junior Subordinated Debentures") of the
Company will be the sole assets of the Trust, and
payments on those Junior Subordinated Debentures
will be the sole revenue of the Trust. The Company
will own all of the common undivided beneficial
interests in the assets of the Trust (the "Common
Trust Securities" and, collectively with the QUIPS,
the "Trust Securities").
The QUIPS.................. The QUIPS will represent preferred undivided
beneficial interests in the assets of the Trust.
Distributions on the QUIPS will be cumulative, will
accrue from the first date of issuance of the QUIPS
and will be payable at the annual rate of %
(the "QUIPS Distribution Rate") of the liquidation
amount of $ per QUIPS (the "QUIPS
Liquidation Amount"), payable quarterly in arrears
on each Quarterly Payment Date, subject to the
deferral provisions described below.
Interest and QUIPS
Distribution Deferral
Provisions................. The Company will generally have the right to defer
the payments of interest on the Junior Subordinated
Debentures at any time or from time to time for a
period not extending beyond the QUIPS and Debenture
Maturity Date. Upon any such deferral, quarterly
distributions on the QUIPS by the Trust will be
deferred. However, deferred payments of interest on
the Junior Subordinated Debentures and deferred
distributions on the QUIPS will bear additional
interest or distributions at a rate per annum equal
to the Deferral Rate (compounding on each
succeeding Quarterly Payment Date) until paid.
Mandatory Redemption....... The QUIPS will be mandatorily redeemable in whole
on , 2003 (the "QUIPS and Debenture
Maturity Date"), at a redemption price equal to the
aggregate QUIPS Liquidation Amount thereof plus
unpaid distributions accrued thereon to such date,
out of the proceeds of the repayment of the Junior
Subordinated Debentures at maturity.
Exchange of QUIPS for
Junior
Subordinated Debentures.... The Company will have the right at any time to
terminate the Trust and cause the Junior
Subordinated Debentures to be distributed
8
<PAGE> 14
to the holders of the QUIPS and Common Trust
Securities in liquidation of the Trust.
Right to Exercise Junior
Subordinated Debenture Put
Options.................... Each holder of QUIPS will have the option to
require the Trust to distribute the underlying
Junior Subordinated Debentures to the Put Agent (as
defined herein), on the Stock Purchase Date or on
the date that is three months after the Stock
Purchase Date, in exchange for such QUIPS, in
connection with the concurrent exercise by the Put
Agent on behalf of such holder of the Junior
Subordinated Debt Put Option related thereto.
Junior Subordinated
Debentures................. The Junior Subordinated Debentures will be issued
by the Company under an indenture (the "Indenture")
between The Bank of New York, as trustee (together
with any successor thereto in such capacity, the
"Debenture Trustee"), and the Company, in an
aggregate principal amount equal to the aggregate
liquidation amount of the Trust Securities. The
Junior Subordinated Debentures will bear interest
at a rate per annum that is equal to the QUIPS
Distribution Rate, payable quarterly in arrears on
the Quarterly Payment Dates, subject to the
deferral provisions described above. The Junior
Subordinated Debentures will mature on the QUIPS
and Debenture Maturity Date and will not be
redeemable at the option of the Company prior to
such date. The Junior Subordinated Debentures will
be unsecured and junior in right of payment to all
Senior Indebtedness of the Company.
Junior
Subordinated Debenture Put
Options.................... Each holder of Junior Subordinated Debentures will
have the right to require the Company to repurchase
such Junior Subordinated Debentures, in whole or in
part, on the Stock Purchase Date or on the date
that is three months after the Stock Purchase Date,
for a purchase price equal to the Applicable Put
Price (as defined herein) for such Junior
Subordinated Debentures. The Applicable Put Price
for any Junior Subordinated Debentures being sold
on the Stock Purchase Date will equal the aggregate
principal amount of such Junior Subordinated
Debentures plus unpaid interest accrued thereon to
the Stock Purchase Date. The Applicable Put Price
for any Junior Subordinated Debentures being sold
on the date that is three months after the Stock
Purchase Date will be calculated based on a formula
described herein. See "Description of the
Units -- Description of the Junior Subordinated
Debentures -- Junior Subordinated Debenture Put
Options".
The Guarantee.............. Pursuant to a guarantee agreement (the "Guarantee")
between the Company and The Bank of New York, as
trustee (together with any successor thereto in
such capacity, the "Guarantee Trustee"), the
Company will guarantee the payment of distributions
and other payments on the QUIPS to the extent that
the Trust has funds on hand sufficient therefor.
9
<PAGE> 15
GENERAL
Listing.................... Application has been made to list the Normal Units
on the New York Stock Exchange.
Federal Income
Tax Consequences........... For a discussion of the United States Federal
income tax consequences associated with the
purchase, ownership and disposition of the Units,
QUIPS, Purchase Contracts and Common Stock, see
"Certain Federal Income Tax Consequences".
Prospective investors should be aware that no
statutory, judicial or administrative authority
directly addresses the tax treatment of Units or
instruments similar to Units for United States
Federal income tax purposes. ACCORDINGLY,
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR
TAX ADVISORS CONCERNING THE TAX CONSEQUENCES OF AN
INVESTMENT IN THE UNITS, INCLUDING THE APPLICATION
OF STATE, LOCAL AND FOREIGN OR OTHER TAX LAWS AND
THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER
TAX LAWS.
Use of Proceeds............ The Company intends to use the net proceeds of the
offering made hereby and the Common Stock Offering
(as defined herein) to provide additional capital
to its Subsidiaries to support recently announced
and recently completed transactions and the
continued growth of its businesses, as well as for
general corporate purposes.
Common Stock Offering...... Concurrently with the offering made hereby, the
Company also is offering 3,300,000 shares of Common
Stock and certain stockholders of the Company are
offering 200,000 shares of Common Stock (725,000
shares of Common Stock if the over-allotment option
granted by such selling stockholders to the
underwriters thereof is exercised in full (such
offerings collectively, the "Common Stock
Offering")). The Common Stock Offering is being
made by means of a separate prospectus. Neither the
Common Stock Offering nor the offering made hereby
is conditioned on consummation of the other
offering. There can be no assurance that the Common
Stock Offering will be consummated. This Prospectus
does not constitute an offer to sell or the
solicitation of an offer to buy the Common Stock
being offered in the Common Stock Offering.
10
<PAGE> 16
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data below should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 and
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference". The summary consolidated financial data at and for the years ended
December 31, 1996, 1995, 1994, 1993 and 1992 are derived from the consolidated
financial statements of the Company. The summary consolidated financial data at
September 30, 1997 and for the nine months ended September 30, 1997 and 1996 are
derived from the unaudited condensed consolidated financial statements of the
Company, which have been prepared on the same basis as the Company's audited
consolidated financial statements and, in the opinion of management, contain all
adjustments consisting of only normal recurring adjustments necessary for a fair
presentation of the financial position and results of operations for these
periods. The results of operations for the nine months ended September 30, 1997
may not be indicative of results for the full year.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Policy revenues............................ $360.9 $328.9 $451.0 $383.2 $350.9 $289.0 $250.9
Investment income.......................... 110.0 89.9 124.3 98.6 82.4 73.5 72.6
Realized investment gains.................. 2.9 15.7 17.2 3.7 0.1 21.0 27.1
Equity in earnings of investee............. -- -- -- -- -- -- 4.3
------ ------ ------ ------ ------ ------ ------
Total revenues....................... 473.8 434.5 592.5 485.5 433.4 383.5 354.9
------ ------ ------ ------ ------ ------ ------
Benefits and Expenses:
Policy benefits............................ 252.5 245.6 332.5 281.5 245.8 208.7 171.5
Policy acquisition costs................... 105.1 81.6 111.9 95.7 88.7 71.1 65.5
Interest credited to policyholder
accounts................................. 28.6 24.1 34.6 21.2 15.0 15.0 15.0
Interest expense........................... 6.0 6.5 8.4 10.7 9.1 9.9 18.9
Distributions on capital securities........ 2.8 -- -- -- -- -- --
Other operating expenses................... 25.0 21.0 29.0 21.6 22.0 18.1 15.4
------ ------ ------ ------ ------ ------ ------
Total benefits and expenses.......... 420.0 378.8 516.5 430.8 380.6 322.8 286.3
------ ------ ------ ------ ------ ------ ------
Income before federal income taxes and
extraordinary charge....................... 53.8 55.8 76.1 54.8 52.8 60.6 68.6
Provision for federal income taxes........... 18.8 14.8 21.9 19.2 18.5 21.4 23.5
------ ------ ------ ------ ------ ------ ------
Income before extraordinary charge........... 34.9 41.0 54.2 35.6 34.3 39.2 45.0
Extraordinary charge, net of federal income
tax benefit................................ -- -- -- 1.0 -- -- 8.6
------ ------ ------ ------ ------ ------ ------
Net income................................... $ 34.9 $ 41.0 $ 54.2 $ 34.6 $ 34.3 $ 39.2 $ 36.4
====== ====== ====== ====== ====== ====== ======
Net income (excluding realized investment
gains and extraordinary charge)............ $ 33.1 $ 26.0 $ 38.3 $ 33.2 $ 34.3 $ 25.8 $ 27.0
====== ====== ====== ====== ====== ====== ======
Diluted earnings per share(1):
Income before extraordinary charge......... $ 2.47 $ 2.94 $ 3.89 $ 2.39 $ 2.21 $ 2.50 $ 3.45
Extraordinary charge, net of federal income
tax benefit.............................. -- -- -- (0.07) -- -- (0.76)
------ ------ ------ ------ ------ ------ ------
Net income................................. $ 2.47 $ 2.94 $ 3.89 $ 2.32 $ 2.21 $ 2.50 $ 2.69
Net income (excluding realized investment
gains and extraordinary charge)(2)....... $ 2.34 $ 1.87 $ 2.75 $ 2.22 $ 2.21 $ 1.63 $ 2.11
Common dividends per share................... $ 0.39 $ 0.30 $ 0.40 $ 0.28 $ 0.24 $ 0.20 --
Preferred stock dividends.................... -- -- -- -- -- -- $ 5.7
Weighted average common and common equivalent
shares..................................... 14.2 13.9 13.9 14.9 15.5 15.7 11.4
</TABLE>
11
<PAGE> 17
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------
1997 1996 1995 1994 1993 1992
------------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Invested assets............................. $2,156.5 $1,833.2 $1,504.2 $ 998.5 $ 944.6 $ 845.2
Total assets................................ 2,908.4 2,519.3 2,024.1 1,442.3 1,339.7 1,167.2
Loans payable............................... 125.0 125.0 140.0 140.0 150.0 165.0
Capital securities.......................... 100.0 -- -- -- -- --
Common shareholders' equity................. 344.0 290.1 279.3 194.9 230.7 170.8
Common shareholders' equity (excluding
unrealized investment gains and losses)... 296.7 265.3 229.9 228.8 198.2 162.1
OTHER FINANCIAL DATA (AS OF OR FOR THE
PERIOD ENDED):
Return on average shareholders' equity(3)... 16% 15% 14% 16% 14% *
Book value per common share(4).............. $ 21.8 $ 19.6 $ 16.5 $ 14.8 $ 12.8 $ 10.4
First year premiums assumed................. 45.4 38.2 22.6 19.3 13.6 14.8
Capital invested in Administrative
Reinsurance transactions(5)............... 34.4 32.0 35.9 -- -- --
Life insurance in force(6).................. ** 116,012 91,283 81,213 79,652 74,408
Statutory capital and surplus(6)............ 266.0 209.3 208.2 193.8 187.4 214.1
</TABLE>
- ---------------
* Not meaningful.
** Not available.
(1) Diluted earnings per share have been calculated in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). Basic earnings per share in accordance with SFAS 128 for the nine
months ended September 30, 1997 and 1996 were $2.99 and $2.57, respectively,
and for the years ended December 31, 1996, 1995, 1994, 1993 and 1992 were
$3.97, $2.32, $2.21, $2.53 and $3.82, respectively. The adoption of SFAS 128
did not result in the restatement of previously reported earnings per share,
as diluted earnings per share calculated in accordance with SFAS 128 results
in the same per share amounts as previously reported by the Company.
(2) Net income per share (excluding realized investment gains and extraordinary
charge) for the year ended December 31, 1992 has been adjusted to reflect
the refinancings of debt and preferred stock and the initial public
offering.
(3) Return on average shareholders' equity is calculated by dividing net income
(excluding realized investment gains and extraordinary charge) by average
shareholders' equity for the period (which is the simple average of
beginning and end of period shareholders' equity excluding unrealized
investment gains or losses). Return on average shareholders' equity for the
nine months ended September 30, 1997 has been annualized.
(4) Book value per common share is calculated by dividing end of period
shareholders' equity (excluding unrealized investment gains and losses) by
end of period common shares outstanding.
(5) Capital invested in Administrative Reinsurance transactions represents the
sum of the consideration paid for life insurance in force acquired and the
related capital to support the business.
(6) Amounts have been derived from the Annual Statements of Life Reassurance,
REALIC and TexasRe, as filed with insurance regulatory authorities and
prepared in accordance with statutory accounting practices. For purposes of
this presentation, capital and surplus are defined as statutory capital and
surplus of Life Reassurance only, as its capital and surplus materially
reflect that of Life Reassurance, REALIC and TexasRe, plus the Asset
Valuation Reserve ("AVR") and the Interest Maintenance Reserve ("IMR") of
Life Reassurance and REALIC.
12
<PAGE> 18
RISK FACTORS
Before purchasing any of the Units offered hereby, prospective purchasers
of Units should consider, in addition to the other information with respect to
the Company and its business contained or incorporated by reference in this
Prospectus, the following factors relating to the corporate structure of the
Company and the terms of the Units offered hereby.
HOLDING COMPANY STRUCTURE; RELIANCE ON DIVIDENDS FROM INSURANCE SUBSIDIARIES
The Company is a holding company and the right of the Company to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Units to benefit indirectly from such distribution) is subject to
the prior claim of creditors of that subsidiary, except to the extent that the
Company may itself be recognized as a creditor of that subsidiary. Accordingly,
the Junior Subordinated Debentures will be effectively subordinated to all
existing and future liabilities of the subsidiaries of the Company, and holders
of Junior Subordinated Debentures should look only to the assets of the Company
for payments on the Junior Subordinated Debentures. At September 30, 1997, the
subsidiaries of the Company had total liabilities on a statutory basis
(excluding liabilities owed to the Company and intercompany transactions) of
approximately $2.1 billion.
The Company's principal asset is the common stock of TexasRe, which in turn
owns all the common stock of Life Reassurance. In July 1995, Life Reassurance
acquired all of the common stock of John Deere Life Insurance Company (now known
are REALIC). The primary sources of funds for the Company to make payments of
principal, interest and dividends are payments from TexasRe under two Surplus
Debentures (as defined herein) and dividends paid by TexasRe. TexasRe's
principal sources of funds are dividends from Life Reassurance and distributions
from Life Reassurance under a Tax Allocation Agreement effective as of the first
day of the consolidated return taxable year beginning January 1, 1994 (the "Tax
Allocation Agreement"), by and among the Company, TexasRe and Life Reassurance.
Current Connecticut and Texas insurance laws permit the payment of a
dividend or distribution which, together with dividends or distributions paid
during the preceding twelve months, does not exceed the greater of (i) 10% of
statutory capital and surplus as of the preceding December 31 and (ii) statutory
net gain from operations for the preceding calendar year. Any proposed dividend
in excess of this amount is designated an "extraordinary dividend" and may not
be paid until it has been approved, or a 30-day waiting period shall have passed
during which it has not been disapproved, by the Insurance Commissioner of the
State of Connecticut (the "Connecticut Insurance Commissioner") or the
Commissioner of Insurance of the State of Texas (the "Texas Insurance
Commissioner"), as the case may be. In addition, Connecticut law provides that
an insurance company may not pay dividends in an amount exceeding its earned
surplus without prior regulatory approval. Life Reassurance has received
approval from the Connecticut Department of Insurance to define its earned
surplus for this purpose to include amounts of paid in surplus in excess of
$125.0 million, and as of September 30, 1997, such earned surplus was $99.6
million. Currently, no prior approval of the Texas Department of Insurance is
required to pay scheduled principal or interest on the Surplus Debentures
provided that, after giving effect to any such payment, the statutory surplus of
TexasRe exceeds $125.0 million.
Under such insurance laws, Life Reassurance was permitted to pay dividends
of $23.2 million, $34.8 million, $30.9 million and $15.8 million in 1997, 1996,
1995 and 1994, respectively, without the prior approval of the Connecticut
Insurance Commissioner. Life Reassurance actually paid dividends of $23.2
million, $14.9 million, $30.9 million and $13.5 million in 1997, 1996, 1995 and
1994, respectively. TexasRe was permitted to pay dividends of $16.3 million,
$27.1 million, $28.2 million and $15.4 million in 1997, 1996, 1995 and 1994,
respectively, without the prior approval of the Texas Insurance Commissioner.
TexasRe paid dividends of $16.3 million, $12.1 million, $15.0 million and $0.0
in 1997, 1996, 1995 and 1994, respectively.
13
<PAGE> 19
In the event that the ability of either TexasRe or Life Reassurance to pay
dividends is reduced or eliminated, the Company's ability to pay interest on the
Junior Subordinated Debentures would be materially and adversely affected,
depending upon the extent of such reduction. The Company is not aware of any
current actions regarding such regulatory changes.
The Texas and Connecticut insurance laws and regulations require that the
statutory surplus of TexasRe and Life Reassurance, as the case may be, following
any dividend or distribution, be reasonable in relation to its outstanding
liabilities and adequate to meet its financial needs. The Texas Insurance
Commissioner or the Connecticut Insurance Commissioner may bring an action to
enjoin or rescind the payment of a dividend or distribution by TexasRe or Life
Reassurance that would cause it statutory surplus to be unreasonable or
inadequate under this standard.
RISK OF DECLINE IN EQUITY VALUE
The market value of the Common Stock receivable upon settlement of the
Purchase Contracts may be materially different than the purchase price payable
for such Common Stock. If the Applicable Market Value of the Common Stock on the
Stock Purchase Date is less than the Stated Amount (i.e., less than the Closing
Price of the Common Stock on the date of this Prospectus), each holder of Units
will, on the Stock Purchase Date, be required to purchase shares of Common Stock
for an amount greater than the aggregate Applicable Market Value of such shares.
Accordingly, a holder of Units assumes the risk that the market value of the
Common Stock may decline, and such decline could be substantial.
LIMITATION ON EQUITY APPRECIATION POTENTIAL
Since the number of shares of Common Stock issuable upon settlement of each
Purchase Contract may decline by up to % as the Applicable Market Value
increases, the opportunity for equity appreciation afforded by an investment in
the Units is less than that afforded by a direct investment in the Common Stock.
LIMITATION ON VALUE OF QUIPS AS A RESULT OF CALL OPTIONS
If the value of the QUIPS underlying the Normal Units is greater than the
Aggregate Consideration Deliverable on Exercise of the Call Options (as
expected), it is likely that the Call Option Holder will exercise its Call
Options. In that case, the Call Option Holder rather than holders of Normal
Units will realize the benefit of that greater value.
PLEDGED SECURITIES ENCUMBERED
Although holders of Units will be beneficial owners of the underlying
Pledged Securities, those Pledged Securities will be pledged with the Collateral
Agent to secure the obligations of the holders under the Purchase Contracts and
the Call Options. Thus, for so long as the Purchase Contracts remain in effect,
holders will not be entitled to withdraw their Pledged Securities from this
pledge arrangement except in the limited circumstances described herein.
SUBORDINATION OF COMPANY OBLIGATIONS
The ability of the Trust to pay amounts due on the QUIPS (including,
without limitation, the ability of the Trust to pay amounts due upon exercise of
any Junior Subordinated Debenture Put Options) is dependent upon the Company
making payments on the Junior Subordinated Debentures as and when required.
The obligations of the Company under the Junior Subordinated Debentures and
the Guarantee will be unsecured and subordinate and rank junior in right of
payment to all present and future Senior Indebtedness of the Company to the
extent and in the manner set forth in the Indenture and the Guarantee,
respectively. In addition, if Contract Fees are payable by the Company on the
14
<PAGE> 20
Purchase Contracts, the obligations of the Company to pay Contract Fees will be
unsecured and subordinate and rank junior in right of payment to all present and
future Senior Indebtedness of the Company to the extent and in the manner set
forth in the Master Unit Agreement (as defined herein). No payments on account
of principal of, premium, if any, or interest on the Junior Subordinated
Debentures (including payments on exercise of Junior Subordinated Debenture Put
Options) may be made if there shall have occurred and be continuing a default in
any payment with respect to Senior Indebtedness, or an event of default with
respect to any Senior Indebtedness resulting in the acceleration of the maturity
thereof, or if any judicial proceeding shall be pending with respect to any
default. In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full of all
amounts due in respect of such Senior Indebtedness before the holders of Junior
Subordinated Debentures will be entitled to receive or retain any payment in
respect of Junior Subordinated Debentures. Notwithstanding the foregoing,
amounts that would be due and payable by the Company to holders of Units in the
absence of the foregoing subordination provisions may be applied by such holders
to offset their obligations under their respective Purchase Contracts.
None of the Indenture, the Guarantee, the Declaration or the Master Unit
Agreement places any limitation on the amount of secured or unsecured debt,
including Senior Indebtedness, that may be incurred by the Company or any of its
subsidiaries. See "Description of the Units -- Description of the Junior
Subordinated Debentures -- Subordination" and "Description of the Guarantee --
Status". At December 31, 1997, the Company had $125.0 million of Senior
Indebtedness outstanding.
OPTION TO DEFER PAYMENTS
The Company will generally have the right to defer payments of interest on
the Junior Subordinated Debentures at any time or from time to time for a period
not extending beyond the QUIPS and Debenture Maturity Date. Upon any such
deferral, quarterly distributions on the QUIPS by the Trust will be deferred.
However, deferred payments of interest on the Junior Subordinated Debentures and
deferred distributions on the QUIPS will bear additional interest or
distributions at a rate per annum equal to the Deferral Rate (compounding on
each succeeding Quarterly Payment Date) until paid. See "Description of the
Units -- Description of the QUIPS -- Distributions" and "-- Description of the
Junior Subordinated Debentures -- Option to Extend Interest Payment Date".
If Contract Fees are payable by the Company on the Purchase Contracts, the
Company will generally have the right to defer the payment of such Contract Fees
at any time or from time to time for a period not extending beyond the Stock
Purchase Date. However, deferred payments of Contract Fees will bear additional
Contract Fees at the Deferral Rate (compounding on each succeeding Quarterly
Payment Date) until paid. If the Purchase Contracts are terminated (upon the
occurrence of certain events of bankruptcy, insolvency or reorganization with
respect to the Company), the right to receive Contract Fees, including deferred
Contract Fees, will terminate.
The Company believes that the likelihood that it will exercise its right to
defer payments of interest on the Junior Subordinated Debentures is remote and
that, therefore, the Junior Subordinated Debentures should not be considered to
be issued with original issue discount ("OID") unless it actually exercises such
deferral right. There is no assurance that the Internal Revenue Service (the
"IRS") will agree with such position. See "Certain Federal Income Tax
Consequences -- Interest Received on the QUIPS".
Should the Company elect to exercise its right to defer payments of
interest on the Junior Subordinated Debentures or Contract Fees, the market
price of the QUIPS or Junior Subordinated Debentures or, for so long as the
Purchase Contracts remain in effect, the Units is likely to be affected. A
holder that disposes of its QUIPS, Junior Subordinated Debentures or Units
15
<PAGE> 21
during such deferral period, therefore, might not receive the same return on its
investment as a holder that continues to hold its QUIPS, Junior Subordinated
Debentures or Units. In addition, the mere existence of the Company's right to
defer such payments may cause the market price of the QUIPS, Junior Subordinated
Debentures or Units to be more volatile than the market prices of other
securities that are not subject to such deferrals.
For information about certain adverse tax consequences that would result if
the Company exercises its right to defer payments of interest on the Junior
Subordinated Debentures, see "-- Tax Matters" and "Certain Federal Income Tax
Consequences -- Interest Received on the QUIPS".
MASTER UNIT AGREEMENT NOT QUALIFIED UNDER TRUST INDENTURE ACT; LIMITED
OBLIGATIONS OF UNIT AGENT
Although the QUIPS constituting a part of the Normal Units will be issued
pursuant to a Declaration qualified as an indenture under the Trust Indenture
Act, the Master Unit Agreement relating to the Units and the appointment of the
Unit Agent (as defined herein) as the agent and attorney-in-fact for the holders
of the Units will not be qualified as an indenture under the Trust Indenture
Act, and the Unit Agent will not be required to qualify as a trustee thereunder.
Accordingly, holders of the Units will not have the benefits of the protections
of the Trust Indenture Act. Under the terms of the Master Unit Agreement, the
Unit Agent will have only limited obligations to the holders of the Units. See
"Description of the Units -- Certain Provisions of the Principal Agreements --
Information Concerning the Unit Agent".
RIGHTS UNDER THE GUARANTEE
The Guarantee will guarantee payments due in respect of the QUIPS to the
holders of the QUIPS (including holders of Normal Units so long as Normal Units
include QUIPS), but only to the extent that the Trust has funds on hand legally
available therefor. If the Company defaults on its obligation to pay amounts
payable in respect of the Junior Subordinated Debentures, the Trust will not
have sufficient funds to make the corresponding payments due in respect of the
QUIPS, and, in such event, holders of the QUIPS (including holders of Normal
Units so long as Normal Units include QUIPS) will not be able to rely upon the
Guarantee for payment of such amounts.
LIMITED ENFORCEMENT RIGHTS IN RESPECT OF JUNIOR SUBORDINATED DEBENTURES
In the event a Debenture Event of Default (as defined herein) shall have
occurred and be continuing and such event is attributable to the failure of the
Company to pay principal or interest on the Junior Subordinated Debentures on
the respective dates such principal or interest is payable (after giving effect
to any permitted deferral), then a holder of record of QUIPS (or, for so long as
QUIPS underlie Normal Units, a holder of record of Normal Units) may institute a
legal proceeding directly against the Company for enforcement of payment to such
holder of the portion of such principal or interest attributable to Junior
Subordinated Debentures having a principal amount equal to the aggregate QUIPS
Liquidation Amount of the QUIPS held by such holder (or underlying such holder's
Normal Units) (a "Direct Action"). Except as described herein, holders of QUIPS
will not be able to exercise directly any other remedy available to the holders
of the Junior Subordinated Debentures or to assert directly any other rights in
respect of the Junior Subordinated Debentures. See "Description of the
Units -- Description of the Junior Subordinated Debentures -- Enforcement of
Certain Rights by Holders of the QUIPS" and "-- Debenture Events of Default" and
"-- Description of the Guarantee". The Declaration will provide that each holder
of QUIPS (including each holder of Normal Units for so long as Normal Units
include QUIPS) by acceptance thereof agrees to the provisions of the Indenture
and the Guarantee.
16
<PAGE> 22
LIMITED VOTING AND OTHER RIGHTS
Holders of QUIPS (including holders of Normal Units for so long as Normal
Units include QUIPS) generally will have voting rights with respect to the QUIPS
relating only to the modification of the terms of the QUIPS and the exercise of
the Trust's rights as holder of the Junior Subordinated Debentures. Holders of
QUIPS will not be entitled to vote to appoint, remove or replace, or to increase
or decrease the number of, the Issuer Trustees or Administrators, which voting
rights are vested exclusively in the holder of the Common Trust Securities,
except as described under "Description of the Units -- Description of the
QUIPS -- Removal of Issuer Trustees and Administrators". See "Description of the
Units -- Description of the QUIPS -- Voting Rights; Amendment of the
Declaration".
Holders of Units will not be entitled to any rights with respect to the
Common Stock (including, without limitation, voting rights or rights to receive
any dividends or other distributions in respect thereof) until such time as the
Company shall have delivered shares of Common Stock upon settlement of the
Purchase Contracts on the Stock Purchase Date.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
The Units are novel securities for which there is currently no secondary
market. It is not possible to predict how the Units will trade in the secondary
market or whether the market for the Units will be liquid or illiquid.
Application will be made to list the Normal Units on the NYSE. The Underwriters
have advised the Company and the Trust that the Underwriters intend to make a
market for the Normal Units; however, the Underwriters are not obligated to do
so and any market making may be discontinued at any time.
TAX MATTERS
Should the Company exercise its right to defer payments of interest on the
Junior Subordinated Debentures, each holder of QUIPS (including each holder of
Normal Units for so long as Normal Units include QUIPS) will be required to
accrue income (as OID) in respect of the deferred stated interest allocable to
its QUIPS for United States Federal income tax purposes. As a result, during a
deferral period, each holder of QUIPS will recognize income for United States
Federal income tax purposes in advance of the receipt of cash and will not
receive the cash related to such income from the Trust if the holder disposes of
the QUIPS prior to the record date for the payment of distributions thereafter.
See "Certain Federal Income Tax Consequences -- Interest Received on the QUIPS".
In the event that holders of Units are required to pay Contract Fees to the
Company, it is unlikely such holders will be entitled to a current deduction for
such payments. As a result, although the amount of cash distributions made to
holders will be reduced by the amount of Contract Fees payable to the Company,
holders will nevertheless recognize income each quarter equal to the full amount
of interest received or accrued with respect to the QUIPS underlying the Units
held by such holder. See "Certain Federal Income Tax Consequences -- Contract
Fees".
Because income with respect to the QUIPS will not be considered dividends
for United States Federal income tax purposes, corporate holders of Normal Units
or QUIPS will not be entitled to a dividends-received deduction in respect of
such income.
17
<PAGE> 23
THE TRUST
The Trust is a statutory business trust created under the laws of the State
of Delaware pursuant to (i) a declaration of trust, dated as of February 10,
1998, executed by the Company, as Sponsor, and certain of the Issuer Trustees
and (ii) the filing of a certificate of trust with the Secretary of State of the
State of Delaware on February 10, 1998. Such declaration of trust will be
amended and restated in its entirety by the Declaration. The Declaration will be
qualified as an indenture under the Trust Indenture Act. The Trust exists for
the exclusive purposes of (i) issuing the Trust Securities representing
undivided beneficial interests in the assets of the Trust, (ii) investing the
proceeds of the Trust Securities in the Junior Subordinated Debentures and (iii)
engaging in only those other activities necessary or incidental thereto.
Accordingly, the Junior Subordinated Debentures will be the sole assets of the
Trust and payments under the Junior Subordinated Debentures will be the sole
revenues of the Trust. The Trust has a term of approximately seven (7) years,
but may dissolve earlier as provided in the Declaration. All of the Common Trust
Securities will be directly or indirectly owned by the Company. The Common Trust
Securities will rank pari passu, and payments will be made thereon pro rata,
with the QUIPS, except that, if certain events of default under the Declaration
have occurred and are continuing, the rights of the holders of the Common Trust
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the QUIPS. The Company will directly or indirectly acquire all of the Common
Trust Securities; such Common Trust Securities will have an aggregate
liquidation amount equal to 3% of the total capital of the Trust.
The Trust's business and affairs will be conducted by the Issuer Trustees
and Administrators appointed by the Company as the holder of the Common Trust
Securities. The Issuer Trustees will be The Bank of New York, as the Property
Trustee (the "Property Trustee"), and The Bank of New York (Delaware), as the
Delaware Trustee (the "Delaware Trustee"), and the Administrators will be three
individuals who are employees of the Company (the "Administrators"). The Bank of
New York, as the Property Trustee, will act as sole indenture trustee under the
Declaration for purposes of compliance with the provisions of the Trust
Indenture Act. The Bank of New York will also act as the Guarantee Trustee under
the Guarantee, until removed or replaced by the holder of the Common Trust
Securities. See "Description of the Units -- Description of the Guarantee" and
"Description of the Units -- Description of Junior Subordinated Debentures". The
Company, as the direct or indirect holder of the Common Trust Securities, or if
an event of default under the Declaration has occurred and is continuing, the
holders of a majority in Liquidation Amount of the Trust Securities, will be
entitled to appoint, remove or replace the Property Trustee and/or the Delaware
Trustee. In no event will the holders of the QUIPS (or Units) have the right to
vote to appoint, remove or replace the Administrators; such voting rights will
be vested exclusively in the Company, as the direct or indirect holder of the
Common Trust Securities. The duties and obligations of each Issuer Trustee and
Administrator are governed by the Declaration. The Company will pay directly all
fees, expenses, debts and obligations (other than the Trust Securities) related
to the Trust and the offering of the Units, including all ongoing costs,
expenses and liabilities of the Trust. Under the Declaration, all parties to the
Declaration will agree, and the holders of the Units upon purchase of their
Units will be deemed to have agreed, for United States Federal income tax
purposes, to treat the Trust as a grantor trust, the Junior Subordinated
Debentures as indebtedness and the Trust Securities as evidence of indirect
beneficial ownership of the Junior Subordinated Debentures. See "Description of
the Units -- Description of the Guarantee" and "-- Description of the QUIPS".
The Property Trustee will hold title to the Junior Subordinated Debentures
for the benefit of the holders of the Trust Securities and the Property Trustee
will have the power to exercise all rights, powers and privileges under the
Indenture as the holder of the Junior Subordinated Debentures. In addition, the
Property Trustee will maintain exclusive control of a segregated non-interest
bearing
18
<PAGE> 24
bank account (the "Property Account") to hold all payments made in respect of
the Junior Subordinated Debentures for the benefit of the holders of the Trust
Securities. The Property Trustee will make payments of distributions and
payments on liquidation, redemption and otherwise to the holders of the Trust
Securities out of funds from the Property Account. The Guarantee Trustee will
hold the Guarantee for the benefit of the holders of the QUIPS. See "Description
of the Units -- Description of the Junior Subordinated Debentures".
The rights of the holders of the QUIPS, including economic rights, rights
to information and voting rights, are set forth in the Declaration, the Delaware
Business Trust Act and the Trust Indenture Act. See "Description of the
Units -- Description of the QUIPS".
The principal place of business of the Trust is Life Re Capital Trust II,
c/o Life Re Corporation, 969 High Ridge Road, Stamford, Connecticut 06905, and
its telephone number is (203) 321-3000.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Units,
after deducting estimated underwriting discounts and expenses of the offering
made hereby payable by the Company, are expected to be $93.0 million
(approximately $107.0 million if the Underwriters' over-allotment option is
exercised in full). The net proceeds to the Company from the Common Stock
Offering (assuming it is consummated), after deducting estimated underwriting
discounts and expenses of the Common Stock Offering payable by the Company, are
expected to be $201.4 million. The proceeds to be received by the Trust from the
sale of the QUIPS will be invested by the Trust in the Junior Subordinated
Debentures of the Company. The Company intends to use such net proceeds from the
offering made hereby and the Common Stock Offering to provide additional capital
to its Subsidiaries to support recently announced and recently completed
transactions and the continued growth of its businesses, as well as for general
corporate purposes. Funds not required immediately for such purposes may be
invested in short-term obligations or used to reduce the future level of the
Company's indebtedness.
The offering made hereby and the Common Stock Offering are independent
offerings and consummation of either of the offerings is not conditioned upon
consummation of the other offering. There can be no assurance that the Common
Stock Offering will be consummated.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratios of earnings to fixed
charges for the years and periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------
SEPTEMBER 30, 1997 1996 1995 1994 1993 1992
------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Excluding interest on annuities and
financial products (1)................... 7.0x 9.8x 6.0x 6.6x 6.9x 4.2x
Including interest on annuities and
financial products (2)................... 2.4x 2.8x 2.7x 3.2x 3.4x 2.8x
</TABLE>
- ---------------
(1) For purposes of determining this ratio, earnings consist of income before
federal income taxes and extraordinary charge (1995 and 1992), plus fixed
charges. Fixed charges consist of interest expense on debt, distributions on
capital securities, dividends on preferred stock of TexasRe (1992) and the
portion of operating leases that are representative of the interest factor.
(2) Same as the ratio of earnings to fixed charges, excluding interest on
annuities and financial products, except fixed charges and earnings include
interest on annuities and financial products.
19
<PAGE> 25
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock of the Company has been listed for trading on the NYSE
since October 28, 1992, the date of the Company's initial public offering, under
the symbol LRE. Based upon information reported in the Bloomberg consolidated
transaction reporting system, the high and low sales prices for each quarterly
period from January 1, 1996 to the date hereof were:
<TABLE>
<CAPTION>
PRICE RANGE
------------
HIGH LOW
---- ---
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
First quarter............................................. $27 3/8 $22 1/2
Second quarter............................................ 31 27 1/2
Third quarter............................................. 36 26 5/8
Fourth quarter............................................ 38 5/8 33 3/4
YEAR ENDED DECEMBER 31, 1997
First quarter............................................. 45 3/8 38 5/8
Second quarter............................................ 48 1/8 37 3/8
Third quarter............................................. 56 46 5/8
Fourth quarter............................................ 65 3/8 52 1/16
YEAR ENDED DECEMBER 31, 1998
First quarter (through March 9, 1998)..................... 67 5/8 57 1/2
</TABLE>
As of March 9, 1998, there were approximately 3,200 holders of the
outstanding shares of Common Stock, including individual participants in
securities position listings. The last reported sales price of the Common Stock
on the NYSE on March 9, 1998 was $64 3/4 per share.
Dividends of $0.07 per share, $0.10 per share and $0.13 per share were
declared in each calendar quarter of 1995, 1996 and 1997, respectively. On
February 12, 1998, the Company's Board of Directors declared a dividend of $0.15
per share to be paid on March 25, 1998 to shareholders of record as of March 4,
1998.
The declaration and payment of future dividends to holders of its Common
Stock by the Company will be at the discretion of the Board of Directors and
will depend upon the Company's earnings and financial condition, capital
requirements of its Subsidiaries, regulatory considerations and other factors
the Board of Directors deems relevant. The Company's general policy is to retain
most of its earnings to finance the growth and development of its business.
Because the Company is a holding company, it is dependent upon its
Subsidiaries to provide funding for the Company's operating expenses and for the
payment by the Company of debt service and dividends. State insurance laws
applicable to the Company's Subsidiaries limit the payment of dividends and
other distributions by such Subsidiaries to the Company and may therefore limit
the ability of the Company to make dividend payments. See "Risk
Factors -- Holding Company Structure; Reliance on Dividends from Insurance
Subsidiaries" and "Business -- Regulation -- Restrictions on Dividends and
Distributions".
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<PAGE> 26
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at September 30, 1997 and as adjusted to reflect the sale by the Company
of the 1,500,000 Units offered hereby (at an assumed initial public offering
price of $64 1/4 and assuming the Underwriter's over-allotment option is not
exercised) and the sale by the Company of 3,300,000 shares of Common Stock in
the Common Stock Offering (at an assumed initial public offering price of
$64 1/4), and the application of the net proceeds therefrom, after deducting
estimated underwriting discount and expenses of the offering made hereby and the
Common Stock Offering. The capitalization information set forth in the table
below is qualified by, and should be read in conjunction with, the more detailed
consolidated financial statements and notes thereto incorporated by reference
herein. See "Use of Proceeds".
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Loans payable............................................... $125,000 $125,000
Company-obligated, mandatorily redeemable capital securities
of Life Re Capital Trust I................................ 100,000 100,000
Company-obligated, mandatorily redeemable capital securities
of Life Re Capital Trust II............................... -- 96,375
Shareholders' equity:
Common Stock, par value $.001 per share; authorized
40,000,000 shares; 15,830,785 shares issued, actual;
and 19,130,785 issued, as adjusted(1).................. 16 19
Paid-in capital........................................... 107,974 309,395
Net unrealized appreciation of securities................. 47,278 47,278
Retained earnings......................................... 236,460 236,460
Treasury stock, at cost (2,196,469 shares)................ (47,762) (47,762)
-------- --------
Total shareholders' equity........................... 343,966 545,390
-------- --------
Total capitalization.............................. $568,966 $866,765
======== ========
</TABLE>
- ---------------
(1) Does not include (i) 2,828,275 shares of Common Stock issuable upon exercise
of outstanding stock options or (ii) up to 1,500,000 shares (1,725,000
shares if the Underwriters' over-allotment option is exercised in full) of
Common Stock issuable on the Stock Purchase Date of , 2001 upon
settlement of the Purchase Contracts.
21
<PAGE> 27
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the Company's
consolidated financial statements, with the QUIPS shown on the Company's balance
sheet under the caption "Company-obligated, mandatorily redeemable capital
securities of subsidiary trust". The financial statement footnotes to the
Company's consolidated financial statements will reflect that the sole asset of
the Trust will be the Junior Subordinated Debentures. Dividends on the QUIPS
will be reflected as a charge to the Company's consolidated income, identified
as "Distributions on capital securities", whether paid or accrued.
The Purchase Contracts are forward transactions in the Company's Common
Stock. Under generally accepted accounting principles, the Purchase Contracts
will not be recorded on the Company's consolidated balance sheets but will be
disclosed in the notes to the Company's consolidated financial statements. Upon
settlement of a Purchase Contract, the Company will receive the Stated Amount on
such Purchase Contract and will issue the requisite number of shares of Common
Stock. The Stated Amount thus received will be credited to shareholders' equity
allocated between the common stock and paid-in capital accounts.
Prior to the issuance of shares of Common Stock upon settlement of the
Purchase Contracts, it is anticipated that the Units will be reflected in the
Company's diluted earnings per share calculations using the treasury stock
method. Under this method, the number of shares of Common Stock used in
calculating diluted earnings per share is deemed to be increased by the excess,
if any, of the number of shares issuable upon settlement of the Purchase
Contracts over the number of shares that could be purchased by the Company in
the market (at the average market price during the period) using the proceeds
receivable upon settlement. Consequently, it is anticipated there will be no
dilutive effect on the Company's diluted earnings per share except during
periods when the average market price of Common Stock is above the Threshold
Appreciation Price.
22
<PAGE> 28
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data below should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1996 and Quarterly Report on Form 10-Q for the quarter ended September 30,
1997 incorporated by reference herein. See "Incorporation of Certain Documents
by Reference". The selected historical financial data at and for the years ended
December 31, 1996, 1995, 1994, 1993 and 1992 are derived from the consolidated
financial statements of the Company. The selected consolidated financial data at
September 30, 1997 and for the nine months ended September 30, 1997 and 1996 are
derived from the unaudited condensed consolidated financial statements of the
Company, which have been prepared on the same basis as the Company's audited
consolidated financial statements and, in the opinion of management, contain all
adjustments consisting of only normal recurring adjustments necessary for a fair
presentation of the financial position and results of operations for these
periods. The results of operations for the nine months ended September 30, 1997
may not be indicative of results for the full year.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Policy revenues............................ $360.9 $328.9 $451.0 $383.2 $350.9 $289.0 $250.9
Investment income.......................... 110.0 89.9 124.3 98.6 82.4 73.5 72.6
Realized investment gains.................. 2.9 15.7 17.2 3.7 0.1 21.0 27.1
Equity in earnings of investee............. -- -- -- -- -- -- 4.3
------ ------ ------ ------ ------ ------ ------
Total revenues....................... 473.8 434.5 592.5 485.5 433.4 383.5 354.9
------ ------ ------ ------ ------ ------ ------
Benefits and Expenses:
Policy benefits............................ 252.5 245.6 332.5 281.5 245.8 208.7 171.5
Policy acquisition costs .................. 105.1 81.6 111.9 95.7 88.7 71.1 65.5
Interest credited to policyholder accounts
......................................... 28.6 24.1 34.6 21.2 15.0 15.0 15.0
Interest expense........................... 6.0 6.5 8.4 10.7 9.1 9.9 18.9
Distributions on capital securities........ 2.8 -- -- -- -- -- --
Other operating expenses .................. 25.0 21.0 29.0 21.6 22.0 18.1 15.4
------ ------ ------ ------ ------ ------ ------
Total benefits and expenses.......... 420.0 378.8 516.5 430.8 380.6 322.8 286.3
------ ------ ------ ------ ------ ------ ------
Income before federal income taxes and
extraordinary charge....................... 53.8 55.8 76.1 54.8 52.8 60.6 68.6
Provision for federal income taxes........... 18.8 14.8 21.9 19.2 18.5 21.4 23.5
------ ------ ------ ------ ------ ------ ------
Income before extraordinary charge........... 34.9 41.0 54.2 35.6 34.3 39.2 45.0
Extraordinary charge, net of federal income
tax benefit................................ -- -- -- 1.0 -- -- 8.6
------ ------ ------ ------ ------ ------ ------
Net income................................... $ 34.9 $ 41.0 $ 54.2 $ 34.6 $ 34.3 $ 39.2 $ 36.4
====== ====== ====== ====== ====== ====== ======
Net income (excluding realized investment
gains and extraordinary charge)............ $ 33.1 $ 26.0 $ 38.3 $ 33.2 $ 34.3 $ 25.8 $ 27.0
====== ====== ====== ====== ====== ====== ======
Diluted earnings per share(1):
Income before extraordinary charge......... $ 2.47 $ 2.94 $ 3.89 $ 2.39 $ 2.21 $ 2.50 $ 3.45
Extraordinary charge, net of federal income
tax benefit.............................. -- -- -- (0.07) -- -- (0.76)
------ ------ ------ ------ ------ ------ ------
Net income................................. $ 2.47 $ 2.94 $ 3.89 $ 2.32 $ 2.21 $ 2.50 $ 2.69
Net income (excluding realized investment
gains and extraordinary charge)(2)....... $ 2.34 $ 1.87 $ 2.75 $ 2.22 $ 2.21 $ 1.63 $ 2.11
Common dividends per share................... $ 0.39 $ 0.30 $ 0.40 $ 0.28 $ 0.24 $ 0.20 --
Preferred stock dividends.................... -- -- -- -- -- -- $ 5.7
Weighted average common and common equivalent
shares..................................... 14.2 13.9 13.9 14.9 15.5 15.7 11.4
</TABLE>
23
<PAGE> 29
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------- ---------- --------- --------- --------- ---------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD
END):
Invested assets................ $2,156.5 $ 1,833.2 $ 1,504.2 $ 998.5 $ 944.6 $ 845.2
Total assets................... 2,908.4 2,519.3 2,024.1 1,442.3 1,339.7 1,167.2
Loans payable.................. 125.0 125.0 140.0 140.0 150.0 165.0
Capital securities............. 100.0 -- -- -- -- --
Common shareholders' equity.... 344.0 290.1 279.3 194.9 230.7 170.8
Common shareholders' equity
(excluding unrealized
investment gains and
losses)...................... 296.7 265.3 229.9 228.8 198.2 162.1
OTHER FINANCIAL DATA (AS OF OR
FOR THE PERIOD ENDED):
Return on average shareholders'
equity(3).................... 16% 15% 14% 16% 14% *
Book value per common
share(4)..................... $ 21.8 $ 19.6 $ 16.5 $ 14.8 $ 12.8 $ 10.4
First year premiums assumed.... 45.4 38.2 22.6 19.3 13.6 14.8
Capital invested in
Administrative Reinsurance
transactions(5).............. 34.4 32.0 35.9 -- -- --
Life insurance in force(6) .... ** 116,012 91,283 81,213 79,652 74,408
Statutory capital and
surplus(6)................... 266.0 209.3 208.2 193.8 187.4 214.1
</TABLE>
- ---------------
* Not meaningful.
** Not available.
(1) Diluted earnings per share have been calculated in accordance with SFAS 128.
Basic earnings per share in accordance with SFAS 128 for the nine months
ended September 30, 1997 and 1996 were $2.99 and $2.57, respectively, and
for the years ended 1996, 1995, 1994, 1993 and 1992 were $3.97, $2.32,
$2.21, $2.53 and $3.82, respectively. The adoption of SFAS 128 did not
result in the restatement of previously reported earnings per share, as
diluted earnings per share calculated in accordance with SFAS 128 results in
the same per share amounts as previously reported by the Company.
(2) Net income per share (excluding realized investment gains and extraordinary
charge) for the year ended December 31, 1992 has been adjusted to reflect
the refinancings of debt and preferred stock and the initial public
offering.
(3) Return on average shareholders' equity is calculated by dividing net income
(excluding realized investment gains and extraordinary charge) by average
shareholders' equity for the period (which is the simple average of
beginning and end of period shareholders' equity excluding unrealized
investment gains or losses). Return on average shareholders' equity for the
nine months ended September 30, 1997 has been annualized.
(4) Book value per common share is calculated by dividing end of period
shareholders' equity (excluding unrealized investment gains and losses) by
end of period common shares outstanding.
(5) Capital invested in Administrative Reinsurance transactions represents the
sum of the consideration paid for life insurance in force acquired and the
related capital to support the business.
(6) Amounts have been derived from the Annual Statements of Life Reassurance,
REALIC and TexasRe, as filed with insurance regulatory authorities and
prepared in accordance with statutory accounting practices. For purposes of
this presentation, capital and surplus are defined as statutory capital and
surplus of Life Reassurance only, as its capital and surplus materially
reflect that of Life Reassurance, REALIC and TexasRe, plus the AVR and the
IMR of Life Reassurance and REALIC.
24
<PAGE> 30
RECENT DEVELOPMENTS
RESULTS OF OPERATIONS (UNAUDITED)
On February 12, 1998, the Company announced that for the year ended
December 31, 1997, operating earnings (net income excluding after-tax realized
investment gains) totaled $46.6 million, or $3.28 per share, compared to $38.3
million, or $2.75 per share in 1996, representing a 19% increase on a per share
basis. Net income for the yearly periods totaled $49.5 million and $54.2
million, respectively. After-tax realized investment gains were $2.9 million in
1997 and $15.9 million in 1996, with 1996 gains including a $13.5 million gain
resulting from the sale of a strategic investment.
Fourth quarter operating earnings totaled $13.5 million, or $.94 per share,
compared to $12.2 million, or $.88 per share in last year's fourth quarter,
representing a 7% increase on a per share basis. For the same periods, net
income totaled $14.6 million, or $1.01 per share, and $13.2 million, or $.95 per
share. After-tax realized investment gains were $1.1 million and $1.0 million in
each of the respective quarterly periods.
Total revenues for the year were $645.8 million, an increase of 9% over
last year's total of $592.5 million. Total revenues in 1997 include realized
investment gains of $4.5 million compared to $17.2 million in 1996. Policy
revenues increased by 9% for the same period to $490.3 million from $451.0
million last year. Ordinary life policy revenues increased by 17% to $336.6
million from $286.9 million and group policy revenues decreased by 6% to $153.6
million from $164.1 million. Investment income increased by 21% to $151.0
million from $124.3 million last year.
Revenues totaled $172.0 million in the fourth quarter compared to $158.0
million last year, an increase of 9%. This increase is mainly attributable to
investment earnings which increased by 19% to $40.9 million from $34.5 million.
Policy revenues increased by 6% to $129.4 million from $122.0 million and
realized investment gains were basically level. Ordinary life policy revenues
increased by 17% to $90.1 million from $77.2 million, and group policy revenues
decreased by 12% to $39.3 million from $44.9 million.
In 1997, the Company made a strategic decision to withdraw from the group
accident and health and special risk reinsurance business. Group accident and
health and special risk revenues for 1997 were $121.2 million, compared to
$139.7 million for 1996, representing a 13% decrease. The Company anticipates
further decreases of 50% in 1998 and 80% in 1999. The Company does not expect
this line of business to affect materially future results.
25
<PAGE> 31
UNAUDITED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1997 1996
-------- --------
(IN MILLIONS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Policy revenues........................................... $490.3 $451.0
Investment income......................................... 151.0 124.3
Realized investment gains................................. 4.5 17.2
------ ------
Total revenues.................................... 645.8 592.5
Benefits and expenses:
Policy claims and benefits................................ 341.0 332.5
Policy acquisition costs.................................. 142.1 111.9
Interest credited to policyholder accounts................ 40.7 34.6
Interest expense.......................................... 8.0 8.4
Distributions on capital securities....................... 5.0 --
Other operating expenses.................................. 32.7 29.0
------ ------
Total benefits and expenses....................... 569.5 516.5
------ ------
Income before federal income taxes.......................... 76.2 76.1
Provision for federal income taxes.......................... 26.7 21.9
------ ------
Net income.................................................. $ 49.5 $ 54.2
====== ======
Earnings per share:
Basic earnings per share.................................. $ 3.64 $ 3.97
Diluted earnings per share................................ $ 3.48 $ 3.89
Diluted earnings per common share, excluding realized
investment gains....................................... $ 3.28 $ 2.75
Dividends per share......................................... $ 0.52 $ 0.40
Weighted average shares outstanding (diluted)............... 14.2 13.9
POLICY REVENUES:
Ordinary life reinsurance
First year................................................ $ 58.1 $ 36.2
Renewal................................................... 246.1 232.7
Group life reinsurance...................................... 15.2 23.2
Administrative Reinsurance.................................. 32.4 18.0
Automobile credit life and disability....................... 17.3 1.2
Group accident and health and special risk reinsurance...... 121.2 139.7
------ ------
Total policy revenues............................. $490.3 $451.0
====== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
(IN
MILLIONS)
<S> <C>
BALANCE SHEET AND OTHER FINANCIAL DATA:
Invested assets
At fair value............................................. $2,784.6
At book value............................................. 2,683.2
Total assets................................................ 3,700.2
Loans payable............................................... 125.0
Capital securities.......................................... 100.0
Common shareholders' equity:
Including unrealized investment gains and losses.......... 373.8
Excluding unrealized investment gains and losses.......... 312.4
Return on average shareholders' equity (excluding realized
and unrealized investment gains and losses)............... 16%
</TABLE>
26
<PAGE> 32
ADMINISTRATIVE REINSURANCE TRANSACTIONS
Through its acquisition of REALIC in 1995, the Company put into place a
platform for acquiring and administering blocks of insurance in force. This
platform, known as Administrative Reinsurance, provides a mechanism for an
insurer to transfer to the Company administrative responsibilities to facilitate
the insurer's exit from a line of business by means of reinsurance or sale.
Since December 1997, the Company has entered into three Administrative
Reinsurance transactions in which the Company has acquired or expects to acquire
approximately $1.1 billion in assets and approximately 385,000 policies for
administration.
In December 1997, the Company entered a coinsurance transaction whereby the
Company and ERAC will coinsure a block of life insurance and annuity business
from Allianz. Under the transaction, the Company, in conjunction with ERAC, will
coinsure certain universal life and traditional life insurance policies and
annuity contracts. The Company's agreement with ERAC provides that the Company
initially will reinsure 20% of the total block of business. Based on the terms
of its agreement, the Company expects that its share of the total block of
business being reinsured will increase to 60% over a period of several years.
The total block of business being coinsured entails $1.1 billion of life
insurance and annuity reserves, $90 million of annualized premiums and
approximately 225,000 policies. Under its agreement with ERAC, the Company will
have the primary responsibility for management oversight and administration of
the block of business. The transaction closed in December 1997.
Also in December 1997, the Company entered into an agreement to acquire
Mission Life for a purchase price of approximately $60 million. Mission Life's
business is concentrated in life insurance policies designed to meet final
expenses. As of September 30, 1997, Mission Life had statutory assets of $225
million, and statutory capital and surplus including AVR of $27 million. Mission
Life's estimated 1997 premium income is $38 million, with over 130,000 policies
in force. The transaction closed in February 1998.
In February 1998, the Company entered into an agreement to acquire Lincoln
Liberty and First Delaware for an estimated purchase price of $50 million,
including adjusted capital and surplus and AVR of approximately $29 million.
Lincoln Liberty's and First Delaware's businesses primarily consist of
traditional and universal life insurance policies. For the year ended December
31, 1997, on a combined basis, Lincoln Liberty and First Delaware had estimated
premiums of $7 million and, at year end, estimated total assets, including
adjusted capital and surplus, of $219 million. The agreement, which is subject
to certain conditions including insurance regulatory approvals, targets a
closing date in the first quarter of 1998.
These transactions had no impact on the Company's 1997 results of
operations, but are anticipated to contribute to 1998 results of operations.
OTHER
On February 12, 1998, the Company's Board of Directors authorized and
declared an increase in the Company's annualized cash dividend to $0.60 per
share from $0.52 per share, or to $0.15 per share per quarter from $0.13. The
increase is effective with the first quarter 1998 dividend payment. The first
quarter dividend for 1998 is payable on March 25, 1998 to stockholders of record
at the close of business on March 4, 1998. Furthermore, the Board of Directors
of the Company has elected to discontinue the Company's stock repurchase
program. In addition, the Board of Directors approved an amendment to the
Company's stock option plan, to be effective as of the date it is approved by
stockholders, whereby 1,500,000 additional shares will be allocated to the plan.
The Company traditionally awards options pursuant to its stock option plan
to members of senior management in January of each year. The next such grant
will be in January 1999. These grants are intended to reinforce the executives'
common interests with stockholders, provide additional incentive to increase
stockholder value and to help retain key executive talent.
27
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information has been derived from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 and the Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1997 and has
been included herein for the convenience of the reader.
GENERAL
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
developed by management. Any adjustments to reported bases of assets or
liabilities resulting from changes in estimates are reflected in earnings in the
period the estimates are revised. Certain management estimates are based, in
part, on information provided by ceding companies. As is usual in the
reinsurance business, the Company's ceding companies periodically update, refine
and revise reinsurance information provided to the Company. The financial
effects resulting from the incorporation of revised data are reflected in
earnings as changes in estimates.
Mortality and morbidity experience, both significant factors in the
determination of the results of operations of the Company, generally are
predictable over time but are subject to fluctuations from year to year and
quarter to quarter. Significant fluctuations from period to period could
adversely affect the Company's results of operations.
The Company's reinsurance agreements frequently provide for rights of
recapture, which permit the ceding company to increase the amount of liability
it retains on the reinsured policies after the policies have remained in force
for a designated period of time (generally ten to twenty years). Accordingly, an
increase in the amount of liability retained by the ceding company will decrease
both the Company's insurance in force and premiums to be received from the
reinsured policies. To date, recaptures have not had a material impact on the
Company's results of operations.
The Company retrocedes portions of certain risks in excess of a
predetermined retention amount for which it has accepted liability. From time to
time, the Company also has entered into quota share retrocessional agreements,
and maintained catastrophe reinsurance to protect against catastrophic event
risks. Failure of a retrocessionaire to honor its obligations could result in
material losses to the Company; to date, no such losses have occurred. No
amounts due the Company from its retrocessionaires were deemed uncollectible at
December 31, 1996.
The Company is party to several reinsurance agreements for which
transactions are denominated in Canadian currency. The assets and liabilities
related to such reinsurance agreements are remeasured in U.S. dollars, the
functional currency, at current exchange rates as of the end of each reporting
period. Deterioration in the exchange rate of Canadian currency could have an
adverse effect on results of operations. At December 31, 1996, the Company had
$37.2 million of net assets denominated in Canadian currency. The Company has
not engaged in hedging or any other activities to mitigate the effect on
earnings of a deterioration in the exchange rate of Canadian currency.
The Company's total policy revenues have increased in each year since 1992.
However, should the Company be unable to generate sufficient new business to
offset the expected future decline in policy revenues associated with the
current business in force due to lapsation and mortality, the Company's results
of operations could be adversely affected.
In 1996, the Company derived approximately 60% of its policy revenues from
the reinsurance of ordinary life insurance policies under agreements with ceding
companies which cover new business to be written by the client and/or existing
blocks of in force business. This business generally is written on a direct
basis and is written under agreements with approximately 450 ceding companies.
In 1996, forty-five ceding companies each accounted for at least $1.0 million of
ordinary life reinsurance policy revenues and in the aggregate represented
approximately 89% of the Company's ordinary life reinsurance policy revenues.
28
<PAGE> 34
The Company's group life reinsurance business, which accounted for
approximately 5% of policy revenues in 1996, is written on a direct basis and
generally is excess of loss and often includes experience rating provisions.
Approximately 30% of the Company's policy revenues were generated from
group accident and health and special risk reinsurance in 1996. This business
generally is written on an annual basis through reinsurance facilities which are
managed by managing general underwriters. Generally the risks are shared by
several reinsurers on a quota share basis.
The remainder of 1996 policy revenues was derived from Administrative
Reinsurance. This business represents the acquisition of closed blocks of
primary insurance policies (both interest sensitive and traditional) and annuity
contracts and is expected to become a more significant component of policy
revenues in the future.
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
RECENT TRANSACTIONS
Through its acquisition of REALIC in 1995, The Company put into place a
platform for acquiring and administering blocks of insurance in force. This
platform, known as Administrative Reinsurance, provides a mechanism for an
insurer to transfer to REALIC administrative responsibilities to facilitate the
insurer's exit from a line of business by means of reinsurance or sale.
During 1996, the Company, through REALIC, completed several such
transactions (collectively, "Transactions"). The Transactions increased total
assets and liabilities by approximately $400 million. The assets received
consisted primarily of cash and high quality investments and the liabilities
assumed consisted primarily of future policy benefits on traditional life
insurance policies and account values on annuities and interest sensitive life
insurance policies. For 1996, the Transactions contributed policy revenues
totaling $10.9 million and approximately $10.8 million of investment income.
RESULTS OF OPERATIONS
NET INCOME. Net income increased by $19.6 million in 1996 to $54.2
million, or $3.89 per share, compared with $34.6 million, or $2.32 per share, in
1995 and $34.3 million, or $2.21 per share, in 1994. Included in these results
were after-tax realized investment gains of $15.9 million and $2.4 million in
1996 and 1995, respectively. In March 1996, the Company realized a gain of $13.5
million from the sale of its equity investment in Nacolah Holding Corporation
("Nacolah"), parent of The North American Company for Life and Health Insurance.
The Company utilized existing tax net operating loss carryforwards to offset the
taxes otherwise payable in connection with the gain, and reversed an existing
deferred tax valuation allowance, resulting in a tax benefit of $4.8 million.
Net income in 1995 also included an extraordinary charge amounting to $1.0
million, which resulted from the write-off of unamortized loan costs associated
with amending and restating the 1992 Credit Agreement.
Earnings before realized investment gains and federal income taxes
increased by $7.8 million to $58.9 million in 1996 compared with $51.1 million
in 1995 and $52.7 million in 1994. The increase in 1996 was primarily due to
earnings from the Transactions and increased business in force within ordinary
reinsurance.
29
<PAGE> 35
POLICY REVENUES. Policy revenues by major source for the three year period
are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Ordinary reinsurance................................... $268.9 $243.7 $225.0
Group reinsurance...................................... 164.1 136.8 125.9
Administrative Reinsurance............................. 18.0 2.7 --
------ ------ ------
Total........................................ $451.0 $383.2 $350.9
====== ====== ======
</TABLE>
The growth in ordinary reinsurance revenues was largely due to new
reinsurance agreements entered into during the last two years, as first year
premiums totaled $36.2 million in 1996 and increased by 68% and 17% during 1996
and 1995, respectively. The ordinary reinsurance lapse rate has ranged from
9-11% during the last three years.
Group reinsurance policy revenues consist of life, accident and health,
special risk and credit coverages. During the last three years, the Company's
group accident and health and special risk reinsurance business increased
substantially over previous levels. Group accident and health and special risk
reinsurance policy revenues increased from $102.0 million in 1994 to $112.4
million in 1995 and $139.7 million in 1996. This growth resulted principally
from increased participation in major medical and accident reinsurance pools and
quota share arrangements, which are organized and managed by professional
managing general underwriters. The rate of growth experienced in accident and
health and special risk policy revenues is not expected to continue due to
management's decision to selectively reduce or eliminate participation in
certain pool arrangements to better balance the mix of risks reinsured.
The growth in Administrative Reinsurance policy revenues has been due to
the Transactions. Future revenue growth from Administrative Reinsurance depends
on the Company's ability to identify and complete similar transactions.
INVESTMENT INCOME. Investment income increased by 26% in 1996 to $124.3
million and by 20% in 1995 to $98.6 million. These increases were largely due to
the growth in invested assets from the REALIC acquisition in 1995 and the
Transactions completed in 1996. This rate of growth is dependent on new
Administrative Reinsurance transactions and, to a lesser extent, new ordinary
reinsurance business. The weighted average portfolio yield rate (amortized cost
basis) was 7.8% in 1996 and 8.2% in 1995 and 1994.
POLICY BENEFITS. Policy benefits increased by 18% in 1996 and 15% in 1995.
These increases resulted from higher volumes of group business and increased
life insurance in force, which was significantly impacted by the acquisition of
REALIC and the completion of the Transactions. As a percentage of policy
revenues, policy benefits were 74% in each of 1996 and 1995 and 70% in 1994. The
increase experienced in the last two years was primarily due to an increase in
revenues generated under reinsurance treaties with no acquisition costs,
coinsurance involving paid-up insurance and Administrative Reinsurance, which
produces no new business and, therefore, generally has a higher ratio of
benefits to policy revenues.
POLICY ACQUISITION COSTS. Policy acquisition costs increased by 17% in
1996 and 8% in 1995. These increases reflect the higher volumes of ordinary and
group accident and health reinsurance business and the Transactions. As a
percentage of policy revenues, policy acquisition costs were 25% in each of
1996, 1995 and 1994.
INTEREST CREDITED TO POLICYHOLDER ACCOUNTS. Interest credited to
policyholder accounts increased by 63% to $34.6 million in 1996 and by 42% to
$21.2 million in 1995. These increases are attributable to the acquisition of
REALIC and the Transactions as the majority of the policy benefit liabilities
acquired in these transactions are interest sensitive.
30
<PAGE> 36
INTEREST EXPENSE. Interest expense, including facility fees and agency
fees, decreased to $8.4 million in 1996 from $10.7 million in 1995 and $9.1
million in 1994. This decrease was due to (i) a decrease in the weighted average
variable rate charged on outstanding debt, which decreased to 6.2% in 1996 from
7.1% in 1995 and (ii) a decrease in the outstanding principal balance to $125.0
million resulting from the first quarter of 1996 repayment of $15.0 million. The
effective interest rate as of December 31, 1996 was 6.0%.
OTHER OPERATING EXPENSES. Other operating expenses increased significantly
in 1996 mainly due to (i) third party administration fees incurred by REALIC,
(ii) higher compensation costs related to the Transactions and (iii) higher
staffing levels. REALIC utilizes the services of a third party administrator to
administer all of its business; accordingly, to the extent the Company is
successful in expanding Administrative Reinsurance, its operating expenses will
continue to increase. Other operating expenses were essentially level in 1995
and 1994 as Canadian currency remeasurement losses incurred in 1994 totaling
$4.2 million were partially offset by third party administrator fees incurred in
connection with Administrative Reinsurance and by higher employee-related and
consulting costs in 1995.
The effective federal income tax rate was 29% in 1996 compared with the
statutory rate of 35%. The federal income tax expense is net of a $4.8 million
tax benefit resulting from the reversal of a deferred tax valuation allowance in
connection with the realized investment gain on the Nacolah transaction. In 1995
and 1994, the effective federal income tax rate was 35%.
FINANCIAL CONDITION AND LIQUIDITY
INVESTMENTS. Invested assets at fair value amounted to $1,833.2 million
and $1,504.2 million at December 31, 1996 and 1995, respectively. The increase
in invested assets in 1996 resulted from the Transactions partially offset by a
decrease in unrealized investment gains. Net unrealized gains on invested assets
totaled $39.7 million and $82.5 million at year end 1996 and 1995, respectively,
and generally reflect the increase in interest rates from period to period.
The Company's investment policy is designed to maintain a high quality
portfolio, maximize current income, maintain a high degree of liquidity, and
match the cash flows of the portfolio to the required cash flows of the
Company's liabilities.
The Company does not engage in trading activities to generate realized
investment gains and, thus, does not have a trading portfolio. However, the
Company evaluates the desirability of continuing to hold a security when market
conditions, creditworthiness or other measurement factors change. These changes
may relate to a change in the credit risk of an issuer and a decision to sell
may be made to avoid further declines in realizable value. Securities also may
be sold prior to maturity to provide liquidity should the need arise.
The Company's fixed maturity securities, which constituted 94%, or $1,720.6
million, of the total fair value of its invested assets as of December 31, 1996,
are predominantly investment grade, liquid securities with varying maturity
dates. The fair value of such investments may vary depending on economic and
market conditions, the level of interest rates and the perceived
creditworthiness of the issuer.
At December 31, 1996, approximately $75.8 million (at fair value), or 4%,
of the Company's invested assets consisted of below investment grade securities.
The Company generally limits its investments in fixed maturities that are rated
below investment grade, as these investments are subject to a higher degree of
credit risk than investment grade securities. The Company closely monitors its
below investment grade securities as well as the creditworthiness of the
portfolio as a whole. When fair values decline for reasons other than changes in
interest rates or other perceived temporary conditions, the security is written
down to its net realizable value. In 1996, 1995 and 1994, the Company wrote down
the value of certain securities by $0.5 million, $0.9 million, and $1.3 million,
respectively. The Company had no fixed maturities in default at December 31,
1996.
31
<PAGE> 37
The results of operations and the financial condition of the Company are
significantly affected by the performance of its investments and by changes in
interest rates. During a period of declining interest rates, if the Company's
investments are prematurely sold, called, prepaid or redeemed, the Company would
be unable to reinvest the proceeds in securities with comparable rates of
return. During a period of rising interest rates, the fair value of the
Company's invested assets could decline. In addition, rising interest rates
could also cause disintermediation which in turn could cause the Company to be
required to sell investments at prices and times when the fair values of such
investments are less than their amortized cost. The Company believes that its
traditional life insurance liabilities are not highly interest sensitive and,
therefore, the effects of fluctuating interest rates on these liability cash
flows are not significant. For interest sensitive liabilities, the Company
utilizes asset/liability management to minimize the impact of changes in
interest rates. The Company has not engaged in hedging activities to mitigate
the effects of interest rate changes on its invested assets.
At December 31, 1996, collateralized mortgage obligations and
mortgage-backed pass-through securities represented approximately 21% of the
Company's invested assets. Certain of such investments may be subject to
significant prepayment risk and, therefore, are susceptible to fluctuations in
the level of interest rates.
During 1996, 1995 and 1994, proceeds from sales of fixed maturities
amounted to $253.4 million, $370.8 million and $134.8 million, respectively. The
net gains realized from such sales were $1.8 million, $4.5 million and $0.4
million for the respective periods. The majority of the 1996 and 1995 sales was
attributable to the restructuring of portfolios acquired in connection with the
acquisition of REALIC and the completion of the Transactions.
Real estate and mortgages (at cost) totaled $7.0 million at December 31,
1996 and were acquired as part of the Transactions. Mortgage loans comprise the
majority of this amount.
POLICY BENEFIT LIABILITIES. The Company's obligations for policy benefit
liabilities increased by 33% and 42% during 1996 and 1995, respectively. These
increases resulted from the acquisition of REALIC and the Transactions and
increased reinsurance of new and in force life insurance business. Policy
benefits consist of the present value of net future benefits under traditional
ordinary and group life insurance policies, account values under interest
sensitive life and annuity contracts, group accident and health claim reserves,
life claims payable and other miscellaneous liabilities. Through REALIC and the
Transactions, the relative proportion of interest sensitive and annuity policy
benefit liabilities to the total has increased significantly and, at December
31, 1996, totaled approximately half of the policy benefits under life insurance
contracts.
Asset/liability management techniques are utilized by the Company to
minimize the risks associated with interest rate fluctuations. For interest
sensitive policy benefits, the Company seeks to invest in assets with equal
durations while attaining a targeted rate of return. The Company currently does
not engage in hedging transactions to mitigate the effects of interest rate
fluctuations.
DEBT AND SHAREHOLDERS' EQUITY. In 1995, the Company amended and restated
the 1992 Credit Agreement to convert the facility to a senior secured revolving
and term loan with a stated maturity of January 5, 2002. The two year revolving
loan has a commitment amount of $160.0 million and may be extended for up to two
one-year periods with bank consent. During 1996, the Company received bank
consent to extend the maturity date by one year. At December 31, 1996, loans
totaling $125.0 million were outstanding.
Interest rates on the loans are variable and, subject to certain
restrictions, the Company may select the applicable interest rate index and the
period of applicability.
The 1995 Credit Agreement contains certain covenants which, among other
things, restrict under certain circumstances the payment of dividends and
repurchase of treasury stock. Further, certain actions of the Company are
limited, including those related to mergers, acquisitions,
32
<PAGE> 38
indebtedness and investments. The Company and its subsidiaries are required to
meet certain financial ratios and maintain a minimum level of statutory surplus.
Shareholders' equity increased by $10.8 million to $290.1 million at
December 31, 1996 from $279.3 million at December 31, 1995, primarily as a
result of net income of $54.2 million, partially offset by a decrease in net
unrealized appreciation of securities of $24.5 million, treasury stock purchases
of $17.0 million and common shareholder dividends of $5.5 million.
Under the stock repurchase program initially approved by the Company's
Board of Directors during 1995, approximately 2.1 million shares have been
purchased under a total authorization of 3.0 million shares. The Company may use
internally generated funds or borrowings under the 1995 Credit Agreement to
finance additional purchases of shares, if any, under the repurchase program.
Dividends paid to common shareholders reflect an annual rate of $.40 per
share in 1996 and $.28 per share in 1995; effective in the first quarter of
1997, the Company increased its annual dividend rate to $.52 per share.
Debt to total capitalization (outstanding debt divided by outstanding debt
plus shareholders' equity) decreased significantly during the last two years. As
a percentage, these amounts were 30%, 33% and 42% at year-end 1996, 1995 and
1994, respectively. Management believes that, to best balance leverage and
regulatory targets, a debt to total capitalization ratio in the range of 25-35%
is appropriate.
LIQUIDITY. Sources of liquidity are available to the Company in the form
of cash and short-term investments and, if necessary, the sale of invested
assets. The Company also may borrow an additional $35.0 million under the 1995
Credit Agreement and may enter into reverse repurchase agreements to fund
short-term cash needs. In addition to its debt servicing and dividend
obligations, the Company's financial obligations consist of policy benefit and
acquisition costs, taxes and general operating expenses. During the next twelve
months, management believes these obligations will be adequately provided for by
policy revenues and investment income.
The primary sources of funds for Life Re Corporation (the "Parent") consist
of dividends and surplus debenture principal and interest payments from TexasRe,
which are further funded by dividends from Life Reassurance to TexasRe. The
ability of the Parent to make payments of principal and interest as well as to
continue to pay common stock dividends is ultimately dependent on the statutory
earnings and surplus of its subsidiaries. The following table shows surplus
debenture principal and interest payments received and dividends received by the
Parent for the last three years as well as dividends available for payment in
that year without prior approval of state regulatory authorities:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Surplus debenture amounts received from TexasRe:
Interest................................................. $10.0 $19.4 $2.3
Principal................................................ -- 10.0 5.0
----- ----- -----
10.0 29.4 7.3
Dividends received from TexasRe............................ 12.1 15.0 --
----- ----- -----
$22.1 $44.4 $7.3
===== ===== =====
Dividends available for payment by TexasRe................. $27.1 $28.2 $15.4
===== ===== =====
</TABLE>
The unpaid principal amount of the surplus debentures at December 31, 1996
was $160.5 million. The interest rate payable under the terms of the surplus
debentures is the same as the interest rate under the 1995 Credit Agreement. In
1995, the principal amortization terms of the surplus debentures were changed to
conform to the terms of the 1995 Credit Agreement.
33
<PAGE> 39
Currently, no prior approval of the Texas Insurance Commissioner is
required to prepay or pay scheduled interest or principal on the surplus
debentures provided that, after giving effect to any such payment, the statutory
surplus of TexasRe exceeds $125.0 million.
TexasRe relies primarily on dividends from Life Reassurance to meet its
obligations under the surplus debentures as well as to pay dividends to the
Company. TexasRe received dividends from Life Reassurance during 1996, 1995 and
1994 of $14.9 million, $30.9 million, and $13.5 million, respectively.
The payments of dividends by TexasRe and Life Reassurance are subject to
restrictions set forth in Texas and Connecticut insurance laws and regulations.
Under Connecticut law, no dividend in an amount exceeding Life Reassurance's
earned surplus may be paid without prior regulatory approval. Approval has been
received from the Connecticut Department of Insurance to define earned surplus
for this purpose to include amounts of paid in surplus in excess of $125.0
million.
Purchases and sales of fixed maturities increased substantially in 1996 and
1995 due primarily to restructuring of portfolios related to REALIC and the
Transactions. The completion of these types of transactions generally produces a
cash outlay for acquisitions and a net cash inflow upon reinsurance of insurance
in force. During 1996, net cash of $59.7 million was generated by the receipt of
cash as consideration for the assumption of insurance liabilities partially
offset by the purchase price paid in acquiring companies. Financing cash flows
include debt prepayments of $15.0 million in 1996 and $10.0 million in 1994.
Withdrawals from annuity and interest sensitive life insurance contracts totaled
$74.7 million in 1996 compared to $30.7 million in 1995 due to increased volumes
of business resulting from the Transactions and an increase in the related rate
of lapsation.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
During 1997 and 1996, the Company completed several transactions through
which it acquired blocks of insurance in force. The 1997 Transactions, which
were the purchase of AML and a coinsurance agreement with UNUM Life Insurance
Company of America and First UNUM Life Insurance Company, increased total assets
by approximately $240 million. The 1996 Transactions increased total assets by
approximately $400 million.
RESULTS OF OPERATIONS
NET INCOME. Net income totaled $34.9 million for the nine months ended
September 30, 1997 compared to $41.0 million for the same period last year.
Included in the 1996 results was an after-tax realized gain of $13.5 million
from the sale of a strategic investment. In conjunction therewith, the Company
utilized existing tax net operating loss carryforwards to offset the taxes
otherwise payable in connection with the gain and reversed an existing deferred
tax valuation allowance, resulting in a tax benefit of $4.8 million. Income
before federal income taxes and excluding realized investment gains was $50.9
million in the current nine month period compared to $40.0 million in the same
period last year. The increase in earnings is largely attributable to higher in
force volumes in ordinary life reinsurance and comparatively favorable
mortality, contributions from Administrative Reinsurance as a result of the 1996
Transactions and income from an automobile credit reinsurance agreement
effective July 1996. These favorable results were partially offset by higher
morbidity in the group accident and health and special risk pool business.
Morbidity experience within the group accident and health and special risk pool
business is not expected to improve materially in the near term.
POLICY REVENUES. Policy revenues increased by $32.0 million, or 10%, to
$360.9 million in 1997 from $328.9 million in 1996. Ordinary life reinsurance
policy revenues increased by $25.5 million, or 13%, to $224.8 million due to an
increase in first year premiums of $17.5 million and higher renewal premiums
resulting from higher in force amounts. An increase in Administrative
Reinsurance policy revenues of $11.4 million is attributable to the
Transactions. Future revenue growth from Administrative Reinsurance is dependent
on the completion of similar transactions.
34
<PAGE> 40
Group policy revenues decreased by $4.9 million, or 4%. Of the group policy
revenues, premiums of $13.3 million in the 1997 period were generated from
automobile credit reinsurance. Group life premiums declined by $7.2 million
period to period due to treaty terminations. Group accident and health and
special risk premiums decreased by $11.0 million, or 11%, primarily as a result
of an agreement, effective January 1, 1997, to retrocede 50% of 1997 group
accident and health and special risk reinsurance risks. Also contributing to the
decline were reductions in certain pool participations which were offset by
higher premium from remaining business. In October 1997, the Company announced
its withdrawal from the group accident and health and special risk pool
reinsurance marketplace. The Company will not renew or accept new participations
in group accident and health and special risk pools. The Company anticipates a
decline in policy revenues in these lines of approximately 20% for the full year
1997 from 1996 policy revenues, 50% in 1998 from 1997 policy revenues and 80% in
1999 from 1998 policy revenues, as the existing business runs off. The Company
expects no adverse financial impact from its withdrawal from this business.
INVESTMENT INCOME. Investment income increased by 22% to $110.0 million as
a result of assets received in conjunction with the Transactions, the automobile
credit reinsurance agreement and proceeds from the Company's issuance in June
1997 of capital securities, offset by a decrease in the weighted average
portfolio yield rate, which was 7.49% and 7.61% at September 30, 1997 and 1996,
respectively. Future investment income growth is dependent on, among other
factors, the completion of additional Administrative Reinsurance transactions
and continued growth in ordinary life reinsurance and automobile credit
reinsurance business.
POLICY BENEFITS. Policy benefits increased by $6.9 million from the prior
period due to higher volumes of business in force; however, as a percentage of
policy revenues, policy benefits improved to 70% in 1997 from 75% in 1996.
Contributing to the lower percentage is a shift in the mix of business from
excess reinsurance to first dollar quota share reinsurance; under first dollar
quota share reinsurance, typically a higher proportion of the reinsurance
premium funds acquisition costs and a lesser proportion funds mortality costs.
Also, improved mortality in ordinary life reinsurance was partially offset by a
deterioration in group accident and health and special risk morbidity
experience.
POLICY ACQUISITION COSTS. Policy acquisition costs as a percentage of
policy revenues were 29% for the nine months ended September 30, 1997 compared
to 25% for the same period of 1996. The increase is largely due to higher
ultimate commission rates on ordinary life reinsurance resulting from the shift
of the mix of business.
INTEREST CREDITED TO POLICYHOLDER ACCOUNTS. Interest credited to
policyholder accounts increased to $28.6 million in 1997 from $24.1 million in
1996 corresponding to the growth in interest sensitive business resulting from
the Transactions. These results were partially offset by a revised estimate of
certain bonus interest provisions and the lapsation of business in force.
INTEREST EXPENSE. Interest expense declined by $.5 million as a result of
a $15.0 million principal repayment in March 1996 and a decline in the weighted
average variable rate to 6.0% from 6.2%.
DISTRIBUTIONS ON CAPITAL SECURITIES. Distributions on capital securities
of $2.8 million were incurred from the issuance in June 1997 of $100 million of
8.72% capital securities by a subsidiary trust as further described in
"-- Financial Condition and Liquidity" below.
OTHER OPERATING EXPENSES. Other operating expenses increased by $4.0
million to $25.0 million partly as a result of increased fees for third party
administration of Administrative Reinsurance, which fees increased as a result
of greater in force volumes resulting from the Transactions. The Company's
higher compensation costs also contributed to the increase in operating
expenses.
FEDERAL INCOME TAXES. Federal income taxes were provided at the federal
statutory rate of 35% for 1997. The 1996 rate was 27% due to the previously
mentioned tax benefit from utilization of operating loss carryforwards.
35
<PAGE> 41
FINANCIAL CONDITION AND LIQUIDITY
INVESTMENTS. Invested assets grew to $2,156.4 million at September 30,
1997 from $1,833.2 million at December 31, 1996 as a result of the issuance of
$100 million of capital securities, net assets of approximately $200.0 million
received from the Transactions in 1997, the reinvestment of operating cash flows
of $40.6 million and a $38.8 million interest rate related fair value increase,
partially offset by net withdrawals from policyholder accounts of $47.7 million.
The Company's fixed maturity portfolio (including the fixed maturity
securities which are included in assets held by ceding company under reinsurance
treaty) constituted 94% of invested assets at September 30, 1997, of which $69.0
million, or 3.2% of invested assets, consisted of below investment grade
securities. At September 30, 1997, the weighted average quality rating of the
fixed maturities portfolio was "A" and no fixed maturities were in default.
LIQUIDITY. Sources of liquidity are available to the Company in the form
of cash and short-term investments and, if necessary, the sale of invested
assets. The Company may enter into reverse repurchase agreements to fund
short-term cash needs and can also borrow an additional $35.0 million under its
revolving credit agreement. Effective May 1, 1997, the credit agreement was
amended to reduce the margin over an index rate that determines the amount of
interest paid by the Company. In addition, the Company may defer the
commencement of principal amortization until January 2001. As of September 30,
1997 and December 31, 1996, the weighted average interest rate on long-term debt
was 6.0%. In addition to debt servicing and dividend obligations, the Company's
financial obligations consist of policy benefit and acquisition costs, taxes and
general operating expenses. Management believes that these obligations will be
adequately provided for by policy revenues and investment income for the next
twelve months.
The ability of the Company to make principal and interest payments under
its credit agreement and fund capital security distributions as well as to
continue to pay common stock dividends ultimately is dependent on the statutory
earnings and surplus of the insurance subsidiaries. The transfer of funds from
the subsidiaries to Life Re Corporation is subject to applicable insurance laws
and regulations. Pursuant to a stock repurchase program approved by the
Company's Board of Directors under which a total 3.0 million shares have been
authorized for purchase, the Company has repurchased approximately 2.2 million
shares for an aggregate purchase price of $46.6 million.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued Statements No.
128, 130 and 131. These statements concern the calculation of earnings per share
and the presentation of comprehensive income and segment reporting,
respectively. These statements will not affect the Company's financial condition
or results of operations.
36
<PAGE> 42
BUSINESS
Life Re, through its principal wholly-owned subsidiary, Life Reassurance,
is a leading provider of life reinsurance in the United States, with over $145
billion of life reinsurance in force and assets of $3.7 billion at December 31,
1997. Management believes the Company is the largest independent publicly traded
life reinsurer in the United States, and that it ranks fifth overall among U.S.
life reinsurers as measured by life reinsurance in force. The Company's
operating strategy has been to focus on two core lines of business: (i)
Traditional Life Reinsurance, which involves the transfer to the Company of
mortality risks on new sales from primary (or ceding) insurers of ordinary and
group life insurance policies and (ii) Administrative Reinsurance(SM), which
involves the acquisition of blocks of life insurance in force and, frequently,
the assumption of administrative responsibility for life insurance in force by
the Company. During the five year period ending December 31, 1997, the Company's
operating earnings per share and book value per share (excluding realized and
unrealized investment gains and losses) have grown at 19% and 16% compound
annual growth rates, respectively, and return on average equity (excluding
realized and unrealized investment gains and losses) has averaged 15%.
Management estimates that between 1993 and 1996, new ordinary insurance in
force ceded to the life reinsurance market grew from $166 billion to $343
billion, representing a 27% compound annual growth rate. In addition, over the
same period, management believes there has been an expansion in the number of
opportunities to acquire blocks of life insurance in force. The Company believes
that certain dynamics in the life insurance industry have contributed to the
Company's growth over time in Traditional Life Reinsurance and Administrative
Reinsurance. These dynamics include: (i) an increasing use of life reinsurance
by primary companies as a means of managing risk-based capital pressures by
shifting mortality risk and distribution costs to reinsurers and (ii) an
increasing focus by primary companies on asset accumulation products and a
desire to eliminate or minimize mortality risk taking. Moreover, primary
companies increasingly are seeking to sell blocks of life insurance in force in
order to realize value and release capital embedded in non-core businesses or to
ease administrative burdens and costs associated with maintaining outdated or
inefficient systems.
The Company derived approximately 62% of its revenues for the year ended
December 31, 1997, and the majority of its pre-tax operating income for the same
period, from Traditional Life Reinsurance. The Company provides life reinsurance
primarily for mortality risk with respect to both ordinary and group life
insurance products on an automatic treaty basis. Substantially all of the
Company's Traditional Life Reinsurance business is marketed directly by the
Company without the use of intermediaries. Between 1993 and 1996, the Company's
new sales of ordinary life reinsurance, as measured by insurance in force
assumed, grew at a compound annual growth rate of 29%. The Company's first year
premium growth, another measure of new life insurance sales, has grown
consistently over the past several years, from $13 million in 1993 to $61
million in 1997.
The Company derived approximately 18% of its revenues for the year ended
December 31, 1997 from Administrative Reinsurance. Management expects the
Administrative Reinsurance line of business to be an important source of
additional growth in the Company's pre-tax operating income. Through
Administrative Reinsurance, the Company is able to benefit from the increasing
consolidation in the life insurance industry by focusing on acquiring non-core
or smaller blocks of life insurance in force. In July 1995, the Company acquired
REALIC, which served as its initial platform for Administrative Reinsurance.
With the acquisition of REALIC, the Company obtained primary insurance licenses
and began outsourcing administrative services for acquired blocks of insurance
in force on a variable cost basis. Since 1995, the Company has acquired or is
under contract to acquire a total of 10 blocks of life insurance in force,
representing in excess of $2.0 billion in assets.
In 1997, the Company made a strategic decision to withdraw from the group
accident and health and special risk reinsurance business. This line of business
provided approximately 20% of revenues for the year ended December 31, 1997. The
decision to exit this line of business primarily
37
<PAGE> 43
was motivated by the need for additional capital in its Traditional Life
Reinsurance and Administrative Reinsurance lines of business and the
deterioration in accident and health morbidity experience. The Company does not
expect this line of business to affect materially future results.
Life Re was founded in 1988 by Rodney A. Hawes, Jr., Douglas M. Schair and
Jacques E. Dubois, each of whom has over 25 years of insurance industry
experience, for the purpose of acquiring Life Reassurance from General
Reinsurance Corporation. Life Re currently has a rating of A+ (Superior) by A.M.
Best. A.M. Best ratings are based upon an insurance company's financial strength
regarding its ability to pay obligations to policyholders and are not directed
toward the protection of investors.
------------------------
The following information has been derived from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 and the Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1997 and has
been included herein for the convenience of the reader.
BUSINESS WRITTEN
GENERAL
The business of reinsurance generally consists of reinsurers, such as the
Company, who enter into contractual arrangements (treaties) with primary
insurers (ceding companies) whereby the reinsurer agrees to indemnify the ceding
company for all or a portion of the risk associated with the underlying
insurance policy in exchange for a reinsurance premium payable to the reinsurer.
Reinsurers also may enter into retrocessional reinsurance arrangements with
other reinsurers, which operate in a manner similar to the underlying
reinsurance arrangement described above. Under retrocessional reinsurance
arrangements, the reinsurer shifts a portion of the risk associated with the
underlying insurance policy to the retrocessionaires.
Reinsurance agreements may be written on an automatic treaty basis or
facultative basis, and reinsurance may be marketed directly by the reinsurer or
through reinsurance intermediaries or brokers. An automatic treaty provides for
a ceding company to cede contractually agreed-upon risks on specific blocks of
business to a reinsurer and binds that reinsurer without obtaining further
approval from that reinsurer. Facultative reinsurance is the reinsurance of
individual risks whereby a reinsurer has the opportunity to analyze and
separately underwrite a risk prior to agreeing to accept the risk. In addition,
both automatic treaty and facultative reinsurance may be written on either a
quota share basis (a percentage of each risk in the reinsured class of risk is
assumed by the reinsurer from the ceding company with premiums proportional to
such assumed risk being paid to reinsurers) or an excess of loss basis
(reinsurers indemnify the ceding company up to a contractually-specified amount
for a portion of loss exceeding a specified loss retention amount in
consideration of non-proportional premiums being paid).
The Company's operating strategy has been to focus on two core lines of
business: (i) Traditional Life Reinsurance and (ii) Administrative Reinsurance.
Traditional Life Reinsurance includes ordinary life reinsurance and group life
reinsurance. Administrative Reinsurance includes automobile credit life and
disability. These two core lines of business cover the following risks: (i)
mortality and morbidity, (ii) investment, (iii) lapsation, and (iv) medical
expense, disability and accident. The Company writes reinsurance predominantly
on a direct basis with primary life insurance companies. Life Reassurance has a
closed block of primary insurance in force consisting of single premium
annuities issued prior to 1986. In addition, the Administrative Reinsurance line
of business, which focuses on administering primary life insurance in force,
includes closed blocks of directly written life insurance. In 1997, the Company
made a strategic decision to withdraw from the group accident and health and
special risk reinsurance business.
38
<PAGE> 44
The following table sets forth selected information for the indicated
periods concerning the Company's insurance operations:
DISTRIBUTION OF POLICY REVENUES AND INSURANCE IN FORCE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994
----------------- ----------------- -----------------
AMOUNT % AMOUNT % AMOUNT %
-------- ----- -------- ----- -------- -----
(IN THOUSANDS, EXCEPT IN FORCE DATA)
<S> <C> <C> <C> <C> <C> <C>
Policy revenues:
Ordinary life reinsurance........... $268,902 59.6% $243,672 63.6% $224,998 64.1%
Group life reinsurance.............. 23,213 5.2 24,442 6.4 23,913 6.8
Administrative Reinsurance.......... 18,013 4.0 2,714 0.7
Automobile credit life and
disability........................ 1,211 0.2 -- 0.0 -- 0.0
Group accident and health and
special risk reinsurance.......... 139,653 31.0 112,403 29.3 101,964 29.1
-------- ----- -------- ----- -------- -----
Total policy revenues........ $450,992 100.0% $383,231 100.0% $350,875 100.0%
======== ===== ======== ===== ======== =====
Insurance in force at end of year (in
millions and before reinsurance
ceded):
Ordinary life reinsurance........... $103,560 $ 83,668 $ 74,167
Group life reinsurance.............. 7,933 6,430 7,046
Administrative Reinsurance.......... 4,519 1,185 --
-------- -------- --------
Total insurance in force............ $116,012 $ 91,283 $ 81,213
======== ======== ========
Ordinary life lapse ratio............. 9.4% 10.8% 9.9%
</TABLE>
ORDINARY LIFE REINSURANCE
Ordinary life reinsurance is generally the reinsurance of individual term
life insurance policies, whole life insurance policies, universal life insurance
policies, and joint and survivor insurance policies. The Company's ordinary life
line of business includes all of these products.
Substantially all of the Company's policy revenues with respect to ordinary
life reinsurance are written on an automatic treaty basis. Ordinary life
reinsurance is written on a facultative basis only in limited circumstances,
generally for primary insurers with which the Company has automatic treaty
reinsurance business. Facultative reinsurance is individually underwritten by
the Company for each policy to be reinsured, with the pricing and other terms
established at the time the policy is underwritten based upon rates negotiated
in advance. Most of the Company's ordinary life reinsurance business is written
on a quota share basis. The Company generally requires ceding companies to
retain at least 10% of every risk, whether the business is written on an excess
or quota share basis. The Company generally limits its own net liability on any
one ordinary life risk to $1.0 million. The Company's reinsurance agreements
frequently provide for rights of recapture, which permit the ceding company to
increase the amount of liability it retains on the reinsured policies after the
policies have remained in force for a designated period of time (generally
between ten and twenty years). Accordingly, an increase in the amount of
liability retained by the ceding company will decrease both the Company's
insurance in force and premiums to be received from the reinsured policies.
The Company's ordinary life reinsurance agreements typically remain in
force for the life of the underlying policies reinsured. The Company is entitled
to renewal policy revenues absent the death of the insured, voluntary surrender
or lapse of the policy due to nonpayment of premium or the recapture by the
ceding company of the risks reinsured.
39
<PAGE> 45
The following table sets forth the Company's policy revenues on ordinary
life reinsurance first year business and renewal business for the periods
indicated:
DISTRIBUTION OF FIRST YEAR AND RENEWAL POLICY REVENUES
FOR ORDINARY LIFE REINSURANCE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994
----------------- ----------------- -----------------
AMOUNT % AMOUNT % AMOUNT %
-------- ----- -------- ----- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Ordinary life reinsurance
policy revenues:
First year(1).............. $ 36,217 13.5% $ 17,736 7.3% $ 13,248 5.9%
Renewal.................... 232,685 86.5 225,936 92.7 211,750 94.1
-------- ----- -------- ----- -------- -----
Total ordinary life
reinsurance policy
revenues................... $268,902 100.0% $243,672 100.0% $224,998 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
- ---------------
(1) First year policy revenues are premiums received within one year of the date
of issuance of the underlying policy, whether reinsured by treaties entered
into prior to or during the indicated period.
As of December 31, 1996, the Company reinsured ordinary life insurance
business under treaties with approximately 450 ceding companies. In 1996, 45
ceding companies each accounted for at least $1.0 million of ordinary life
reinsurance policy revenues and in the aggregate represented approximately 89%
of the Company's ordinary life reinsurance policy revenues. The Company markets
its ordinary life reinsurance to a broad cross section of companies, which vary
in size, corporate structure and geographic location. No ordinary life ceding
company accounted for more than 10% of the Company's policy revenues in 1996.
The Company occasionally reinsures ordinary life insurance business on an
experience rated basis, whereby the ceding company receives a refund of a
portion of the profits resulting from favorable claims experience with respect
to the underlying policies. Experience rating refunds amounted to $5.1 million,
$4.4 million and $2.8 million for 1996, 1995 and 1994, respectively.
The Company reinsures, or retrocedes, portions of certain risks for which
it has accepted liability. The Company's policy is to retain up to $1.0 million
of liability on any one life for ordinary life insurance. The next $10.0 million
of liability in excess of $1.0 million is retroceded to a pool of ten
retrocessionaires. In certain limited circumstances the Company reinsures
policies where the underlying risk exceeds $11.0 million. In such cases, the
Company retrocedes any such risk in excess of $11.0 million on a facultative
basis.
Each retrocessionaire in the Company's current ordinary life pool reinsures
a percentage of each risk that is retroceded to the pool. Each of the domestic
participants in the pool is rated "A-" or better by A.M. Best. Although the
foreign retrocessionaires, which constitute 20% of the pool, are not rated by
A.M. Best, each of the foreign retrocessionaires provides the Company with an
irrevocable letter of credit drawn on a U.S. bank or a U.S. branch of a foreign
bank in the amount of the reserves held by such retrocessionaire for the benefit
of the Company. If a foreign retrocessionaire were to default on its payments,
the Company could collect such funds by exercising its rights under the
applicable letter of credit. To date, the Company has not experienced a material
default in connection with its retrocessional arrangements nor any material
difficulty in collecting claims recoverable from its retrocessionaires.
40
<PAGE> 46
GROUP LIFE REINSURANCE
Group life reinsurance is the reinsurance of various types of group life
policies. These policies generally include employee-employer group term life
(representing the majority of such business), voluntary and supplemental term
life, association or affinity term life, group universal life and voluntary
group universal life. Group life reinsurance generally is written on an annual
basis resulting in the terms of such contracts being subject to renegotiation or
cancellation each year. The Company typically reinsures group life clients on an
experience rated basis, whereby the ceding company receives a refund of a
portion of the profits resulting from favorable claims experience with respect
to the underlying policies. Group life reinsurance policy revenues were $23.2
million, $24.4 million and $23.9 million in 1996, 1995 and 1994, respectively.
Experience rating refunds amounted to $3.1 million, $3.8 million and $2.4
million for 1996, 1995, and 1994, respectively.
The Company markets its group life reinsurance to a broad cross section of
client entities, which vary in size, corporate structure and geographic
location. No group life client accounted for more than 5% of the Company's
policy revenues in 1996.
The Company's group life retrocessionaire is rated "A" by A.M. Best and the
Company has not experienced any material difficulties in its recovery of group
life claims. The Company's retention limit for group life insurance business
generally may be in an amount up to $350,000, with amounts in excess thereof
being retroceded.
ADMINISTRATIVE REINSURANCE
In furtherance of REALIC's strategy of providing its clients with a
financial benefit through block reinsurance of existing insurance in force and
assisting those clients who wish to discontinue the administration of older
non-core blocks of business, the Company established its Administrative
Reinsurance line of business. By combining an administrative transfer with block
reinsurance of insurance in force, the Company's clients may benefit financially
in two ways: by realizing the embedded value of the in force and freeing target
surplus, and by reducing overhead and variable expenses associated with these
older blocks.
Administrative Reinsurance takes at least two forms: the reinsurance of
non-core existing insurance in force from life insurers, and the acquisition of
life insurance companies that lack critical mass to effectively market products
and efficiently administer blocks of insurance. In either case, the Company,
through REALIC, organizes the conversion of the client's block of business to
the systems of its third party administrator, Cybertek Corporation ("Cybertek"),
and ceases new marketing of the products reinsured. Before entering into
agreements for the acquisition of either blocks of business or insurance
companies, management of the Company conducts a review of each company's
underwriting standards and procedures and assesses each company's claims
history.
REALIC utilizes the services of an outside administrator, Cybertek, to
provide most of the administrative services needed for the primary business. The
administrative services provided by Cybertek are set forth in a seven-year
agreement between Cybertek and REALIC, and include premium processing, billing,
policyholder service and claims administration. The balance of REALIC's
administrative services and the supervision of Cybertek are performed by
employees of REALIC and Life Reassurance.
AUTOMOBILE CREDIT LIFE AND DISABILITY REINSURANCE
During 1996, the Company entered into the automobile credit life and
disability reinsurance line of business. In July 1996, the Company entered into
certain transactions with Resource Financial Corporation ("Resource"), which was
formerly Ryan Dealer Group and a subsidiary of Aon Corporation ("Aon"). Ryan
Dealer Group had over thirty years experience in marketing and issuing, through
its affiliates, credit life and disability insurance products in connection with
the sale of
41
<PAGE> 47
automobiles. Ryan Dealer Group was purchased from Aon by its management
employees and renamed Resource. Resource also purchased from Aon a life
insurance carrier, American Combined Life Insurance Company, which was renamed
Resource Life Insurance Company ("Resource Life").
The Company's transactions with Resource included (i) the purchase of 5.9%
of the voting and 32.7% of the non-voting stock of Resource, (ii) the investment
of $15.0 million in the preferred stock of, and a $5.0 million loan to, an
intermediate holding company of Resource Life, and (iii) reinsurance
arrangements between Resource Life and Life Reassurance. The funds invested and
loaned to the intermediate holding company have been contributed to and are now
retained by Resource Life as capital and surplus.
Much of the business produced by Resource Life originates from automobile
dealerships that own reinsurance companies. These reinsurance companies are
referred to as Dealer Owned Reinsurance Companies (each, a "DRC"). Generally,
business sold at a dealership will be reinsured to that dealer's DRC on a
written basis for credit life insurance and on an earned basis for credit
disability insurance. Resource Life entered into reinsurance arrangements with
Life Reassurance under which a substantial majority of the credit life and
disability risks are reinsured to Life Reassurance which then retrocedes such
risks to the DRCs.
Life Reassurance also has entered into reinsurance agreements with
affiliates of Aon, and in connection with such reinsurance arrangements and the
arrangements with Resource Life, Life Reassurance agreed to pay contingent
consideration to a subsidiary of Aon based on premiums produced by Resource for
a period of five years subsequent to July 1, 1996.
GROUP ACCIDENT AND HEALTH AND SPECIAL RISK REINSURANCE
In 1997, the Company made a strategic decision to withdraw from the group
accident and health and special risk reinsurance business. This line of business
provided approximately 20% of revenues for the year ended December 31, 1997. The
decision to exit this line of business primarily was motivated by the need for
additional capital in its Traditional Life Reinsurance and Administrative
Reinsurance lines of business and the deterioration in accident and health
morbidity experience. The Company does not expect this line of business to
affect materially future results.
Group accident and health reinsurance consists of the reinsurance of
medical expense, disability and accident risks. Special risk reinsurance
consists principally of accidental death coverage and catastrophic excess of
loss coverage, as well as occupational accident coverage. In the substantial
majority of the Company's group accident and health reinsurance treaties, the
original client is a self insured corporate health plan. Reinsurance for such
self insured plans is secured in order to minimize the risk to the plan of
claims well in excess of those originally projected. The reinsurance is usually
in the form of specific and aggregate stop loss coverage. Specific stop loss
coverages provide for reimbursement of individual losses in excess of a
specified per person retention. Aggregate stop loss covers accumulations of
claims within the specified retention, once they exceed an agreed percentage
(usually 125%) of the total original estimated claims cost. The average
specified retention is generally at a level in excess of $25,000 to $100,000 per
person. Group accident and health and special risk reinsurance policy revenues
were $139.7 million, $112.4 million and $102.0 million in 1996, 1995 and 1994,
respectively.
The Company generally participates in group accident and health reinsurance
through reinsurance facilities, and in the case of special risk reinsurance,
through pool arrangements. Such reinsurance facilities typically are formed by
managing general underwriters to accept given types of risk. The managing
general underwriters then market their facilities and invite reinsurers to share
the risks. Usually, reinsurance facilities consist of several reinsurance
companies. Other functions performed by managing general underwriters typically
include underwriting of the reinsurance risk, adjustment and payment of claims,
marketing and accounting.
42
<PAGE> 48
Reinsurance of group accident and health and special risk business
generally is written on an annual basis resulting in the terms of such contracts
being subject to renegotiation or cancellation each year. Many of the specific
and aggregate medical facilities have a profit commission feature which is based
on the profitability of the treaty.
A substantial portion of the group accident and health and special risk
business was written on an excess basis as measured by policy revenues.
At December 31, 1996, the Company reinsured risks under treaties with
approximately 150 ceding client entities with respect to group accident and
health and special risk business. In 1996, twenty-nine ceding client entities
each accounted for at least $1.0 million of group accident and health or special
risk policy revenues and represented, in the aggregate, approximately 89% of the
Company's group accident and health and special risk policy revenues. The
Company markets its group accident and health and special risk reinsurance to a
broad cross section of client entities, which vary in size, corporate structure
and geographic location. No group accident and health or special risk ceding
client entity accounted for more than 5% of the Company's policy revenues in
1996.
On group health reinsurance, the Company generally retains up to $300,000
for any one insured person per year. The Company's net liability in excess of
its retention up to $1.0 million is retroceded to a pool of reinsurers and the
next $1.0 million of liability is retroceded to a single retrocessionaire. For
one group health client, the Company has a retrocessional arrangement with a
single retrocessionaire. The Company has not experienced any material difficulty
in collecting claims recoverable from its group health retrocessionaires.
On special risk reinsurance, the Company generally retains up to $1.0
million on any one risk. Amounts in excess of $1.0 million are retroceded to a
syndicate of reinsurers in Europe. The Company has not experienced any
difficulty in collecting claims recoverable from its special risk
retrocessionaires.
UNDERWRITING
Senior management has developed underwriting guidelines, policies and
procedures with the objective of controlling the quality and pricing of business
written. The Company's underwriting process emphasizes close collaboration among
its underwriting, actuarial, administration and claims departments.
The Company determines whether to write reinsurance business by considering
many factors, including the type of risks to be covered, ceding company
retention and binding authority, product and pricing assumptions and the ceding
company's underwriting standards, financial strength and distribution systems.
The Company generally does not assume 100% of a risk and requires the ceding
company to retain at least 10% of every reinsured risk. The Company will assume
a substantial portion of the risk in connection with Administrative Reinsurance.
The Company regularly updates its underwriting policies, procedures and
standards to take into account changing industry conditions, market developments
and changes in medical technology. The Company endeavors to ensure that the
underwriting standards and procedures of its ceding client entities are
compatible with those of the Company. Toward this end, the Company conducts
periodic reviews of the ceding clients' underwriting and claims procedures. The
Company maintains its underwriting manual, which is distributed for use by its
ceding clients, to reflect current medical technology and the Company's
underwriting standards. In addition, with respect to a portion of the Company's
group reinsurance business, certain underwriting functions are performed on the
Company's behalf by managing general underwriters according to underwriting
guidelines reviewed by the Company.
43
<PAGE> 49
MARKETING
The Company has developed its business on the basis of direct marketing
relationships established over many years through responsive service. The
Company's senior management is directly involved in all aspects of the Company's
marketing efforts, including the formulation, execution and evaluation of
marketing strategies, the identification of marketing opportunities and the
maintenance of relationships with senior executives at client companies. The
Company seeks to evaluate each client's specific reinsurance needs, tailor
reinsurance programs to meet those needs and be responsive in processing claims.
The Company believes this strategy will enable it to achieve its objective of
favorably competing on the basis of service as well as price.
In January 1996, the Company announced the creation of the Office of Life
Marketing. The Office of Life Marketing is responsible for direct marketing of
life reinsurance products and group reinsurance products. These group
reinsurance products include group life, major medical, and catastrophic excess
of loss business, all of which are marketed on a direct basis. The Office of
Life Marketing consists of executives having expertise in various disciplines
within the insurance industry. These disciplines include actuarial, legal,
marketing and underwriting. The Office of Life Marketing is designed to provide
excellent service to the Company's clients by working with clients to identify
and address their specific needs.
During 1996, substantially all policy revenues with respect to ordinary
life and group life reinsurance business were written directly while
approximately 11% of group accident and health and special risk reinsurance was
written directly. The remaining 89% of group accident and health and special
risk reinsurance was placed through reinsurance intermediaries, and of that
amount, 27% was placed by a single intermediary, D.W. Van Dyke and Company of
Connecticut, Inc. Intermediaries solicit, negotiate or place reinsurance
cessions or retrocessions on behalf of a ceding insurer, reinsurer or a
reinsurance facility. Intermediaries do not have the authority to bind the
Company with respect to reinsurance agreements, and the Company does not commit
in advance to accept any portion of the business that intermediaries submit.
CLAIMS ADMINISTRATION
The Company's claims department (i) reviews and verifies reinsurance
claims, (ii) obtains information necessary to evaluate claims, (iii) determines
the Company's liability with respect to claims and (iv) arranges for timely
claim payments. Claims are subjected to a thorough review process to ensure that
the risk was properly ceded, the claim complies with the contract provisions and
the ceding company is current in the payment of reinsurance policy premiums to
the Company. Ordinary life and group life claims generally are reported on an
individual basis by the ceding entity. The ceding entity will provide the
Company with proofs of loss, which the Company then reviews for compliance with
treaty terms.
Ordinary life claims under policies reinsured on a facultative basis and
underwritten within the five previous years and ordinary life claims under
policies reinsured under automatic treaties and underwritten within the two
previous years generally are reviewed by the underwriting department. The claims
department also investigates claims generally for evidence of misrepresentation
in the policy application and approval process. In addition to reviewing and
paying claims, the claims department monitors both specific claims and overall
claims handling procedures of ceding companies.
Group accident and health claims generally are reported to the Company by
the ceding entity on an aggregate basis. The ceding entity will provide the
Company with a listing of the claims paid by the ceding entity, which the
Company then reviews for compliance with treaty terms.
Cybertek provides claims administration for the Company's Administrative
Reinsurance. Cybertek reviews and processes all claims information and provides
for the payment of claims. The Company reviews and must approve prior to payment
all claims received by Cybertek which involve
44
<PAGE> 50
a death benefit in excess of $100,000 or in which the insured died within two
years of policy issuance.
POLICY BENEFIT LIABILITIES
Policy benefit liabilities comprise the majority of the Company's financial
obligations. Policy benefit liabilities for other than annuities and interest
sensitive life insurance products reflected in the Company's consolidated
financial statements included herein are based upon the Company's best estimates
of mortality, persistency and investment income, with appropriate provision for
adverse deviation and the use of the net level premium method. The liabilities
for policy benefits established by the Company with respect to individual risks
or classes of business may be greater or less than those established by ceding
companies due to the use of different mortality and other assumptions. Policy
benefit liabilities for annuities and interest sensitive life insurance products
are reported at the accumulated fund balance of such contracts. Policy benefit
liabilities include both mortality and morbidity claims in the process of
settlement and claims that have been incurred but not yet reported. Actual
experience in a particular period may be worse than assumed experience and,
consequently, may adversely affect the Company's operating results for such
period. See Notes 2 and 6 of to the Company's consolidated financial statements
for certain additional information regarding reserve assumptions under generally
accepted accounting principles ("GAAP").
INVESTMENTS
All investments made by the Company are governed by the general
requirements and guidelines established and approved by the Boards of Directors
of the Company and the Subsidiaries and by qualitative and quantitative limits
prescribed by Connecticut, Illinois and Texas insurance laws and regulations.
The Company's investment policy is designed to maintain a high quality
portfolio, maximize current income, maintain a high degree of liquidity, and
attempt to match the cash flows of the portfolio to the required cash flows of
the Company's liabilities.
At December 31, 1996, the Company's invested assets had an aggregate fair
value of $1,833.2 million, of which 94% were fixed maturities with a weighted
average investment quality rating of "A". At December 31, 1996, the weighted
average duration of invested assets was 6.3 years. In the event the duration of
invested assets were to materially differ from the duration of liabilities and
if significant rapid increases or decreases in market interest rates were to
occur, the Company could be required to sell assets at a loss or incur
liabilities with respect to policies in excess of investment income. Such
consequences could have a material adverse effect on the Company's capital
resources and financial condition. Although no assurances as to future
performance can be given, the Company has not experienced any material
differences in cash flows relating to its assets and liabilities.
The Company's investment securities are managed by two professional
investment advisors, Conseco Capital Management, Inc. ("CCM") and Liberty
Capital Advisors, Inc. ("LCA"), each of which manages a segment of the
portfolio. Certain equity and short-term investments aggregating at December 31,
1996 approximately $44.4 million at fair value are managed directly by the
Company. CCM is the primary investment advisor for the Company, managing at
December 31, 1996 81% of its invested assets (approximately $1,480.0 million at
fair value as of December 31, 1996). LCA acts as an investment advisor for the
portion of the Company's invested assets relating to the reinsured universal
life insurance policies of an affiliate of LCA (approximately $244.0 million at
fair value as of December 31, 1996). The LCA-managed assets are held in separate
custody accounts and are managed to achieve a desired spread between investment
earnings and interest credited on the underlying universal life policies. The
agreements with CCM and LCA may be terminated by either party at the end of each
calendar year upon sixty days' notice. The performance of CCM and LCA and the
fees associated with the arrangements are periodically reviewed by the Boards of
Directors of the Company and the Subsidiaries.
45
<PAGE> 51
The following table summarizes certain of the Company's investment results
for the years indicated:
INVESTMENT RESULTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Total invested assets(1)............................. $1,833,242 $1,504,175 $998,518
Investment income, net of related expenses........... $ 124,340 $ 98,616 $ 82,438
Effective yield rate(2).............................. 7.77% 8.16% 8.15%
Realized investment gains............................ $ 17,210 $ 3,702 $ 89
</TABLE>
- ---------------
(1) Fair value at end of the indicated year.
(2) The effective yield rate equals (i) net pre-tax investment income divided by
(ii) the average of total adjusted invested assets (fixed maturities at
amortized cost) at the end of each calendar quarter included in the
indicated period.
The Company's invested assets consist primarily of fixed maturities and
equity securities, with the majority being fixed maturities. The Company's fixed
maturities are invested primarily in U.S. government obligations, foreign
government obligations, public utilities obligations, corporate fixed
maturities, and mortgage-backed securities. Equity securities are primarily
nonredeemable preferred stock.
Mortgage-backed securities represented approximately 21% of total invested
assets as of December 31, 1996. Investors in these securities are compensated
primarily for reinvestment risk rather than credit quality risk. Investments in
mortgage-backed securities include collateralized mortgage obligations ("CMOs")
and mortgage-backed passthrough securities. Mortgage-backed securities generally
are collateralized by mortgages issued by the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"), all of which are agencies of
the U.S. government. Of these, only GNMA mortgages are backed by the full faith
and credit of the U.S. government. Credit risk generally is not a consideration
when investing in agency mortgage-backed securities. The Company's
mortgage-backed securities portfolio had a weighted average investment quality
rating of AAA at December 31, 1996.
At December 31, 1996 approximately 36% of the Company's mortgage-backed
investment portfolio consists of planned amortization class ("PAC") and target
amortization class ("TAC") instruments. These investments are designed to
amortize in a more predictable manner by shifting the primary risk of prepayment
of the underlying collateral to investors in other tranches ("support classes")
of the CMO.
In addition to the fixed maturities and equity securities, approximately 3%
of the Company's invested assets consisted of policy loans at December 31, 1996.
These policy loans present no credit risk because the amount of the loan cannot
exceed the obligation due the ceding company upon the death of the insured or
surrender of the underlying policy. The policy loan interest rates charged are
determined by the provisions of the treaties in force and the underlying
policies.
COMPETITION
The Company operates in a highly competitive environment. Reinsurers
compete based upon many factors, including financial strength, A.M. Best rating,
pricing and other terms and conditions of reinsurance agreements, reputation,
service and experience in the lines of business underwritten. The Company
believes that there are over 30 companies with significant competitive positions
within the ordinary life, group life, group accident and health and special risk
reinsurance markets within
46
<PAGE> 52
the United States. The Company believes that within this market it is among the
five largest of those companies, based on reinsurance in force.
In connection with Administrative Reinsurance, the nature of the
competition faced by the Company depends on the company targeted for acquisition
or the block of business to be reinsured. Based on results achieved thus far,
the Company believes that it is competitively positioned to achieve its
objectives for growth in this area.
A.M. BEST RATING
Life Reassurance has been rated "A+" (Superior) by A.M. Best every year
since 1981. A.M. Best's ratings for insurance companies currently range from
"A++" to "F", and some companies are not rated. Publications of A.M. Best
indicate that "A++" and "A+" ratings are assigned to those companies which in
A.M. Best's opinion have achieved superior overall performance when compared to
the norms of the life insurance industry and generally have demonstrated a
strong ability to meet their policyholder and other contractual obligations.
Life Reassurance's A.M. Best "Financial Size Category" is Class VIII, which
encompasses companies with adjusted policyholders' surplus of $100.0 million to
$250.0 million.
REALIC is currently rated "A" (Excellent) by A.M. Best, the rating that was
given to REALIC prior to its acquisition by Life Reassurance. Publications of
A.M. Best indicate that "A" and "A-" ratings are assigned to those companies
which in A.M. Best's opinion have a strong ability to meet their obligations to
policyholders over a long period of time. During 1996, REALIC's A.M. Best
"Financial Size Category" was Class VI, which encompasses companies with
adjusted policyholders' surplus of $25.0 million to $50.0 million. At December
31, 1996, REALIC's adjusted policyholder surplus was approximately $39.0
million.
In evaluating a company's financial and operating performance, A.M. Best
reviews such company's profitability, leverage and liquidity as well as its book
of business, the adequacy and soundness of its reinsurance, the quality and
estimated market value of its assets, the adequacy of its policy reserves and
the experience and competency of its management. A.M. Best's ratings are based
upon factors of concern to policyholders, agents and intermediaries and are not
directed toward the protection of investors.
EMPLOYEES
As of December 31, 1996, the Company had 123 employees. None of these
employees is represented by a labor union. The Company believes that its
relationship with its employees is generally satisfactory.
REGULATION
The Company and the Subsidiaries are subject to the insurance laws and
regulations of Connecticut, Illinois and Texas, the domiciliary states of the
Subsidiaries, and the laws and regulations of the other states in which the
Subsidiaries are licensed to do business. At present, Life Reassurance is
licensed to conduct business or is an authorized reinsurer in all 50 states, the
District of Columbia and Puerto Rico, and REALIC is licensed to conduct business
in all such locations except for New Hampshire, New York, the District of
Columbia and Puerto Rico. The insurance laws and regulations, as well as the
level of supervisory authority that may be exercised by the various state
insurance departments vary by jurisdiction, but generally grant broad powers to
supervisory agencies or state regulators to examine and supervise insurance
companies and insurance holding companies with respect to every significant
aspect of the conduct of the insurance business. These laws and regulations
generally require insurance companies to meet certain solvency standards and
asset tests, to maintain minimum standards of business conduct and to file
certain reports with regulatory authorities, including information concerning
their capital structure, ownership and financial condition. The Subsidiaries
generally are required to file annual
47
<PAGE> 53
and quarterly statutory financial statements in each jurisdiction in which they
are licensed. Additionally, the Subsidiaries are subject to periodic examination
by the insurance departments of the jurisdictions in which each is licensed,
authorized and accredited. The Connecticut Insurance Department and the Texas
Department of Insurance completed their most recent respective examinations of
Life Reassurance and TexasRe for the years ended December 31, 1987 through
December 31, 1992, and the Texas Department of Insurance is in the process of
completing its examination of TexasRe for years through December 31, 1995. The
Illinois Department of Insurance completed its most recent examination of REALIC
for years through December 31, 1991 and is in the process of completing an
examination of REALIC for subsequent years through December 31, 1995. The
results of each of the completed examinations contained no findings which would
have a material adverse effect on the operations of any of the Subsidiaries.
Although the rates and policy terms of primary insurance agreements are
regulated by state insurance departments, the rates, policy terms and conditions
of reinsurance agreements generally are not subject to regulation by any
regulatory authority.
RESTRICTIONS ON DIVIDENDS AND DISTRIBUTIONS. The principal sources of cash
for the Company to make payments of principal, interest and dividends are
payments under two surplus notes issued by TexasRe to the Company in connection
with the purchase of Life Reassurance from General Reinsurance Corporation in
1988 (the "Surplus Debentures") and dividends paid by TexasRe. TexasRe's
principal sources of funds are dividends from Life Reassurance and distributions
by Life Reassurance under the Tax Allocation Agreement, a portion of which
distributions are used to pay TexasRe's income taxes. Under current Connecticut,
Illinois and Texas laws, any proposed payment of a dividend or distribution
which, together with dividends or distributions paid during the preceding twelve
months, exceeds the greater of (i) 10% of statutory capital and surplus as of
the preceding December 31 or (ii) statutory net gain from operations for the
preceding calendar year, is designated an "extraordinary dividend" and may not
be paid until either it has been approved, or a 30-day waiting period shall have
passed during which it has not been disapproved, by the Connecticut Insurance
Commissioner, the Director of Insurance of the State of Illinois (the "Illinois
Director of Insurance") or the Texas Insurance Commissioner, as the case may be.
In addition, Connecticut law provides that an insurance company may not pay
dividends in an amount exceeding its earned surplus without prior regulatory
approval. Life Reassurance has received approval from the Connecticut Department
of Insurance to define its earned surplus for this purpose to include amounts of
paid in surplus in excess of $125.0 million, and as of December 31, 1996, such
earned surplus was $43.9 million. Currently, no prior approval of the Texas
Department of Insurance is required to pay scheduled principal or interest on
the Surplus Debentures provided that, after giving effect to any such payment,
the statutory surplus of TexasRe exceeds $125.0 million. Life Reassurance paid
$14.9 million of dividends in 1996, although the maximum amount of dividends
Life Reassurance could have paid in 1996 without the prior approval of the
Connecticut Insurance Commissioner was $34.8 million. Life Reassurance paid the
maximum amount of dividends permitted without the prior approval of the
Connecticut Insurance Commissioner of $30.9 million and $13.5 million in 1995
and 1994, respectively. TexasRe had the capacity to pay dividends of $27.1
million, $28.2 million and $15.4 million in 1996, 1995 and 1994, respectively,
without the prior approval of the Texas Insurance Commissioner. TexasRe paid
dividends aggregating $12.1 million and $15.0 million in 1996 and 1995,
respectively. No dividends were paid by TexasRe in 1994. REALIC has not paid any
dividends subsequent to its acquisition by Life Reassurance in July 1995.
The Connecticut, Illinois and Texas insurance laws require that the
statutory surplus of Life Reassurance, REALIC and TexasRe, as the case may be,
following any dividend or distribution, be reasonable in relation to its
outstanding liabilities and adequate to meet its financial needs. The Insurance
Commissioner of any such state may bring an action to enjoin or rescind the
payment of a dividend or distribution that would cause statutory surplus to be
unreasonable or inadequate under this standard.
In the event of a default on the Company's debt or the bankruptcy,
liquidation or other reorganization of the Company, the creditors and
stockholders of the Company will have no right to
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proceed against the assets of the Life Reassurance, REALIC or TexasRe. If Life
Reassurance, REALIC or TexasRe were to be liquidated, such liquidation would be
conducted by the Connecticut, Illinois or Texas Insurance Commissioner, as the
case may be, as the receiver with respect to such insurance company's property
and business. Under the Connecticut, Illinois and Texas insurance laws, all
creditors of such insurance companies, including, without limitation, holders of
its reinsurance agreements and the various state guaranty associations, would be
entitled to payment in full from such assets before the Company, as a
stockholder, would be entitled to receive any distribution therefrom.
NAIC REGULATORY CHANGES. The NAIC and insurance regulators are in the
process of reexamining existing laws and regulations and their application to
insurance companies. In particular, this reexamination has focused on insurance
company investment and solvency issues and, in some instances, has resulted in
new interpretations of existing law, the development of new laws and the
implementation of nonstatutory guidelines. The NAIC has formed committees and
appointed advisory groups to study and formulate regulatory proposals on diverse
issues. As part of this review, the NAIC recently adopted the Valuation of Life
Insurance Policies Model Regulation (the "Model Regulation").
If adopted in its current form, the Model Regulation will have the greatest
impact on level term life insurance products with current premiums guaranteed
for more than five years. Companies with these products generally will have to
increase reserves above the current levels or limit the period of guaranteed
premiums to five years. The Model Regulation also will impact the reserve
requirements for other increasing premium products, deficiency reserves and
certain benefit guarantees in universal life products. The Model Regulation will
not impact the financial statements of the Company prepared in accordance with
GAAP; however, as a statutory accounting principle, the Model Regulation may
impact the statutory financial statements of the Subsidiaries.
CODIFICATION. In addition to the above regulatory changes being reexamined
and considered by the NAIC, the NAIC is in the process of codifying statutory
accounting principles. The purpose of such codification is to establish a
uniform set of accounting rules and regulations for use by insurance companies
in financial report preparation in connection with financial reporting to
regulatory authorities. The Company is unable to determine what impact, if any,
this codification will have on its Subsidiaries' statutory surplus requirements.
ASSESSMENTS AGAINST INSURERS. Under insolvency or guaranty laws in most
states in which the Company operates, insurers can be assessed for policyholder
losses incurred by insolvent insurance companies. At present, most insolvency or
guaranty laws provide for assessments based upon the amount of primary
insurance, rather than reinsurance, underwritten in a given jurisdiction.
Primary insurance written by REALIC is subject to such laws. REALIC incurred an
immaterial amount of guaranty fund assessments in 1996. To date, the Company has
paid only a de minimis amount of assessments with respect to insurer insolvency
proceedings.
INSURANCE HOLDING COMPANY REGULATIONS. The Company and the Subsidiaries
are subject to regulation under the insurance and insurance holding company
statutes of Connecticut, Illinois and Texas. The insurance holding company laws
and regulations vary from jurisdiction to jurisdiction, but generally require
insurance and reinsurance subsidiaries of insurance holding companies to
register with the applicable state regulatory authorities and to file with those
authorities certain reports describing, among other information, their capital
structure, ownership, financial condition, certain intercompany transactions and
general business operations. The insurance holding company statutes also require
prior regulatory agency approval or, in certain circumstances, prior notice of
certain material intercompany transfers of assets as well as certain
transactions between insurance companies, their parent companies and affiliates.
Under the Connecticut, Illinois and Texas insurance laws, unless (i)
certain filings are made with the Connecticut Insurance Department, the Illinois
Department of Insurance or the Texas Department of Insurance, as the case may
be, (ii) certain requirements are met, including, in the case of Texas, a public
hearing and/or (iii) approval or exemption is granted by the applicable
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insurance commissioner, no person may acquire any voting security or security
convertible into a voting security of an insurance holding company, such as the
Company, which controls a Connecticut insurance company or an Illinois insurance
company or a Texas insurance company, or merge with such a holding company, if
as a result of such transaction such person would "control" the insurance
holding company. "Control" is presumed to exist in Connecticut, Illinois and
Texas if a person directly or indirectly owns or controls 10% or more of the
voting securities of another person.
FEDERAL REGULATION. Although the federal government generally does not
directly regulate the insurance or reinsurance industries, federal legislation,
financial services regulation and federal taxation can significantly affect the
insurance business. In recent years, increased scrutiny has been placed upon the
insurance regulatory framework and legislation has been introduced in Congress
which could result in the federal government assuming some role in the
regulation of the insurance industry.
It is not possible to predict the future impact of changing state and
federal regulation on the operations of the Subsidiaries or the Company, and
there can be no assurance that existing insurance related laws and regulations
will not become more restrictive in the future or that laws and regulations
enacted in the future will not be more restrictive.
TAX MATTERS
Under applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), a life insurance company is not permitted to file a
consolidated federal income tax return with a company that is not a life
insurance company until such life insurance company has been a member of the
"affiliated group" (as such term is defined for federal income tax purposes) for
five taxable years. REALIC filed a separate company income tax return for 1996.
Although TexasRe and Life Reassurance (together, the "Life Tax Group") as life
insurance companies, could and did file a consolidated federal income tax
return, prior to 1994 they could not file a consolidated federal income tax
return with the Company. As a result, to the extent the Company generated
taxable losses, such losses could not be used to offset the taxable income
reported on the consolidated federal income tax return of the Life Tax Group.
The Company began filing consolidated federal income tax returns with the Life
Tax Group commencing with its 1994 federal income tax return. Only losses
generated by the Company during consolidated years can be used to offset taxable
income of the Life Tax Group reported on the consolidated federal income tax
return and those losses can only be so used to a limited extent (generally, the
lesser of 35% of such losses or 35% of the taxable income of the Life Tax
Group).
Pursuant to the Tax Allocation Agreement, the members of the Life Tax Group
are required to pay to the Company an amount of tax measured by the total amount
that would have been due and payable by the Life Tax Group to the taxing
authorities had the Life Tax Group filed a life insurance company consolidated
federal income tax return. That amount is required to be paid even if the
Company is, due to its own tax status apart from the Life Tax Group, in a net
tax loss or nontaxable position. In the event that the Life Tax Group incurs tax
losses, credits or other benefits (including tax loss or credit carryforwards)
that reduce the tax liability of the consolidated group consisting of the Life
Tax Group and the Company, the Company is required to pay to the Life Tax Group
the amount of such reduction.
PROPERTIES
The Company's principal operations are conducted from approximately 51,000
square feet of leased office space located at 969 High Ridge Road, Stamford,
Connecticut 06905. The lease with respect to such space expires on September 30,
2004. The rental expense paid by the Company under the lease during 1996 was $.9
million.
LEGAL PROCEEDINGS
The Company is not a party to any material pending litigation or
arbitration.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the current directors and executive officers of
the Company:
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
Rodney A. Hawes, Jr........... 60 Chairman of the Board, Chief Executive Officer,
Office of the Chairman and Director
Douglas M. Schair............. 52 Vice Chairman of the Board, Chief Investment
Officer, Office of the Chairman and Director
Jacques E. Dubois............. 48 President, Chief Operating Officer, Office of the
Chairman and Director
Chris C. Stroup............... 37 Executive Vice President, Chief Financial Officer
and Director
Samuel V. Filoromo............ 53 Vice President-Operations and Director
Carolyn K. McCandless......... 52 Director
K. Fred Skousen............... 55 Director
T. Bowring Woodbury, II....... 60 Director
W. Weldon Wilson.............. 37 Vice President, General Counsel and Secretary
</TABLE>
Mr. Hawes has served as Chairman of the Board and Chief Executive Officer
of the Company since November 1988 and in the Office of the Chairman since May
1992. Mr. Hawes also has served as Chairman of the Executive Committees of Life
Reassurance since 1988 and REALIC since 1995, and Chairman of the Boards of Life
Reassurance since July 1993, REALIC since August 1995 and of AML since October
1997. In addition, Mr. Hawes is associated with Insurance Investment Associates
("IIA"), which provides investment banking services to the insurance industry,
which he founded in 1972.
Mr. Schair has served as Vice Chairman of the Board of the Company since
November 1988 and Chief Investment Officer and in the Office of the Chairman
since May 1992. Mr. Schair also has served as Vice Chairman of the Board and
Chief Investment Officer of Life Reassurance since July 1993, of REALIC since
August 1995 and of AML since October 1997. In addition, Mr. Schair has been
associated with IIA since 1975.
Mr. Dubois has served as President and Director of the Company since
November 1988 and Chief Operating Officer and in the Office of the Chairman
since May 1992. Mr. Dubois also serves as President and Chief Executive Officer
of Life Reassurance and as Chief Executive Officer of REALIC and of AML. In
addition, Mr. Dubois has been associated with IIA since 1979.
Mr. Stroup has served as Executive Vice President and Chief Financial
Officer and as a Director of the Company since June 1996. Mr. Stroup also has
served as Executive Vice President and Chief Financial Officer of Life
Reassurance and Vice President and Chief Financial Officer of REALIC since
August 1996 and of AML since October 1997. From 1983 to 1996, Mr. Stroup was
associated with the firm of Ernst & Young LLP, where he served as a partner from
1993, providing accounting and consulting services to the insurance industry.
Mr. Filoromo has served as Vice President-Operations of the Company since
June 1996 and served as Vice President and Chief Financial Officer of the
Company from May 1992 to June 1996 and as a Director of the Company since May
1992. Mr. Filoromo has served as Executive Vice President-Operations of Life
Reassurance since August 1996, and as its Executive Vice President and Chief
Financial Officer from May 1992 to August 1996. He also has served as Vice
President-Operations of REALIC since August 1996 and served as its Chief
Financial Officer from August 1995 to August 1996. From January 1992 to May
1992, Mr. Filoromo was employed on a full-time basis as
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a consultant for the Company. From May 1991 to January 1992, Mr. Filoromo was an
independent consultant. From November 1990 to May 1991, Mr. Filoromo served as a
Senior Vice President of Conseco, Inc. From 1986 to February 1990, Mr. Filoromo
served as Vice President-Finance and Controller of Sun America Corporation.
Ms. McCandless has served as a Director of the Company since November 1992.
Since April 1990, Ms. McCandless has served as Vice President of Human Resources
and Administration for Time Warner Inc. From 1985 to 1990, Ms. McCandless was
Vice President and Director of Employee Benefits for Time Inc.
Dr. Skousen has served as a Director of the Company since November 1992.
Since 1989, Dr. Skousen has been the Dean of the Marriott School of Management
at Brigham Young University, Provo, Utah. From 1983 to 1989, Dr. Skousen held
the Peat Marwick Mitchell Professorship and from 1974 to 1983 served as Director
of the School of Accountancy at Brigham Young University. Dr. Skousen is a
certified public accountant. Dr. Skousen also serves on the board of Geneva
Steel Co.
Mr. Woodbury has served as a Director of the Company since November 1992.
Mr. Woodbury currently serves as a President of the Tacoma, Washington Mission
of The Church of Jesus Christ of Latter-day Saints. From June 1989 to April
1995, Mr. Woodbury served as Senior Vice President and General Counsel of
Consolidated Edison, where he also served as a member of the corporate policy
committee, and from May 1995 through June 1996 he served as a consultant to
Consolidated Edison. From 1987 to 1989, Mr. Woodbury served as Senior Vice
President, General Counsel and Corporate Secretary of Commercial Union Insurance
Company. From 1986 to 1987, Mr. Woodbury served as Executive Vice President,
General Counsel and Corporate Secretary of The Home Insurance Company.
Mr. Wilson has served as Vice President, General Counsel and Secretary of
the Company since May 1992. Mr. Wilson also has served as Executive Vice
President, General Counsel and Secretary of Life Reassurance since June 1995, as
its Senior Vice President, General Counsel and Secretary since January 1992 and
as its Vice President, General Counsel and Secretary since July 1991. Mr. Wilson
also has served as Vice President, General Counsel and Secretary of REALIC since
August 1995 and of AML since October 1997. Prior to joining Life Reassurance,
from May 1989 to June 1991, Mr. Wilson was associated with the law firm of
Johnson & Gibbs in Dallas, Texas. From September 1986 to May 1989, Mr. Wilson
was associated with the law firm of Moore & Peterson in Dallas, Texas.
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DESCRIPTION OF THE UNITS
The summaries of certain provisions of documents described below are not
necessarily complete, and in each instance reference is hereby made to the
copies of such documents (including the definitions therein of certain terms)
which are on file with the Commission. Wherever particular sections of, or terms
defined in, such documents are referred to herein, such sections or defined
terms are incorporated by reference herein. Capitalized terms not defined herein
have the meanings assigned to such terms in the Principal Agreements (as defined
herein).
GENERAL
Each Unit will have a Stated Amount of $ (equal to the last
reported per share sale price of the Common Stock on the NYSE on the date of
this Prospectus). Each Unit will initially consist of (a) a Purchase Contract
under which (i) the holder will purchase from the Company on the Stock Purchase
Date of , 2001, for cash in an amount equal to the
Stated Amount, between of a share and one share of Common Stock of the
Company (depending on the Applicable Market Value of the Common Stock on the
Stock Purchase Date, as described below), subject to adjustment in certain
circumstances, and (ii) the Company will pay to the holder or the holder will
pay to the Company (as specified in the final Prospectus for the offering made
hereby) Contract Fees on the Stated Amount at the Contract Fee Rate of % of
the Stated Amount per annum as described below (see "-- Description of the
Purchase Contracts"), and (b) QUIPS having a QUIPS Liquidation Amount equal to
the Stated Amount, a QUIPS Distribution Rate of % per annum and a QUIPS and
Debenture Maturity Date of , 2003 (see "-- Description
of the QUIPS"), subject to a Call Option granted by the holder of the Unit to
the Call Option Holder which (when aggregated with the Call Options underlying
all other Units) will entitle the Call Option Holder to acquire the QUIPS
underlying the Units (or the Junior Subordinated Debentures substituted
therefor), on or before the Call Option Expiration Date of
, 2001 (i.e., 90 days before the Stock Purchase Date),
in exchange for the Aggregate Consideration Deliverable on Exercise of the Call
Options (see "-- Description of the Call Options"). For so long as a Purchase
Contract remains in effect, such Purchase Contract and the QUIPS or other
Pledged Securities securing it (and, for so long as a Call Option relating to
such Pledged Securities is exercisable, the obligations of the holder to the
Call Option Holder thereunder) will not be separable and may be transferred only
as an integrated Unit.
For the period from the date of issuance of the Units to the Stock Purchase
Date, each holder of a Unit (other than a Stripped Unit) will be entitled to
receive cash payments of % of the Stated Amount per annum, payable in
arrears on the Quarterly Payment Dates of , ,
and of each year (unless deferred as described herein).
Such payments will consist of payments on the QUIPS or other Pledged Securities
plus Contract Fees payable by the Company or net of Contract Fees payable by the
holders, as the case may be. See "-- Description of the QUIPS -- Distributions",
"-- Description of the Call Options" and "-- Description of the Purchase
Contracts -- Contract Fees". If a holder of a Unit does not provide cash to
settle the underlying Purchase Contract in the manner described herein, cash
proceeds from the QUIPS or other Pledged Securities underlying such Unit will be
applied on the Stock Purchase Date to the purchase of Common Stock pursuant to
such Purchase Contract.
The QUIPS underlying a Unit will constitute Pledged Securities that will be
pledged to the Collateral Agent to secure the holder's obligations to the
Company and the Call Option Holder under the Purchase Contract and Call Option
underlying such Unit. If Treasury Securities are exchanged for Pledged
Securities upon exercise of the Call Options or Junior Subordinated Debentures
are distributed in respect of Pledged Securities upon dissolution of the Trust,
the Treasury Securities so exchanged or the Junior Subordinated Debentures so
distributed will automatically be substituted as Pledged Securities in place of
the securities that theretofore had been Pledged Securities.
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<PAGE> 59
Each holder of Units, by acceptance thereof, will, under the terms of the
Principal Agreements and the Purchase Contracts and any Call Options underlying
such Units, be deemed to have (a) irrevocably agreed to be bound by the terms of
the Principal Agreements and such Purchase Contracts and Call Options for so
long as such holder remains a holder of such Units, and (b) duly appointed the
Unit Agent as such holder's agent and attorney-in-fact to enter into and perform
such Purchase Contracts and Call Options on behalf of and in the name of such
holder.
Subject to applicable law (including, without limitation, United States
Federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Units by tender, in the open market or by
private agreement.
FORMATION OF THE UNITS
At the closing of the offering made hereby, the Underwriters will (a) enter
into Purchase Contracts with the Company and (b) purchase QUIPS from the Trust
for cash. The Underwriters will fund that cash in part by the sale of the Units
offered hereby to the initial investors thereof and in part by the sale of Call
Options (on behalf of such investors) to the Call Option Holder. The Trust will
use the cash received from the sale of the QUIPS to purchase Junior Subordinated
Debentures from the Company. The QUIPS will then be pledged to the Collateral
Agent to secure the obligations owed to the Company under the Purchase Contracts
and the obligations owed to the Call Option Holder under the Call Options. The
rights to purchase Common Stock under a Purchase Contract, together with the
QUIPS or other Pledged Securities pledged to secure the obligations referred to
in (a) and (b) below, subject to (a) the obligations owed to the Company under
such Purchase Contract, (b) the obligations owed to the Call Option Holder under
the Call Option relating to such QUIPS or other Pledged Securities and (c) the
pledge arrangements securing the foregoing obligations, are collectively
referred to herein as a "Normal Unit".
Each holder of Normal Units will have the right, at any time on or prior to
the second Business Day immediately preceding the Stock Purchase Date, to
substitute, as Pledged Securities, Treasury Securities that will generate
payments matching such holder's obligations under the underlying Purchase
Contracts, in return for the securities that theretofore had been the Pledged
Securities underlying such Normal Units. For so long as the Call Options
underlying such Normal Units remain exercisable, such right may be exercised
only if the holder obtains an instrument from the Call Option Holder releasing
its security interest in the Pledged Securities securing such Call Options and
agreeing that such Call Options no longer underlie such Normal Units (or the
Stripped Units they become). The holder might obtain such an instrument by
separately documenting such Call Options with the Call Option Holder (and, if
required by the Call Option Holder, entering into credit support arrangements
satisfactory to the Call Option Holder backing such Call Options), paying the
Call Option Holder to cancel such Call Options or otherwise. However, the Call
Option Holder will be under no obligation to deliver such an instrument, and
there can be assurance that a holder will be able to induce the Call Option
Holder to do so. If a holder of Normal Units exercises such holder's right to
substitute Treasury Securities for Pledged Securities in the manner described
herein, the securities that theretofore had been the Pledged Securities
underlying such Normal Units will be released from the pledge arrangement
described herein and delivered to such holder, and such holder's remaining
rights and obligations under the Normal Units will thereupon become "Stripped
Units" that will no longer generate cash payments to such holder and that will
no longer be listed on the NYSE or be fungible with Normal Units.
A holder of Normal Units may exercise the right referred to above by
presenting and surrendering the certificate evidencing such Normal Units, at the
offices of the Unit Agent, with the form of "Request to Create Stripped Units"
thereon completed and executed as indicated, and concurrently delivering to the
Collateral Agent (a) Treasury Securities that will generate, on the Stock
Purchase Date, an amount of cash equal to the aggregate Stated Amount of such
Units, (b) if Contract Fees are payable by the holders of the Units to the
Company, Treasury Securities that will generate, on each Quarterly Payment Date
falling after the date of delivery and on or before the
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<PAGE> 60
Stock Purchase Date, an amount of cash equal to the aggregate Contract Fees that
are scheduled to be payable in respect of the Purchase Contracts underlying such
Normal Units (assuming for this purpose that no Contract Fees will then have
been deferred), (c) if such holder is, at the date of delivery, deferring
Contract Fees payable by such holder in respect of such Normal Units, an amount
of cash equal to (i) the aggregate amount of such Contract Fees accrued to the
date of delivery, if such date is a Quarterly Payment Date, and (ii) the
aggregate amount of such Contract Fees accrued to the Quarterly Payment Date
immediately preceding such date of delivery plus interest thereon at the
Deferral Rate for the period from and including such Quarterly Payment Date to
but excluding such date of delivery, if such date is not a Quarterly Payment
Date and (d) if the Call Options underlying such Normal Units remain
exercisable, the instrument from the Call Option Holder referred to above;
provided, however, that if Treasury Securities are the Pledged Securities
underlying such Normal Units, such right must be exercised with respect to a
number of Normal Units that will result in the release of Treasury Securities in
denominations of $1,000 and integral multiples thereof. A certificate
representing the Stripped Units that such Normal Units have become will then be
issued and delivered to such holder or such holder's designee and the securities
that theretofore had been the Pledged Securities underlying such Normal Units
will then be released from the pledge under the Pledge Agreement and delivered
to such holder or such holder's designee, upon payment by the holder of any
transfer or similar taxes payable in connection with the transfer of Units or
the securities that theretofore had been Pledged Securities to any person other
than such holder.
The Normal Units and any Stripped Units are collectively referred to herein
as the "Units".
The Company will enter into (a) an agreement (the "Master Unit Agreement") with
The Bank of New York, as unit agent (together with any successor thereto in such
capacity, the "Unit Agent"), governing the appointment of the Unit Agent as the
agent and attorney-in-fact for the holders of the Units, the Purchase Contracts,
the transfer, exchange or replacement of certificates representing the Units and
certain other matters relating to the Units and (b) an agreement (the "Pledge
Agreement") among the Company, the Collateral Agent and the Call Option Holder
creating a pledge and security interest for the benefit of the Company to secure
the obligations of holders of Units under the Purchase Contracts and a pledge
and security interest for the benefit of the Call Option Holder to secure the
obligations of the holders of Normal Units under the Call Options. In addition,
the Unit Agent will enter into an agreement (the "Call Option Agreement") with
the Call Option Holder governing the Call Options. The Master Unit Agreement,
the Pledge Agreement and the Call Option Agreement are collectively referred to
herein as the "Principal Agreements".
DESCRIPTION OF THE PURCHASE CONTRACTS
GENERAL
The Purchase Contracts will be governed by the Master Unit Agreement.
Each Purchase Contract underlying a Unit (unless earlier terminated) will
obligate the holder of such Unit to purchase, and the Company to sell, on the
Stock Purchase Date, for cash in an amount equal to the Stated Amount, a number
of newly issued shares of Common Stock equal to the Settlement Rate. The
Settlement Rate will be calculated as follows (subject to adjustment under the
circumstances described below under "-- Anti-Dilution Adjustments"):
(a) if the Applicable Market Value is greater than or equal to the
Threshold Appreciation Price of $ (i.e., approximately %
higher than the Stated Amount), the Settlement Rate will be ;
(b) if the Applicable Market Value is less than the Threshold
Appreciation Price but greater than the Stated Amount, the Settlement Rate
will equal the Stated Amount divided by the Applicable Market Value (i.e.,
the Settlement Rate will be calculated so that the Applicable
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Market Value of the Common Stock purchasable under each Purchase Contract
would equal the Stated Amount payable therefor), rounded to the nearest
1/10,000th of a share; and
(c) if the Applicable Market Value is less than or equal to the Stated
Amount, the Settlement Rate will be one.
"Applicable Market Value" means the average of the Closing Prices per share
of Common Stock on each of the twenty consecutive Trading Days ending on the
last Trading Day immediately preceding the Stock Purchase Date. "Closing Price"
of the Common Stock on any date of determination means the closing sale price
(or, if no closing price is reported, the last reported sale price) of the
Common Stock on the NYSE on such date, or if the Common Stock is not listed for
trading on the NYSE on any such date, as reported in the composite transactions
for the principal United States securities exchange on which the Common Stock is
so listed, or if the Common Stock is not so listed on a United States national
or regional securities exchange, as reported by The Nasdaq Stock Market, or if
the Common Stock is not so reported, the last quoted bid price of the Common
Stock in the over-the-counter market as reported by the National Quotation
Bureau or similar organization, or if such bid price is not available, the
market value of the Common Stock on such date as determined by a nationally
recognized investment banking firm retained for this purpose by the Company. A
"Trading Day" means a day on which the Common Stock (a) is not suspended from
trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and (b) has traded at least
once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of the Common
Stock.
No fractional shares of Common Stock will be issued by the Company pursuant
to the Purchase Contracts. In lieu of a fraction of a share otherwise issuable
in respect of Purchase Contracts being settled by a holder of Units, the holder
will be entitled to receive an amount of cash equal to such fraction times the
Applicable Market Value.
Prior to the Stock Purchase Date, the Common Stock purchasable on
settlement of Purchase Contracts will not be deemed to be outstanding for any
purpose and no holder of Units will have any voting rights, rights to dividends
or other distributions or other rights or privileges of a stockholder of the
Company by virtue of holding such Units.
SETTLEMENT
In order to settle the Purchase Contracts underlying any Units, the holder
of such Units shall, by no later than 10:00 a.m., New York City time, on the
Stock Purchase Date, deliver payment (in the form of a certified or cashier's
check payable to the order of the Company in immediately available funds), at
the offices of the Unit Agent, of an amount equal to the aggregate Stated Amount
of such Units (plus, if there are unpaid Contract Fees accrued on such Purchase
Contracts and payable by the holder on the Stock Purchase Date and the cash
received by the Collateral Agent on such date in respect of the Pledged
Securities securing such Purchase Contracts is less than the amount of such
unpaid Contract Fees, an amount sufficient to cover such short-fall). The Common
Stock purchased on settlement of such Purchase Contracts will then be issued and
delivered to such holder or such holder's designee and the Pledged Securities
securing such Purchase Contracts (or, in the case of Treasury Securities, the
proceeds from the payment of such Treasury Securities at maturity, net of any
unpaid Contract Fees payable by the holder accrued thereon to the Stock Purchase
Date) will then be released from the pledge under the Pledge Agreement and
delivered to such holder or such holder's designee, upon presentation and
surrender of the certificate evidencing such Units and payment by the holder of
any transfer or similar taxes payable in connection with the issuance of Common
Stock or the transfer of Pledged Securities to any person other than such
holder.
On the Stock Purchase Date, if a holder of Units has not delivered cash to
settle the underlying Purchase Contracts in the manner described above and no
event described under "-- Termination" below has occurred, then (a) the Unit
Agent will notify the Collateral Agent and (i) if QUIPS underlie
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such Units, the Collateral Agent, on behalf of such holder, will exercise such
holder's right to require the Trust to distribute Junior Subordinated Debentures
having an aggregate principal amount equal to the aggregate QUIPS Liquidation
Amount of such QUIPS, in exchange for such QUIPS, and, upon receiving such
Junior Subordinated Debentures, will thereupon, as Put Agent, exercise the
Junior Subordinated Debenture Put Option with respect thereto (see
"-- Description of the QUIPS -- Right to Exercise Junior Subordinated Debenture
Put Options" and "-- Description of the Junior Subordinated Debentures -- Junior
Subordinated Debenture Put Options") and (ii) if Junior Subordinated Debentures
underlie such Units, the Collateral Agent, on behalf of such holder, will, as
Put Agent, exercise the Junior Subordinated Debenture Put Option with respect
thereto (see "-- Description of the Junior Subordinated Debentures -- Junior
Subordinated Debenture Put Options"), (b) a portion of the proceeds from the
exercise of such Junior Subordinated Debenture Put Option (or, if Treasury
Securities underlie such Units, a portion of the proceeds from the payment of
such Treasury Securities at maturity) will be applied to satisfy in full such
holder's obligation to purchase Common Stock under such Purchase Contracts and
to pay any unpaid Contract Fees payable by such holder accrued thereon to the
Stock Purchase Date and (c) the remainder of such proceeds, if any, will be paid
to such holder; provided, however, that the holder's obligation to satisfy such
Purchase Contracts may be offset by any amounts due and owing by the Company to
such holder. Such Common Stock will then be issued and delivered to such holder
or such holder's designee, upon presentation and surrender of the certificate
evidencing such Units and payment by the holder of any transfer or similar taxes
payable in connection with the issuance of Common Stock to any person other than
such holder.
CONTRACT FEES
The holders of Units may be required to pay Contract Fees to the Company,
or the Company may be required to pay Contract Fees to the holders of Units, as
specified under "-- General" above.
Any obligation of the holders of Units to pay Contract Fees to the Company
will be funded out of payments made in respect of the Pledged Securities. If
payments made in respect of the Pledged Securities are insufficient to cover the
obligation of the holders of the Units to pay Contract Fees, such obligation
will be deferred until the earlier of the date sufficient cash is available and
the Stock Purchase Date. In the event that holders of Units are required to pay
Contract Fees to the Company, it is unlikely such holders will be entitled to a
current deduction for such payments. As a result, although the amount of cash
distributions made to holders will be reduced by the amount of Contract Fees
payable to the Company, holders will nevertheless recognize income each quarter
equal to the full amount of interest received or accrued with respect to the
QUIPS underlying the Units held by such holder. See "Certain Federal Income Tax
Consequences -- Contract Fees".
Any obligation of the Company to pay Contract Fees to the holders of Units
will be subordinated and junior in right of payment to the Company's obligations
under its Senior Indebtedness, in a manner substantially similar to the manner
in which the Junior Subordinated Debentures are subordinated as described under
"-- Description of the Junior Subordinated Debentures" below. So long as no
default in the Company's obligations under the Principal Agreements has occurred
and is continuing, the Company will have the right to defer the payment of
Contract Fees at any time or from time to time for a period not extending beyond
the Stock Purchase Date; provided, however, that in order to exercise such
right, the Company must give the Unit Agent notice at least five Business Days
prior to the earlier of (a) the date such payment would otherwise have been
payable, (b) the date the Company is required to give notice to any securities
exchange or to holders of Units of the record date or the date such payment is
payable and (c) such record date. During any such deferral period, the Company
may not take any of the actions that it would be prohibited from taking during
an Extension Period as described in the first paragraph under "-- Description of
the Junior Subordinated Debentures -- Option To Extend Interest Payment Date"
below.
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Contract Fees will be payable at the Contract Fee Rate set forth under
"-- General" above. Any deferred Contract Fees will bear additional Contract
Fees at the Deferral Rate (compounding on each succeeding Quarterly Payment
Date) until paid. Contract Fees payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. Contract Fees will accrue from
and including the date of issuance of the Units to but excluding the Stock
Purchase Date and will be payable in arrears on the Quarterly Payment Dates
(unless deferred as described above). If the Purchase Contracts are terminated,
the right of holders of Units to receive Contract Fees or the obligation of
holders of Units to pay Contract Fees (including any deferred Contract Fees)
will also terminate.
ANTI-DILUTION ADJUSTMENTS
The formula for determining the Settlement Rate will be subject to
adjustment upon the occurrence of certain events, including: (a) the payment of
dividends (and other distributions) of Common Stock on Common Stock; (b) the
issuance to all holders of Common Stock of rights, warrants or options entitling
them, for a period of up to 45 days, to subscribe for or purchase Common Stock
at less than the Current Market Price (as defined herein) thereof; (c)
subdivisions and combinations of Common Stock; (d) distributions to all holders
of Common Stock of evidences of indebtedness of the Company, securities, cash or
other assets (excluding any dividend or distribution covered by clause (a) or
(b) above and any dividend or distribution paid exclusively in cash); (e)
distributions consisting exclusively of cash to all holders of Common Stock in
an aggregate amount that, together with (i) other all-cash distributions made
within the preceding 12 months and (ii) any cash and the fair market value, as
of the expiration of the tender or exchange offer referred to below, of
consideration payable in respect of any tender or exchange offer by the Company
or a subsidiary for the Common Stock concluded within the preceding 12 months,
exceeds 12.5% of the Company's aggregate market capitalization (such aggregate
market capitalization being the product of the Current Market Price of the
Common Stock multiplied by the number of shares of Common Stock then
outstanding) on the date of such distribution; and (f) the successful completion
of a tender or exchange offer made by the Company or any subsidiary for the
Common Stock which involves an aggregate consideration that, together with (i)
any cash and the fair market value of other consideration payable in respect of
any tender or exchange offer by the Company or a subsidiary for the Common Stock
concluded within the preceding 12 months and (ii) the aggregate amount of any
all-cash distributions to all holders of the Company's Common Stock made within
the preceding 12 months, exceeds 12.5% of the Company's aggregate market
capitalization on the date of expiration of such tender or exchange offer. The
"Current Market Price" per share of Common Stock on any day means the average of
the daily Closing Prices for the five consecutive Trading Days selected by the
Company commencing not more than 20 Trading Days before, and ending not later
than, the earlier of the day in question and the day before the "ex date" with
respect to the issuance or distribution requiring such composition. For purposes
of this paragraph, the term "ex date", when used with respect to any issuance or
distribution, shall mean the first date on which the Common Stock trades on such
exchange or in such market without the right to receive such issuance or
distribution.
In the case of certain reclassifications, consolidations, mergers, sales or
transfers of assets or other transactions pursuant to which the Common Stock is
converted into the right to receive other securities, cash or property, each
Purchase Contract then outstanding would, without the consent of the holders of
Units, become a contract to purchase only the kind and amount of securities,
cash and other property receivable upon consummation of the transaction by a
holder of the number of shares of Common Stock which would have been received by
the holder of the related Unit immediately prior to such transaction if such
holder had then settled such Purchase Contract.
If at any time the Company makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
United States Federal income tax purposes (i.e., distributions of evidences of
indebtedness or assets of the Company, but generally not stock
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dividends or rights to subscribe to capital stock) and, pursuant to the
Settlement Rate adjustment provisions of the Master Unit Agreement, the
Settlement Rate is increased, such increase may be deemed to be the receipt of
taxable income to holders of Units. See "Certain Federal Income Tax
Consequences -- Adjustment of Settlement Rate".
In addition, the Company may make such increases in the Settlement Rate as
the Board of Directors of the Company deems advisable to avoid or diminish any
income tax to holders of shares of Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes or for any other reasons.
Adjustments to the Settlement Rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the Settlement Rate shall be required
unless such adjustment would require an increase or decrease of at least one
percent in the Settlement Rate; provided, however, that any adjustments which by
reason of the foregoing are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
The Company will be required, within ten Business Days following the
occurrence of an event that requires or permits an adjustment in the Settlement
Rate, to provide written notice to the Unit Agent of the occurrence of such
event and a statement in reasonable detail setting forth the method by which the
adjustment to the Settlement Rate was determined and setting forth the revised
Settlement Rate.
TERMINATION
The Purchase Contracts, and the rights and obligations of the Company and
of the holders of the Units thereunder (including the right to receive and the
obligation to pay Contract Fees or deferred Contract Fees thereunder and the
right and obligation of the holders to purchase and the Company to sell Common
Stock thereunder), will automatically terminate upon the occurrence of certain
events of bankruptcy, insolvency or reorganization with respect to the Company.
Upon such termination, the Call Options will terminate and the Pledged
Securities will be distributed in the manner described under "-- Pledged
Securities and Pledge Agreement -- Termination of Purchase Contracts".
DESCRIPTION OF THE CALL OPTIONS
At the closing of the Offering made hereby, the Underwriters (on behalf of
the initial investors in the Units) will sell the Call Options to the Call
Option Holder at a price equal to $ per Call Option. The Call Options
will be governed by the Call Option Agreement.
Each Call Option underlying a Normal Unit (unless earlier terminated), when
aggregated with the Call Options underlying all other Normal Units, will entitle
the Call Option Holder to acquire the QUIPS underlying the Normal Units (or the
Junior Subordinated Debentures substituted therefor), on or before the Call
Option Expiration Date, in exchange for the Aggregate Consideration Deliverable
on Exercise of the Call Options. The Aggregate Consideration Deliverable on
Exercise of the Call Options will be comprised of:
(a) Treasury Securities that will generate, on each Quarterly Payment
Date falling after the settlement date for the Call Options (the "Call
Settlement Date") and on or before the Stock Purchase Date, an amount of
cash equal to the aggregate distributions or interest payments that are
scheduled to be payable in respect of the QUIPS or Junior Subordinated
Debentures underlying the Normal Units on such Quarterly Payment Date
(assuming for this purpose that no distributions or interest payments will
then have been deferred);
(b) Treasury Securities that will generate, on the Stock Purchase
Date, an amount of cash equal to the aggregate QUIPS Liquidation Amount of
the QUIPS or principal amount of the Junior Subordinated Debentures
underlying the Normal Units; and
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(c) if the Company is, at the Call Settlement Date, deferring
distributions on the QUIPS or interest payments on the Junior Subordinated
Debentures (see "-- Description of the QUIPS -- Distributions" and
"-- Description of the Junior Subordinated Debentures -- Option to Extend
Interest Payment Date"), an amount in cash equal to (i) the aggregate
deferred distributions on the QUIPS or deferred interest payments on the
Junior Subordinated Debentures underlying the Normal Units accrued to the
Call Settlement Date, if the Call Settlement Date is a Quarterly Payment
Date, and (ii) the aggregate deferred distributions on the QUIPS or
deferred interest payments on the Junior Subordinated Debentures underlying
the Normal Units accrued to the Quarterly Payment Date immediately
preceding the Call Settlement Date plus interest thereon at the Deferral
Rate for the period from and including such Quarterly Payment Date to but
excluding such Call Settlement Date, if the Call Settlement Date is not a
Quarterly Payment Date.
The Call Option Holder may exercise all of its Call Options (but not less
than all) by (a) delivering to the Unit Agent and the Collateral Agent, on or
prior to the Call Settlement Date, a notice stating that the Call Option Holder
is exercising its Call Options and specifying the Call Settlement Date (which
may not be after the Call Option Expiration Date) and (b) delivering to the
Collateral Agent, by 12:00 noon, New York City time, on the Call Settlement
Date, the Aggregate Consideration Deliverable on Exercise of the Call Options.
Pursuant to the Pledge Agreement, upon receipt by the Collateral Agent of the
Aggregate Consideration Deliverable on Exercise of the Call Options, the
Collateral Agent will transfer the QUIPS (or Junior Subordinated Debentures)
underlying the Normal Units to the Call Option Holder or its designee free and
clear of the pledge and security interest created by the Pledge Agreement and
the Treasury Securities included in the Aggregate Consideration Deliverable on
Exercise of the Call Options shall automatically be substituted for such QUIPS
(or Junior Subordinated Debentures) as Pledged Securities, whereupon the Call
Option Holder shall cease to have a security interest in the Pledged Securities.
If the Call Options are exercised, the Unit Agent shall, not later than
three Business Days following the Call Settlement Date, mail notice of such
exercise to the holders of Normal Units.
The Call Options, and the rights and obligations of the Call Option Holder
and of the holders of the Normal Units thereunder, will automatically terminate
upon the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company. See "-- Description of the Purchase
Contracts -- Termination" and "-- Pledged Securities and Pledge
Agreement -- Termination of Purchase Contracts".
PLEDGED SECURITIES AND PLEDGE AGREEMENT
GENERAL
Pursuant to the Pledge Agreement, the Pledged Securities will be pledged to
the Collateral Agent, for the benefit of the Company and the Call Option Holder,
to secure (a) the obligations of holders of Units to purchase Common Stock under
the Purchase Contracts, (b) any obligations of the holders of Units to pay
Contract Fees to the Company and (c) the obligations of holders of Normal Units
to deliver the underlying QUIPS (or Junior Subordinated Debentures) to the Call
Option Holder if the Call Options are exercised. The Pledged Securities will
initially consist of the QUIPS. If Treasury Securities are exchanged for Pledged
Securities upon exercise of the Call Options or in connection with the creation
of Stripped Units or Junior Subordinated Debentures are distributed in respect
of Pledged Securities upon dissolution of the Trust, the Treasury Securities so
exchanged or the Junior Subordinated Debentures so distributed will
automatically be substituted as Pledged Securities in place of the securities
that theretofore had been Pledged Securities and the securities that theretofore
had been Pledged Securities will automatically be released from the pledge and
security interest created by the Pledge Agreement.
The rights of the holders of the Units to the underlying Pledged Securities
will be subject to the pledge and security interest created by the Pledge
Agreement; no holder of Units will be permitted to
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withdraw the Pledged Securities underlying such Units from the pledge
arrangement except upon the settlement or termination of the Purchase Contracts
or as described under "-- Formation of the Units" above. Subject to such pledge
and security interest, however, each holder of Units will have full beneficial
ownership of the underlying Pledged Securities and will be entitled (directly or
through the Collateral Agent) to all of the rights provided by such Pledged
Securities, and the Company and Call Option Holder will have no rights with
respect to Pledged Securities other than their respective security interests
therein.
QUARTERLY PAYMENTS ON PLEDGED SECURITIES
The Collateral Agent will, upon receipt of any quarterly distributions or
payments of interest on the Pledged Securities, (a) pay to the Company an amount
therefrom equal to the aggregate Contract Fees (if any) then due from the
holders of the Units to the Company and (b) pay the remainder to the Unit Agent,
which will in turn distribute that amount, together with the Contract Fees (if
any) then due from the Company to the holders of Units, to the holders of Units
entitled thereto. As long as the Units remain in book-entry only form, the
Record Date for any payment will be one Business Day prior to such payment date.
SUBSTITUTION OF PLEDGED SECURITIES TO CREATE STRIPPED UNITS
For a description of the right of a holder of Normal Units to substitute
Treasury Securities for Pledged Securities underlying Normal Units, thereby
creating Stripped Units, see "-- Formation of the Units" above.
SETTLEMENT OF PURCHASE CONTRACTS
On the Stock Purchase Date, the Pledged Securities (or, in the case of
Treasury Securities, the proceeds from the payment of such Treasury Securities
at maturity) will be released from the pledge and security interest created by
the Pledge Agreement and distributed or delivered as specified under
"-- Description of the Purchase Contracts -- Settlement".
TERMINATION OF PURCHASE CONTRACTS
Upon termination of the Purchase Contacts (see "-- Description of the
Purchase Contracts -- Termination"), the Collateral Agent will release the
Pledged Securities underlying the Units to the Unit Agent for distribution to
the holders of such Units, upon presentation and surrender of the certificates
evidencing such Units. If upon such termination any holder would otherwise be
entitled to receive a principal amount of Treasury Securities of any series that
is not an integral multiple of $1,000, the Unit Agent will distribute to such
holder Treasury Securities of such series in a principal amount equal to the
next lower integral multiple of $1,000, will sell the Treasury Securities of
such series not otherwise distributed to such holder (together with the Treasury
Securities of such series not otherwise distributed to other holders) and will
distribute to all such holders (in accordance with their respective interests
therein) the proceeds therefrom.
BOOK ENTRY SYSTEM
The Depository Trust Company (the "Depositary") will act as securities
depositary for the Units. The Units will be issued only as fully-registered
securities registered in the name of Cede & Co. or another nominee of the
Depositary. Fully-registered global security certificates ("Global Security
Certificates"), representing the total aggregate number of Units, will be
issued, will be deposited with the Depositary and will bear a legend regarding
the restrictions on exchanges and registration of transfer thereof referred to
below.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the Units so long as
such Units are represented by Global Security Certificates.
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The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its participants ("Participants")
deposit with the Depositary. The Depositary also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). The Depositary is owned by a number of
its Direct Participants and by the NYSE, the American Stock Exchange, Inc., and
the National Association of Securities Dealers, Inc. Access to the Depositary
system is also available to others, such as securities brokers and dealers,
banks and trust companies that clear transactions through or maintain a direct
or indirect custodial relationship with a Direct Participant either directly or
indirectly ("Indirect Participants"). The rules applicable to the Depositary and
its Participants are on file with the Commission.
No Units represented by Global Security Certificates may be exchanged in
whole or in part for Units registered, and no transfer of Global Security
Certificates in whole or in part may be registered, in the name of any person
other than the Depositary or a nominee of the Depositary unless the Depositary
has notified the Company that it is unwilling or unable to continue as
depositary for such Global Security Certificates or has ceased to be qualified
to act as such as required by the Master Unit Agreement or there shall have
occurred and be continuing a default by the Company in respect of its
obligations under one or more Principal Agreements. All Units represented by
Global Security Certificates or any portion thereof will be registered in such
names as the Depositary may direct.
As long as the Depositary or its nominee is the registered owner of the
Global Security Certificates, the Depositary or such nominee, as the case may
be, will be considered the sole owner and holder of the Global Security
Certificates and all Units represented thereby for all purposes under the Units,
Purchase Contracts, Call Options and Principal Agreements. Except in the limited
circumstances referred to above, owners of beneficial interests in Global
Security Certificates will not be entitled to have such Global Security
Certificates or the Units represented thereby registered in their names, will
not receive or be entitled to receive physical delivery of certificates in
exchange therefor and will not be considered to be owners or holders of such
Global Security Certificates or any Units represented thereby for any purpose
under the Units, Purchase Contracts, Call Options and Principal Agreements. All
payments on the Units represented by the Global Security Certificates and all
deliveries of Pledged Securities or Common Stock to the holders thereof will be
made to the Depositary or its nominee, as the case may be, as the holder
thereof.
Ownership of beneficial interests in the Global Security Certificates will
be limited to Participants or persons that may hold beneficial interests through
institutions that have accounts with the Depositary. Ownership of beneficial
interests in Global Security Certificates will be shown only on, and the
transfer of those ownership interests will be effected only through, records
maintained by the Depositary or its nominee (with respect to Participants'
interests) or any such Participant (with respect to interests of persons held by
such Participants on their behalf). Procedures for settlement of Purchase
Contracts on the Stock Purchase Date will be governed by arrangements among the
Depositary, Participants and persons that may hold beneficial interests through
Participants designed to permit such settlement without the physical movement of
certificates. Payments, transfers, deliveries, exchanges and other matters
relating to beneficial interests in Global Security Certificates may be subject
to various policies and procedures adopted by the Depositary from time to time.
The Depositary has advised the Company that it will take any action permitted to
be taken by a holder of Units only at the direction of one or more Participants
to whose account with the Depositary interests in the Global Security
Certificates are credited and only in respect of such
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number of Units as to which such Participant or Participants has or have given
such direction. None of the Company, the Trust, the Unit Agent or any agent of
the Company, the Trust or the Unit Agent will have any responsibility or
liability for any aspect of the Depositary's or any Participant's records
relating to, or for payments made on account of, beneficial interests in Global
Security Certificates, or for maintaining, supervising or reviewing any of the
Depositary's records or any Participant's records relating to such beneficial
ownership interests.
The information in this section concerning the Depositary and its
book-entry system has been obtained from sources that the Company and the Trust
believe to be reliable, but neither the Company nor the Trust takes
responsibility for the accuracy thereof.
CERTAIN PROVISIONS OF THE PRINCIPAL AGREEMENTS
GENERAL
Distributions on the Units will be payable, Purchase Contracts (and
documents related thereto) will be settled and transfers of the Units will be
registrable at the office of the Unit Agent in the Borough of Manhattan, The
City of New York. In addition, in the event that the Units do not remain in
book-entry form, payment of distributions on the Units may be made, at the
option of the Company, by check mailed to the address of the persons entitled
thereto as shown on the Unit Register.
In the event that any Quarterly Payment Date, the date of exercise of the
Call Options, the Stock Purchase Date or any Put Date is not a Business Day,
then payment of the Contract Fees payable on any such Quarterly Payment Date or
settlement of the Call Options, the Purchase Contracts or the Junior
Subordinated Debenture Put Options, as the case may be, will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that if such Business Day is in
the next succeeding calendar year, such payment or settlement will be made on
the immediately preceding Business Day, in each case with the same force and
effect as if made on such payment date. A "Business Day" shall mean any day
other than Saturday, Sunday or any other day on which banking institutions in
The City of New York are authorized or obligated by law or executive order to be
closed.
If a holder of Units fails to present and surrender the certificate
evidencing such Units to the Unit Agent on the Stock Purchase Date, the shares
of Common Stock issuable in settlement of the related Purchase Contracts will be
registered in the name of the Unit Agent and, together with any distributions
thereon, shall be held by the Unit Agent as agent for the benefit of such
holder, until such certificate is presented and surrendered or the holder
provides satisfactory evidence that such certificate has been destroyed, lost or
stolen, together with any indemnity that may be required by the Unit Agent and
the Company.
If the Purchase Contracts have terminated prior to the Stock Purchase Date,
the related Pledged Securities have been transferred to the Unit Agent for
distribution to the holders entitled thereto and a holder of Units fails to
present and surrender the certificate evidencing such Units to the Unit Agent,
the Pledged Securities otherwise deliverable to such holder and payments thereon
shall be held by the Unit Agent as agent for the benefit of such holder, until
such certificate is presented and surrendered or the holder provides the
evidence and indemnity described above.
The Unit Agent will have no obligation to invest or to pay interest on any
amounts held by the Unit Agent pending distribution.
No service charge will be made for any registration of transfer or exchange
of the Units, except for any tax or other governmental charge that may be
imposed in connection therewith.
MODIFICATION
The Principal Agreements will contain provisions permitting the parties
thereto, with the consent of the holders of in excess of 50% of the Units at the
time outstanding (or, in the case of
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modifications affecting only holders of Normal Units or Stripped Units, the
consent of the holders of in excess of 50% of the Normal Units or Stripped
Units, as the case may be), to modify the terms of the Principal Agreements, the
Purchase Contracts and the Call Options, except that no such modification may,
without the consent of the holder of each outstanding Unit affected thereby, (a)
change any payment date, (b) change the amount or type of Pledged Securities
required to be pledged to secure obligations under the Units, impair the right
of the holder of any Units to receive distributions on the Pledged Securities
underlying such Units or otherwise adversely affect the holder's rights in or to
such Pledged Securities, (c) change the place or currency of payment for any
Contract Fees or other amounts payable in respect of the Units, increase any
Contract Fees or other amounts payable by holders in respect of Units or
decrease any Contract Fees or other amounts receivable by holders in respect of
Units, (d) impair the right to institute suit for the enforcement of any
Purchase Contract, (e) reduce the amount of Common Stock purchasable under any
Purchase Contract, increase the price to purchase Common Stock on settlement of
any Purchase Contract, change the Stock Purchase Date or otherwise adversely
affect the holder's rights under any Purchase Contract, (f) reduce the amount
payable on exercise of any Call Option, extend the Call Option Expiration Date
or otherwise adversely affect the holder's rights under any Call Option or (g)
reduce the above-stated percentage of outstanding Units the consent of whose
holders is required for the modification or amendment of the provisions of the
Principal Agreements, the Purchase Contracts or the Call Options.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Company will covenant in the Master Unit Agreement that it will not
merge or consolidate with any other entity or sell, assign, transfer, lease or
convey all or substantially all of its properties and assets to any person, firm
or corporation unless the Company is the continuing corporation or the successor
corporation is a corporation organized under the laws of the United States of
America or a state thereof and such corporation expressly assumes the
obligations of the Company under the Principal Agreements and the Purchase
Contracts, and the Company or such successor corporation is not, immediately
after such merger, consolidation, sale, assignment, transfer, lease or
conveyance, in default in the performance of any of its obligations thereunder.
TITLE
The Company, the Unit Agent, the Collateral Agent and the Call Option
Holder may treat the registered holder of any Units as the absolute owner
thereof for the purpose of making payment and settling the related Purchase
Contracts or Call Options and for all other purposes.
REPLACEMENT OF UNITS CERTIFICATES
In the event that physical certificates have been issued, any mutilated
certificate evidencing Units will be replaced by the Company at the expense of
the holder upon surrender of such certificate to the Unit Agent. Certificates
that become destroyed, lost or stolen will be replaced by the Company at the
expense of the holder upon delivery to the Company and the Unit Agent of
evidence of the destruction, loss or theft thereof satisfactory to the Company
and the Unit Agent. In the case of a destroyed, lost or stolen certificate, an
indemnity satisfactory to the Unit Agent and the Company may be required at the
expense of the holder of the Units evidenced by such certificate before a
replacement will be issued.
Notwithstanding the foregoing, the Company will not be obligated to issue
any Units on or after the Stock Purchase Date or after the Purchase Contracts
have terminated. In lieu of the delivery of a replacement certificate following
the Stock Purchase Date, the Unit Agent, upon delivery of the evidence and
indemnity described above, will deliver the Common Stock issuable pursuant to
the Purchase Contracts included in the Units evidenced by such certificate, or,
if the Purchase Contracts have terminated prior to the Stock Purchase Date,
transfer the Pledged Securities related to the Units evidenced by such
certificate.
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GOVERNING LAW
The Principal Agreements, the Purchase Contracts and the Call Options will
be governed by, and construed in accordance with, the laws of the State of New
York.
INFORMATION CONCERNING THE UNIT AGENT
The Bank of New York will initially act as Unit Agent. The Unit Agent will
act as the agent for the holders of Units from time to time. The Master Unit
Agreement will not obligate the Unit Agent to exercise any discretionary actions
in connection with a default under the terms of the Principal Agreements, the
Purchase Contracts, the Call Options or the Pledged Securities.
The Master Unit Agreement will contain provisions limiting the liability of
the Unit Agent. The Master Unit Agreement will contain provisions under which
the Unit Agent may resign or be replaced. Such resignation or replacement would
be effective upon the appointment of a successor.
INFORMATION CONCERNING THE COLLATERAL AGENT
will initially act as Collateral Agent. The Collateral Agent
will act solely as the agent of the Company or the Call Option Holder and will
not assume any obligation or relationship of agency or trust for or with any of
the holders of the Units except for the obligations owed by a pledgee of
property to the owner thereof under the Pledge Agreement and applicable law.
The Pledge Agreement will contain provisions limiting the liability of the
Collateral Agent. The Pledge Agreement will contain provisions under which the
Collateral Agent may resign or be replaced. Such resignation or replacement
would be effective upon the appointment of a successor.
DESCRIPTION OF THE QUIPS
GENERAL
The QUIPS will be issued by the Trust, a statutory business trust created
under Delaware law pursuant to the Declaration. The Trust's affairs are
conducted by the Issuer Trustees, which are currently The Bank of New York, as
the Property Trustee, and The Bank of New York (Delaware), as the Delaware
Trustee, and the three Administrators, who are employees of the Company. The
Trust exists for the exclusive purposes of (a) issuing and selling the Trust
Securities consisting of the QUIPS and the Common Trust Securities, (b) using
the proceeds from the sale of the Trust Securities to acquire the Junior
Subordinated Debentures issued by the Company and (c) engaging in only those
other activities necessary or incidental thereto. Accordingly, the Junior
Subordinated Debentures will be the sole assets of the Trust, and payments under
the Junior Subordinated Debentures will be the sole revenue of the Trust. All of
the Common Trust Securities will be owned by the Company.
The QUIPS will represent preferred undivided beneficial interests in the
assets of the Trust and the holders thereof will be entitled to a preference
over the Common Trust Securities in certain circumstances with respect to
distributions and amounts payable on redemption of the Trust Securities or
liquidation of the Trust. See "-- Subordination of Common Trust Securities"
below. The QUIPS will be issued pursuant to, and be governed by, the
Declaration. The Declaration will be qualified under the Trust Indenture Act.
Each QUIPS will have a QUIPS Liquidation Amount that is equal to the Stated
Amount. The QUIPS will rank pari passu, and payments will be made thereon pro
rata, with the Common Trust Securities except as described under
"-- Subordination of Common Trust Securities" below. Legal title to the Junior
Subordinated Debentures will be held by the Property Trustee in trust for the
benefit of the holders of the QUIPS and the Common Trust Securities.
The QUIPS will be subject to mandatory redemption on the QUIPS and
Debenture Maturity Date of , 2003, at a redemption price equal to
the aggregate QUIPS Liquidation Amount
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thereof plus unpaid distributions accrued thereon to but excluding such date,
out of the proceeds of the repayment of the Junior Subordinated Debentures at
maturity. The Junior Subordinated Debentures are not redeemable at the option of
the Company prior to the QUIPS and Debenture Maturity Date.
DISTRIBUTIONS
Distributions on the QUIPS will be cumulative, will accumulate from the
first date of issuance of the QUIPS and will be payable quarterly in arrears on
the Quarterly Payment Dates, at the QUIPS Distribution Rate of % per annum
of the QUIPS Liquidation Amount, to the holders of the QUIPS on the relevant
record dates. Unless the QUIPS are not Pledged Securities and are issued in
certificated form, the record date for any payment of Distributions will be one
Business Day prior to such payment date. The amount of Distributions payable for
any period will be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which Distributions are payable on the
QUIPS is not a Business Day, payment of the Distributions payable on such date
will be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that if such
Business Day is in the next succeeding calendar year, such payment will be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on the date such payment was originally payable (each date on
which Distributions are payable in accordance with the foregoing, a
"Distribution Date").
So long as no Debenture Event of Default shall have occurred and be
continuing, the Company will have the right under the Indenture to elect to
defer the payment of interest on the Junior Subordinated Debentures at any time
and from time to time for a period not extending beyond the QUIPS and Debenture
Maturity Date (each such period of deferral, an "Extension Period"). See
"-- Description of the Junior Subordinated Debentures -- Option to Extend
Interest Payment Date" and "Certain Federal Income Tax Consequences -- Interest
Received on QUIPS". Upon any such election, quarterly Distributions on the QUIPS
will be deferred by the Trust during such Extension Period. Distributions to
which holders of the QUIPS are entitled during any such Extension Period will
accumulate additional Distributions thereon at the Deferral Rate, compounded on
each succeeding Distribution Date. The term "Distributions", as used in this
Description of the QUIPS, shall include any such additional Distributions and
any Additional Sums (as defined herein) paid on the Junior Subordinated
Debentures.
During any Extension Period, the Company may not take any of the prohibited
actions described in the first paragraph under "-- Description of the Junior
Subordinated Debentures -- Certain Covenants of the Company".
Although the Company may in the future exercise its option to defer
payments of interest on the Junior Subordinated Debentures, the Company has no
such current intention.
The revenue of the Trust available for distribution to holders of the QUIPS
will be limited to payments under the Junior Subordinated Debentures. If the
Company does not make interest payments on the Junior Subordinated Debentures,
the Property Trustee will not have funds available to pay Distributions on the
QUIPS. The payment of Distributions (if and to the extent the Trust has funds on
hand legally available for the payment of such Distributions) will be guaranteed
by the Company on a limited basis as set forth herein under "-- Description of
the Guarantee".
MANDATORY REDEMPTION
Upon the repayment of the Junior Subordinated Debentures, the proceeds from
such repayment shall be applied by the Property Trustee to redeem a Like Amount
(as defined herein) of the Trust Securities, at a redemption price (the "Final
Redemption Price") which shall be equal to the principal of and accrued and
unpaid interest on the Junior Subordinated Debentures.
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"Like Amount" means (i) with respect to the redemption of the Trust
Securities, Trust Securities having an aggregate liquidation amount equal to the
principal amount of Junior Subordinated Debentures to be paid in accordance with
their terms and (ii) with respect to a distribution of Junior Subordinated
Debentures upon the liquidation of the Trust, Junior Subordinated Debentures
having a principal amount equal to the aggregate liquidation amount of the Trust
Securities of the holder to whom such Junior Subordinated Debentures are
distributed.
RIGHT TO EXERCISE JUNIOR SUBORDINATED DEBENTURE PUT OPTIONS
Each holder of QUIPS will have the right to require the Trust to distribute
Junior Subordinated Debentures having an aggregate principal amount equal to the
aggregate QUIPS Liquidation Amount of such QUIPS to the Put Agent, on the Stock
Purchase Date or on the date which is three months after the Stock Purchase Date
(the "Final Put Date" and, together with the Stock Purchase Date, the "Put
Dates"), in exchange for such QUIPS, in connection with the concurrent exercise
by the Put Agent on behalf of such holder of the Junior Subordinated Debenture
Put Option related thereto.
A holder of QUIPS may exercise the right referred to above by presenting
and surrendering the certificate evidencing such QUIPS, at the offices of the
Property Trustee, with the form of "Notice to Require Exercise of Junior
Subordinated Debenture Put Option" on the reverse side of the certificate
completed and executed as indicated, by 10:00 a.m., New York City time, on the
applicable Put Date. If such right is properly exercised, the applicable Junior
Subordinated Debentures will be distributed to an agent for the holder appointed
by the Company for such purpose (the "Put Agent", who shall, if the right is
exercised on the Stock Purchase Date, be the Collateral Agent), and the Put
Agent will then exercise the Junior Subordinated Debenture Put Option related
thereto on behalf of the holder.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
The Company will have the right at any time to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust.
The Trust shall automatically dissolve upon the first to occur of: (a)
certain events of bankruptcy, dissolution or liquidation of the Company or the
Trust; (b) the distribution of a Like Amount of the Junior Subordinated
Debentures to the holders of the Trust Securities, if the Company, as Sponsor,
has given written direction to the Property Trustee to dissolve the Trust (which
direction is optional and wholly within the discretion of the Company, as
Sponsor); (c) redemption of all of the Trust Securities as described under
"-- Mandatory Redemption"; (d) expiration of the term of the Trust; and (e) the
entry of an order for the dissolution of the Trust by a court of competent
jurisdiction.
If a dissolution occurs as described in clauses (a), (b), (d) or (e) of the
preceding paragraph, the Trust shall be liquidated by the Administrators as
expeditiously as practicable by distributing, after satisfaction of liabilities
to creditors of the Trust as provided by applicable law, to the holders of the
Trust Securities a Like Amount of the Junior Subordinated Debentures (such
amount being the "Liquidation Distribution"). If the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets on hand
legally available to pay in full the aggregate Liquidation Distribution, then
the amounts payable directly by the Trust on the QUIPS and the Common Trust
Securities shall be paid on a pro rata basis, except that if a Debenture Event
of Default has occurred and is continuing, the QUIPS shall have a priority over
the Common Trust Securities. See "-- Subordination of Common Trust Securities"
below.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (a) the Trust
Securities will no longer be deemed to be outstanding, (b) each registered
global certificate, if any, representing Trust Securities and held by the
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Depositary or its nominee will receive a registered global certificate or
certificates representing the Junior Subordinated Debentures to be delivered
upon such distribution and (c) any certificates representing Trust Securities
not held by the Depositary or its nominee will be deemed to represent Junior
Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of such Trust Securities, and bearing accrued and unpaid
interest in an amount equal to the accumulated and unpaid Distributions on such
Trust Securities until such certificates are presented to the Administrators or
their agent for cancellation, whereupon the Company will issue to such holder,
and the Debenture Trustee will authenticate, a certificate representing such
Junior Subordinated Debentures.
REDEMPTION PROCEDURES
The QUIPS shall be redeemed at the Final Redemption Price with the proceeds
from the contemporaneous repayment of the Junior Subordinated Debentures. The
redemption of QUIPS shall be made and the Final Redemption Price shall be
payable on the QUIPS and Debenture Maturity Date only to the extent that the
Trust has funds legally available for the payment of such applicable Redemption
Price.
If the Trust gives a notice of redemption in respect of the QUIPS, then, by
12:00 noon, New York City time, on the QUIPS and Debenture Maturity Date, to the
extent funds are legally available, with respect to the QUIPS held by the
Depositary or its nominees, the Property Trustee will give irrevocable
instructions and authority to the Depositary and will irrevocably deposit with
the Depositary for the QUIPS funds sufficient to pay the Final Redemption Price
to the holders thereof. With respect to the QUIPS held in certificated form, the
Property Trustee, to the extent funds are legally available, will give
irrevocable instructions and authority to the Paying Agent and will irrevocably
deposit with the Paying Agent funds sufficient to pay the Final Redemption Price
to the holders of the QUIPS. If notice of redemption shall have been given and
funds deposited as required to pay the Final Redemption Price, then all rights
of the holders of the QUIPS will cease, except the right of the holders of QUIPS
to receive the Final Redemption Price, but without interest on the Final
Redemption Price, and the QUIPS will cease to be outstanding. In the event that
the QUIPS and Debenture Maturity Date is not a Business Day, then the Final
Redemption Price payable on such date will be paid on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay). In the event that payment of the Final Redemption Price is
improperly withheld or refused and not paid either by the Trust or by the
Company pursuant to the Guarantee as described under "-- Description of the
Guarantee", Distributions on the QUIPS will accumulate on the Final Redemption
Price at the QUIPS Distribution Rate from the QUIPS and Debenture Maturity Date
to the date the Final Redemption Price is actually paid.
SUBORDINATION OF COMMON TRUST SECURITIES
Payment of Distributions on, and the Final Redemption Price of, the QUIPS
and the Common Trust Securities, as applicable, shall be made pro rata based on
the liquidation amount of the QUIPS and Common Trust Securities; provided,
however, that if on any Distribution Date or QUIPS and Debenture Maturity Date a
Debenture Event of Default (solely as the result of an event described in
clauses (a), (b) or (c) thereto) shall have occurred and be continuing, no
payment of any Distribution on, or Final Redemption Price of, any of the Common
Trust Securities, and no other payment on account of the redemption, liquidation
or other acquisition of the Common Trust Securities, shall be made unless
payment in full in cash of all accumulated and unpaid Distributions on all of
the outstanding QUIPS for all Distribution periods terminating on or prior
thereto or, in the case of the QUIPS and Debenture Maturity Date, the full
amount of the Final Redemption Price therefor, shall have been made or provided
for, and all funds available to the Property Trustee shall first be applied to
the payment in full in cash of all Distributions on, or Final Redemption Price
of, the QUIPS then due and payable.
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In the case of any Event of Default, the Company as holder of the Common
Trust Securities will be deemed to have waived any right to act with respect to
such Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the QUIPS, and only the holders of the QUIPS will
have the right to direct the Property Trustee to act on their behalf.
EVENTS OF DEFAULT; NOTICE
The occurrence of a Debenture Event of Default (see "-- Description of the
Junior Subordinated Debentures -- Debenture Events of Default") constitutes an
"Event of Default" under the Declaration; provided that pursuant to the
Declaration, the holder of the Common Trust Securities will be deemed to have
waived any Event of Default with respect to such Common Trust Securities until
all Events of Default with respect to the QUIPS have been cured, waived or
otherwise eliminated. Until such Events of Default have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the holders of the QUIPS and only the holders of such QUIPS will have
the right to direct the Property Trustee with respect to certain matters under
the Declaration, and therefore the Indenture. The holders of a majority in QUIPS
Liquidation Amount of the QUIPS will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Property
Trustee or to direct the exercise of any trust or power conferred upon the
Property Trustee under the Declaration, including the right to direct the
Property Trustee to exercise the remedies available to it as holder of the
Junior Subordinated Debentures. If the Property Trustee fails to enforce its
rights under the Junior Subordinated Debentures after the holders of a majority
in QUIPS Liquidation Amount of QUIPS have so directed the Property Trustee, a
holder of record of such QUIPS (or, for so long as QUIPS underlie Normal Units,
a holder of record of Normal Units) may, to the fullest extent permitted by law,
institute a legal proceeding against the Company to enforce the Property
Trustee's rights under the Junior Subordinated Debentures without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing, and such event is attributable to the failure of the
Company to pay interest or principal on the Junior Subordinated Debentures on
the respective dates such interest or principal is payable (after giving effect
to any Extension Period), then a holder of record of QUIPS (or, for so long as
QUIPS underlie Normal Units, a holder of record of Normal Units) may institute a
Direct Action against the Company for payment to such holder of the portion of
such principal or interest attributable to Junior Subordinated Debentures having
a principal amount equal to the aggregate QUIPS Liquidation Amount of the QUIPS
held by such holder (or underlying such holder's Normal Units). In connection
with such Direct Action, the Company will be subrogated to the rights of such
holder of QUIPS (or Normal Units) under the Declaration to the extent of any
payment made by the Company to such holder of QUIPS (or Normal Units) in such
Direct Action; provided, however, that no such subrogation right may be
exercised so long as an Event of Default has occurred and is continuing. The
holders of QUIPS will not be able to exercise directly any other remedy
available to the holders of the Junior Subordinated Debentures.
Upon occurrence of an Event of Default, the Property Trustee, so long as it
is the sole holder of Junior Subordinated Debentures, will have the right under
the Indenture to declare the principal of (or premium, if any) and interest on
the Junior Subordinated Debentures to be immediately due and payable.
Within ten Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the QUIPS, the Administrators
and the Company, as Sponsor, unless such Event of Default shall have been cured
or waived. The Company, as Sponsor, and the Administrators are required to file
annually with the Property Trustee a certificate as to whether or not they are
in compliance with all the conditions and covenants applicable to them under the
Declaration.
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If a Debenture Event of Default has occurred and is continuing, the QUIPS
shall have a preference over the Common Trust Securities as described under
"-- Liquidation of the Trust and Distribution of Junior Subordinated Debentures"
and "-- Subordination of Common Trust Securities".
REMOVAL OF ISSUER TRUSTEES AND ADMINISTRATORS
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common Trust
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in QUIPS Liquidation Amount of the outstanding QUIPS. In
no event will the holders of the QUIPS have the right to vote to appoint, remove
or replace the Administrators, which voting rights are vested exclusively in the
Company as the holder of the Common Trust Securities. No resignation or removal
of an Issuer Trustee and no appointment of a successor trustee shall be
effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the Declaration.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any Person into which the Property Trustee or the Delaware Trustee that is
not a natural person may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which such Issuer Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of such
Issuer Trustee, shall be the successor of such Issuer Trustee under the
Declaration, provided such Person shall be otherwise qualified and eligible.
MERGERS, CONVERSIONS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE
TRUST
The Trust may not merge or convert with or into, consolidate, amalgamate,
or be replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any Person, except as described
below or as otherwise described under "-- Liquidation of the Trust and
Distribution of Junior Subordinated Debentures". The Trust may, at the request
of the Company, as Sponsor and holder of the Common Trust Securities, but
without the consent of the holders of the QUIPS, merge or convert with or into,
consolidate, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to a trust
organized as such under the laws of any State; provided, that (a) such successor
entity either (i) expressly assumes all of the obligations of the Trust with
respect to the QUIPS or (ii) substitutes for the QUIPS other securities having
substantially the same terms as the QUIPS (the "Successor Securities") so long
as the Successor Securities rank the same as the QUIPS rank in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise, (b) the Company expressly appoints a trustee of such successor entity
possessing the same powers and duties as the Property Trustee with respect to
the Junior Subordinated Debentures, (c) the Successor Securities are listed, or
any Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the QUIPS are then
listed or quoted, if any, (d) such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
QUIPS (including any Successor Securities) or Units to be downgraded by any
nationally recognized statistical rating organization, if then so rated, (e)
such merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the QUIPS (including any Successor Securities) in
any material respect, (f) such successor entity has a purpose substantially
identical to that of the Trust, (g) prior to such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Company has received an opinion from independent counsel to the Trust
experienced in such matters to the effect that (i) such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or
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lease does not adversely affect the rights, preferences and privileges of the
holders of the QUIPS (including any Successor Securities) in any material
respect, (ii) following such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such successor
entity will be required to register as an investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act") and
(iii) following such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Trust or the successor entity
will continue to be classified as a grantor trust for United States Federal
income tax purposes and (h) the Company or any permitted successor or assignee
owns all of the common securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee. Notwithstanding the foregoing, the Trust
shall not, except with the consent of holders of 100% in liquidation amount of
the Trust Securities, consolidate, amalgamate, merge or convert with or into, or
be replaced by or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge or convert with or into, or replace it
if such consolidation, amalgamation, merger, conversion, replacement,
conveyance, transfer or lease would cause the Trust or the successor entity to
be classified as an association taxable as a corporation or as other than a
grantor trust for United States Federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE DECLARATION
Except as provided below and under "-- Mergers, Conversions,
Consolidations, Amalgamations or Replacements of the Trust" above and
"-- Description of the Guarantee -- Amendments and Assignment" and as otherwise
required by law and the Declaration, the holders of the QUIPS will have no
voting rights.
The Declaration may be amended from time to time by the Company and the
Property Trustee, without the consent of the holders of the QUIPS, (a) to cure
any ambiguity, correct or supplement any provisions in the Declaration that may
be inconsistent with any other provision, or to make any other provisions with
respect to matters or questions arising under the Declaration, which shall not
be inconsistent with the other provisions of the Declaration, or (b) to modify,
eliminate or add to any provisions of the Declaration to such extent as shall be
necessary to ensure that the Trust will be classified for United States Federal
income tax purposes as a grantor trust or as other than an association taxable
as a corporation at all times that any Trust Securities are outstanding or to
ensure that the Trust will not be required to register as an "investment
company" under the Investment Company Act; provided, however, that in each case,
such action shall not adversely affect in any material respect the interests of
the holders of the Trust Securities. Any amendments of the Declaration pursuant
to the foregoing shall become effective when notice thereof is given to the
holders of the Trust Securities. The Declaration may be amended by the Issuer
Trustees and the Company (a) with the consent of holders of QUIPS (or Normal
Units) representing a majority (based upon QUIPS Liquidation Amount) of the
outstanding QUIPS and (b) upon receipt by the Property Trustee of an opinion of
counsel to the effect that such amendment or the exercise of any power granted
to the Issuer Trustees in accordance with such amendment will not cause the
Trust to be classified as an association taxable as a corporation or affect the
Trust's status as a grantor trust for United States Federal income tax purposes
or the Trust's exemption from status as an "investment company" under the
Investment Company Act, provided that, without the consent of each affected
holder of Trust Securities, the Declaration may not be amended to (i) change the
amount or timing of any Distribution or other payment on the Trust Securities
(including payment of the Applicable Put Price) or otherwise adversely affect
the amount of any Distribution or other payment (including payment of the
Applicable Put Price) required to be made in respect of the Trust Securities as
of a specified date or (ii) restrict the right of a holder of Trust Securities
to institute suit for the enforcement of any such payment on or after such date.
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So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (a) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
exercising any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debentures, (b) waive certain past defaults under the
Indenture, (c) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Junior Subordinated
Debentures or (d) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
QUIPS (or Normal Units) representing a majority in QUIPS Liquidation Amount of
all outstanding QUIPS; provided, however, that where a consent under the
Indenture would require the consent of each holder of Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior approval of each holder of the QUIPS (or Normal
Units). The Issuer Trustees shall not revoke any action previously authorized or
approved by a vote of the holders of the QUIPS (or Normal Units) except by
subsequent vote of such holders. The Property Trustee shall notify each holder
of Trust Securities (or Normal Units) of any notice of default with respect to
the Junior Subordinated Debentures. In addition to obtaining the foregoing
approvals of such holders, prior to taking any of the foregoing actions, the
Issuer Trustees shall obtain an opinion of counsel experienced in such matters
to the effect that the Trust will not be classified as an association taxable as
a corporation or as other than a grantor trust for United States Federal income
tax purposes on account of such action.
Any required approval of holders of QUIPS (or Normal Units) may be given at
a meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of QUIPS (or Normal Units) are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be given to
each holder of record of QUIPS (or Normal Units) in the manner set forth in the
Declaration.
No vote or consent of the holders of QUIPS (or Normal Units) will be
required for the Trust to redeem and cancel the QUIPS in accordance with the
Declaration.
Notwithstanding that holders of the QUIPS (or Normal Units) are entitled to
vote or consent under any of the circumstances described above, any of the QUIPS
(or Normal Units) that are owned by the Company or any affiliate of the Company
shall, for purposes of such vote or consent, be treated as if they were not
outstanding.
FORM AND BOOK ENTRY PROCEDURES
As long as the QUIPS constitute Pledged Securities, the QUIPS will be
represented by a single certificate and held for the benefit of the holders of
the Normal Units. If the QUIPS cease to constitute Pledged Securities, the QUIPS
may be represented by one or more QUIPS in registered, global form registered in
the name of the Depositary or its nominee. The depositary arrangements for the
QUIPS are expected to be substantially similar to those in effect for the Units.
For a description of the Depositary and the terms of the depositary
arrangements, see "-- Book Entry System".
PAYMENT AND PAYING AGENCY
If the QUIPS cease to constitute Pledged Securities, payments in respect of
the QUIPS held in global form shall be made to the Depositary, which shall
credit the relevant accounts at the Depositary on the applicable Distribution
Dates, or in respect of the QUIPS that are not held by the Depositary, such
payments shall be made by check mailed to the address of the holder entitled
thereto as such address shall appear on the register. The paying agent (the
"Paying Agent") shall initially be the Property Trustee and any additional
paying agent chosen by the Property Trustee and acceptable to the Company. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Property Trustee (if not the Paying Agent) and the Administrators.
In the event that the Property Trustee shall no longer be the Paying Agent, the
Administrators shall appoint a successor to act as Paying Agent.
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REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
QUIPS.
Registration of transfers of the QUIPS will be effected without charge by
or on behalf of the Trust but upon payment of any tax or other governmental
charges that may be imposed in connection with any transfer or exchange. The
Trust will not be required to register or cause to be registered the transfer of
any QUIPS after they have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in the Declaration and, after such Event of Default, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her affairs. Subject to this provision, the Property Trustee
is under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Trust Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. The Property Trustee is not required to expend or
risk its own funds or otherwise incur personal financial liability in the
performance of its duties if repayment or adequate indemnity is not reasonably
assured to the Property Trustee.
MISCELLANEOUS
The Administrators are authorized and directed to conduct the affairs of
and to operate the Trust in such a way that the Trust will not be deemed to be
an "investment company" required to be registered under the Investment Company
Act or classified as an association taxable as a corporation or as other than a
grantor trust for United States Federal income tax purposes and so that the
Junior Subordinated Debentures will be treated as indebtedness of the Company
for United States Federal income tax purposes. In this connection, the Company
and the Administrators are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of the Trust or the Declaration, that
the Company and the Administrators determine in their discretion to be necessary
or desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
GENERAL
The Junior Subordinated Debentures are to be issued under the Indenture.
The Bank of New York will initially act as Debenture Trustee under the
Indenture. The Indenture will be qualified under the Trust Indenture Act.
The Junior Subordinated Debentures will mature on the QUIPS and Debenture
Maturity Date of , 2003. The Junior Subordinated Debentures will not
be redeemable at the option of the Company prior to the QUIPS and Debenture
Maturity Date.
The Junior Subordinated Debentures will bear interest from their first date
of issuance at a rate that is equal to the QUIPS Distribution Rate payable
quarterly in arrears on the Quarterly Payment Dates (each, an "Interest Payment
Date"), to the holders of the Junior Subordinated Debenture on the relevant
record dates, which, unless the Junior Subordinated Debentures are distributed
upon liquidation of the Trust and are issued in certificated form, will be one
Business Day prior to the
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relevant Interest Payment Date. Until the liquidation, if any, of the Trust,
each Junior Subordinated Debenture will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Junior Subordinated Debentures is not a Business Day,
then payment of the interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable. The term "interest", as used in
this Description of the Junior Subordinated Debentures, shall include any
Additional Sums payable on the Junior Subordinated Debentures.
The Junior Subordinated Debentures will be unsecured and subordinate and
rank junior in right of payment to the extent and in the manner set forth in the
Indenture to all Senior Indebtedness of the Company. See "Risk
Factors -- Holding Company Structure; Reliance on Dividends from Insurance
Subsidiaries" above and "-- Subordination" below.
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no Debenture Event of Default has occurred and is continuing,
the Company will have the right under the Indenture at any time during the term
of the Junior Subordinated Debentures to defer the payment of interest at any
time or from time to time for a period not extending beyond the QUIPS and
Debenture Maturity Date. At the end of an Extension Period, the Company must pay
all interest then accrued and unpaid (together with interest thereon accrued at
the Deferral Rate, compounded on each succeeding Interest Payment Date). During
an Extension Period, interest will continue to accrue and, if the Junior
Subordinated Debentures have been distributed to holders of the Trust
Securities, holders of Junior Subordinated Debentures (or holders of the Trust
Securities while Trust Securities are outstanding) will be required to accrue
interest income for United States Federal income tax purposes prior to the
receipt of cash attributable to such income. See "Certain Federal Income Tax
Consequences -- Interest Received on the QUIPS".
During any such Extension Period, the Company may not take any of the
prohibited actions described in the first paragraph under "-- Certain Covenants
of the Company".
Prior to the expiration of any such Extension Period, the Company may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to extend beyond the QUIPS and Debenture Maturity
Date. Upon the termination of any such Extension Period and the payment of all
amounts then due on any Interest Payment Date, the Company may elect to begin a
new Extension Period, subject to the above requirements. No interest shall be
due and payable during an Extension Period, except at the end thereof. The
Company must give the Property Trustee, the Administrators and the Debenture
Trustee written notice of its election of any Extension Period (or an extension
thereof) at least five Business Days prior to the earlier of (a) the date the
Distributions on the Trust Securities would have been payable except for the
election to begin or extend such Extension Period, (b) the date the Trust is
required to give notice to any securities exchange or to holders of QUIPS of the
record date or the date such Distributions are payable and (c) such record date.
The Debenture Trustee shall give notice of the Company's election to begin or
extend an Extension Period to the holders of the QUIPS. There is no limitation
on the number of times that the Company may elect to begin an Extension Period.
ADDITIONAL SUMS
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the Junior Subordinated Debentures the Additional Sums.
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"Additional Sums" means such additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on the
outstanding QUIPS and Common Trust Securities shall not be reduced as a result
of any additional taxes, duties or other governmental charges to which the Trust
has become subject as a result of a Tax Event.
A "Tax Event" means the receipt by the Company and the Trust of an opinion
of a nationally recognized tax counsel experienced in such matters to the effect
that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws or any regulations thereunder of the United
States or any political subdivision or taxing authority thereof or therein, or
as a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which (a) amendment or change
is effective or (b) pronouncement or decision is announced, on or after the date
of original issuance of the Junior Subordinated Debentures, there is more than
an insubstantial risk that (i) the Trust is, or will be within 90 days of the
date of such opinion, subject to United States Federal income tax with respect
to income received or accrued on the Junior Subordinated Debentures or (ii) the
Trust is, or will be within 90 days of the date of such opinion, subject to more
than a de minimis amount of other taxes, duties or other governmental charges.
In lieu of paying Additional Sums on the Junior Subordinated Debentures the
Company may dissolve the Trust and cause the Junior Subordinated Debentures to
be distributed to the holders of the Trust Securities in liquidation of the
Trust. See "-- Description of the QUIPS -- Liquidation of the Trust and
Distribution of Junior Subordinated Debentures".
JUNIOR SUBORDINATED DEBENTURE PUT OPTIONS
Each holder of Junior Subordinated Debentures will have the right (a
"Junior Subordinated Debenture Put Option") to require the Company to repurchase
such Junior Subordinated Debentures, in whole or in part, on either Put Date,
for a purchase price equal to the Applicable Put Price for such Junior
Subordinated Debentures. The Trust will covenant in the Declaration that it will
not exercise any Junior Subordinated Debenture Put Option (although it may
distribute Junior Subordinated Debentures to a Put Agent in connection with the
exercise by a holder of QUIPS or the Put Agent on behalf of such holder of such
holder's right to require the Trust to do so, as contemplated under
"-- Description of the QUIPS -- Right to Exercise Junior Subordinated Debenture
Put Options" above).
Each holder of Junior Subordinated Debentures or the Put Agent on behalf of
such holder may exercise the Junior Subordinated Debenture Put Option related to
such securities by presenting and surrendering the certificate evidencing such
securities, at the offices of the Debenture Trustee, with the form of "Notice of
Exercise of Put Right" on the reverse side of the certificate completed and
executed as indicated, by 10:00 a.m., New York City time, on the applicable Put
Date.
"Applicable Put Price" for any Junior Subordinated Debentures will be:
(a) if the Put Date is the Stock Purchase Date, the aggregate
principal amount of such Junior Subordinated Debentures plus unpaid
interest accrued thereon to but not including the Put Date; or
(b) if the Put Date is the Final Put Date, (i) the Effective Call
Option Price for such Junior Subordinated Debentures plus simple interest
thereon for the period from and including the Call Option Expiration Date
to but excluding the Put Date at a rate per annum equal to the LIBOR Rate
(as defined in the Indenture) for such period prevailing on the Call Option
Expiration Date plus basis points, minus (ii) the aggregate amount of
interest paid on such Junior Subordinated Debentures after the Call Option
Expiration Date and on or before the Final Put Date plus simple interest on
each such interest payment for the period from and including the date of
receipt of such payment to but excluding the Put Date at a rate per annum
equal to the LIBOR Rate for such period prevailing on such date of receipt.
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For purposes of the foregoing:
"Effective Call Option Price" for any Junior Subordinated Debentures means
(a) the aggregate principal amount of such Junior Subordinated Debentures plus
90 days of simple interest thereon at the QUIPS Distribution Rate, all
discounted to present value at the Call Option Expiration Date at a discount
rate equal to the 3-Month Treasury Rate (as defined in the Indenture) prevailing
on the Call Option Expiration Date (i.e., divided by one plus such 3-Month
Treasury Rate (expressed as a decimal between 0 and 1)) plus (b) the aggregate
amount of deferred interest payments on such Junior Subordinated Debentures
accrued to but not including the Call Option Expiration Date.
CERTAIN COVENANTS OF THE COMPANY
The Company will covenant that it will not (a) declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock, (b) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in right of
payment to the Junior Subordinated Debentures or (c) make any guarantee payments
with respect to any guarantee by the Company of any securities of any subsidiary
of the Company if such guarantee ranks pari passu or junior in right of payment
to the Junior Subordinated Debentures (other than, in the case of clauses (a),
(b) and (c), (i) dividends or distributions in shares of, or options, warrants
or rights to subscribe for or purchase shares of, common stock of the Company,
(ii) any declaration of a dividend in connection with the implementation of a
stockholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(iii) payments under the Guarantee, (iv) as a result of a reclassification of
the Company's capital stock solely into shares of one or more classes or series
of the Company's capital stock or the exchange or conversion of one class or
series of the Company's capital stock for another class or series of the
Company's capital stock, (v) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged and (vi)
purchases of common stock in connection with the satisfaction by the Company of
its obligations under any of the Company's benefit plans for its and its
subsidiaries' directors, officers or employees or any of the Company's dividend
reinvestment plans) if at such time (x) a Debenture Event of Default shall have
occurred and be continuing, (y) the Company shall be in default with respect to
its payment of any obligations under the Guarantee or (z) the Company shall have
given notice of its election of an Extension Period, or any extension thereof,
as provided in the Indenture and shall not have rescinded such notice, and such
Extension Period, or any extension thereof, shall have commenced and not yet
terminated.
The Company will also covenant (a) to maintain 100 percent ownership of the
Common Trust Securities; provided, however, that any permitted successor of the
Company under the Indenture may succeed to the Company's ownership of the Common
Trust Securities, (b) to use its reasonable efforts to cause the Trust (i) to
remain a statutory business trust, except in connection with the distribution of
Junior Subordinated Debentures to the holders of Trust Securities in liquidation
of the Trust, the redemption of all of the Trust Securities of the Trust, or
certain mergers, consolidations or amalgamations, each as permitted by the
Declaration of the Trust and (ii) to continue not to be classified as an
association taxable as a corporation or a partnership for United States Federal
income tax purposes and (c) to use its reasonable efforts to cause each holder
of Trust Securities (or, for so long as Trust Securities constitute Pledged
Securities, Units) to be treated as owning an undivided beneficial interest in
the Junior Subordinated Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures constitutes a
"Debenture Event of Default" (whatever the reason for such Debenture Event of
Default and whether it shall be voluntary or involuntary or be
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effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(a) failure for 30 days to pay any interest on the Junior Subordinated
Debentures when due (subject to the deferral of any due date in the case of
an Extension Period); or
(b) failure to pay any principal on the Junior Subordinated Debentures
when due whether at maturity, by declaration of acceleration of maturity or
otherwise; or
(c) failure to pay the Applicable Put Price when due upon exercise of
a Junior Subordinated Debenture Put Option; or
(d) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice
to the Company from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of Junior Subordinated Debentures;
or
(e) certain events of bankruptcy, insolvency or reorganization of the
Company.
Prior to any declaration accelerating the maturity of the Junior
Subordinated Debentures, the holders of a majority in aggregate outstanding
principal amount of the Junior Subordinated Debentures have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Debenture Trustee. The Debenture Trustee or the holders of not less than
25% in aggregate outstanding principal amount of the Junior Subordinated
Debentures may declare the principal due and payable immediately upon a
Debenture Event of Default. The holders of a majority in aggregate outstanding
principal amount of the Junior Subordinated Debentures may annul such
declaration and waive the default if the default (other than the nonpayment of
the principal of the Junior Subordinated Debentures which has become due solely
by such acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee.
Prior to any declaration accelerating maturity of the Junior Subordinated
Debentures, the holder or holders of a majority in aggregate outstanding
principal amount of the Junior Subordinated Debentures (which, prior to any
liquidation or dissolution of the Trust, will be the Property Trustee) affected
thereby may, on behalf of the holders of all the Junior Subordinated Debentures,
waive any past default except a default in the payment of principal, premium, if
any, interest or Applicable Put Price in respect of Junior Subordinated
Debentures (unless such default has been cured and a sum sufficient to pay all
matured installments of interest and premium, if any, and principal due
otherwise than by acceleration and any payments of the Applicable Put Price in
respect of Junior Subordinated Debentures has been deposited with the Debenture
Trustee), or a default in respect of a covenant or provision which under the
Indenture cannot be modified or amended without the consent of the holder of
each outstanding Junior Subordinated Debenture.
The Indenture requires the annual filing by the Company with the Debenture
Trustee of a certificate as to the absence of certain defaults under the
Indenture.
The Indenture provides that the Debenture Trustee may withhold notice of a
Debenture Event of Default from the holders of the Junior Subordinated
Debentures (except a Debenture Event of Default in payment of principal,
premium, if any, interest or Applicable Put Price in respect of Junior
Subordinated Debentures) if the Debenture Trustee considers it in the interest
of such holders to do so.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF QUIPS
If a Debenture Event of Default shall have occurred and be continuing and
shall be attributable to the failure of the Company to pay interest or premium,
if any, on or principal of the Junior Subordinated Debentures on the due date
(after giving effect to any Extension Period), a holder of record of QUIPS (or,
for so long as QUIPS underlie Normal Units, a holder of record of Normal
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Units) may institute a Direct Action. See "-- Description of the QUIPS -- Events
of Default; Notice". The Company may not amend the Indenture to remove the
foregoing right to bring a Direct Action without the prior written consent of
the holders of all of the QUIPS (or, for so long as QUIPS underlie Normal Units,
the holders of all the Normal Units).
The holders of the QUIPS will not be able to exercise directly any
remedies, other than those set forth in the preceding paragraph, available to
the holders of the Junior Subordinated Debentures.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets as
an entirety or substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to the
Company, unless: (i) in case the Company consolidates with or merges into
another Person or conveys or transfers its properties and assets substantially
as an entirety to any Person, the successor Person is organized under the laws
of the United States or any State or the District of Columbia, and such
successor Person expressly assumes the Company's obligations on the Junior
Subordinated Debentures; (ii) immediately after giving effect thereto, no
Debenture Event of Default, and no event which, after notice or lapse of time or
both, would become a Debenture Event of Default, shall have occurred and be
continuing; and (iii) certain other conditions as prescribed in the Indenture
are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holders of the
Junior Subordinated Debentures.
MODIFICATION OF THE INDENTURE
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interest of the holders of Junior
Subordinated Debentures). The Indenture contains provisions permitting the
Company and the Debenture Trustee, with the consent of the holders of a majority
in principal amount of the Junior Subordinated Debentures, to modify the
Indenture in a manner affecting the rights of the holders of Junior Subordinated
Debentures; provided that no such modification may, without the consent of the
holders of each outstanding Junior Subordinated Debenture so affected, (a)
change the QUIPS and Debenture Maturity Date, or reduce the principal amount of
the Junior Subordinated Debentures or reduce the rate or extend the time of
payment of interest thereon (other than a permitted deferral of interest during
an Extension Period), (b) change any of the terms or conditions of the Junior
Subordinated Debenture Put Options or the Applicable Put Price, or (c) reduce
the percentage of principal amount of Junior Subordinated Debentures the holders
of which are required to consent to any such modification of the Indenture.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (a) have become due and payable or (b) will become due and payable
at maturity within one year and the Company deposits or causes to be deposited
with the Debenture Trustee funds, in trust, for the purpose and in an amount
sufficient to pay and discharge the entire indebtedness on the Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation, for the principal and interest to the QUIPS and Debenture Maturity
Date, then the Indenture will cease to be of further effect (except as to the
Company's obligations to pay all other sums due pursuant to the Indenture and to
provide the
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officers' certificates and opinions of counsel described therein), and the
Company will be deemed to have satisfied and discharged the Indenture.
SUBORDINATION
The obligations of the Company under the Junior Subordinated Debentures
will be unsecured and subordinate and rank junior in right of payment to all
present and future Senior Indebtedness to the extent provided in the Indenture.
Upon any payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the holders of Senior Indebtedness will
first be entitled to receive payment in full of all Senior Indebtedness before
the holders of Junior Subordinated Debentures will be entitled to receive or
retain any payment in respect thereof.
No payments on account of principal of, premium, if any, or interest on the
Junior Subordinated Debentures (including payments on exercise of Junior
Subordinated Debenture Put Options) may be made if there shall have occurred and
be continuing a default in any payment with respect to Senior Indebtedness, or
an event of default with respect to any Senior Indebtedness resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full of all
amounts due in respect of such Senior Indebtedness before the holders of Junior
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the Junior Subordinated Debentures.
Notwithstanding the foregoing, amounts that would be due and payable by the
Company to holders of Units in the absence of the foregoing subordination
provisions may be applied by such holders to offset their obligations under
their respective Purchase Contracts.
"Senior Indebtedness" shall mean, with respect to the Company, (a) the
principal, premium, if any, and interest in respect of (i) indebtedness of the
Company for money borrowed and (ii) indebtedness evidenced by securities,
debentures, notes, bonds or other similar instruments issued by the Company,
including, without limitation, any current or future indebtedness under any
indenture (other than the Indenture) to which the Company is party, (b) all
capital lease obligations of the Company, (c) all obligations of the Company
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of the Company and all obligations of the Company under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (d) all obligations of the Company for the
reimbursement on any letter of credit, any banker's acceptance, any security
purchase facility, any repurchase agreement or similar arrangement, any interest
rate swap, any other hedging arrangement, any obligation under options or any
similar credit or other transaction, (e) all obligations of the type referred to
in clauses (a) through (d) above of other persons for the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise and (f) all
obligations of the type referred to in clauses (a) through (e) above of other
persons secured by any lien on any property or asset of the Company (whether or
not such obligation is assumed by the Company), except for (x) any indebtedness
between or among the Company or any affiliate of the Company, (y) any other debt
securities issued pursuant to the Indenture and guarantees in respect of those
debt securities and (z) any indebtedness that is by its terms subordinated to or
pari passu with the Junior Subordinated Debentures, including any junior
subordinated debt securities issued in the future with subordination terms
substantially similar to the Junior Subordinated Debentures. Senior Indebtedness
shall continue to be Senior Indebtedness and be entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of such Senior Indebtedness.
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Because the Company is a holding company, the Junior Subordinated
Debentures are effectively subordinated to all existing and future liabilities
of the Company's subsidiaries, except to the extent the Company is a creditor of
the subsidiary recognized as such. See "Risk Factors -- Holding Company
Structure; Reliance on Dividends from Insurance Subsidiaries".
The Indenture places no limitation on the amount of Senior Indebtedness
that may be incurred by the Company. The Company expects from time to time to
incur indebtedness constituting Senior Indebtedness.
FORM AND BOOK ENTRY PROCEDURES
If the Junior Subordinated Debentures are distributed to the holders of the
Trust Securities and do not constitute Pledged Securities with respect to the
Units, the Junior Subordinated Debentures may be represented by one or more
global certificates registered in the name of the Depositary or its nominee. The
depositary arrangements for such Junior Subordinated Debentures are expected to
be substantially similar to those in effect for the Units. For a description of
the Depositary and the terms of the depositary arrangements, see "-- Book Entry
System".
PAYMENT AND PAYING AGENTS
Payment of principal of and premium, if any, and any interest on Junior
Subordinated Debentures will be made at the office of the Debenture Trustee in
The City of New York or at the office of such paying agent or paying agents as
the Company may designate from time to time, except that at the option of the
Company payment of any interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the register for
Junior Subordinated Debentures or (ii) by transfer to an account maintained by
the Person entitled thereto as specified in such register, provided that proper
transfer instructions have been received by the relevant record date. Payment of
any interest on any Junior Subordinated Debenture will be made to the Person in
whose name such Junior Subordinated Debenture is registered at the close of
business on the record date for such interest, except in the case of defaulted
interest. The Company may at any time designate additional paying agents or
rescind the designation of any paying agent; however the Company will at all
times be required to maintain a paying agent in each place of payment for the
Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent, or
then held by the Company in trust, for the payment of the principal of and
premium, if any, or interest on any Junior Subordinated Debenture (or the
Applicable Put Price therefor) and remaining unclaimed for two years after such
principal and premium, if any, or interest (or Applicable Put Price) has become
due and payable shall, at the request of the Company, be repaid to the Company
and the holder of such Junior Subordinated Debenture shall thereafter look, as a
general unsecured creditor, only to the Company for payment thereof.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
Subject to such provisions, the Debenture Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of any
holder of Junior Subordinated Debentures, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which might be incurred
thereby. The Debenture Trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its duties
if the Debenture Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
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DESCRIPTION OF THE GUARANTEE
GENERAL
The Guarantee will be executed and delivered by the Company concurrently
with the issuance by the Trust of the QUIPS for the benefit of the holders from
time to time of the QUIPS. The Bank of New York will initially act as Guarantee
Trustee under the Guarantee. The Guarantee will be qualified under the Trust
Indenture Act. The Guarantee Trustee will hold the Guarantee for the benefit of
the holders of the QUIPS.
The Company will irrevocably and unconditionally agree to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined herein) to the holders of the QUIPS, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments with respect to the
QUIPS, to the extent not paid by or on behalf of the Trust (the "Guarantee
Payments"), will be subject to the Guarantee: (a) any accumulated and unpaid
Distributions required to be paid on QUIPS, to the extent the Trust has funds on
hand legally available therefor and (b) the Final Redemption Price with respect
to the QUIPS, to the extent that the Trust has funds on hand legally available
therefor. The Company's obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by the Company to the holders of the
QUIPS or by causing the Trust to pay such amounts to such holders.
The Guarantee will be unsecured and subordinate and rank junior in right of
payment to the extent and in the manner provided therein to all Senior
Indebtedness. See "Risk Factors -- Holding Company Structure; Reliance on
Dividends from Insurance Subsidiaries" above and "-- Status" below.
The Guarantee, when taken together with the Company's obligations under the
Declaration, the Junior Subordinated Debentures and the Indenture, including its
obligations to pay costs, expenses, debt and liabilities of the Trust (other
than with respect to the Trust Securities), will provide in the aggregate, a
full, irrevocable and unconditional guarantee of all of the Trust's obligations
of payments due under the QUIPS. See "-- Relationship Among the QUIPS, the
Junior Subordinated Debentures and the Guarantee".
The Company also has agreed separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to Common Trust Securities
issued by the Trust to the same extent as the Guarantee, except that upon an
Event of Default under the Declaration, holders of QUIPS shall have priority
over holder of Common Trust Securities with respect to Distributions and
payments on liquidation, redemption or otherwise.
STATUS
The Guarantee will be unsecured and subordinate and rank junior in right of
payment to all Senior Indebtedness to the extent and in the manner provided
therein, which is similar to extent and manner of subordination of the Junior
Subordinated Debentures as described under "-- Description of the Junior
Subordinated Debentures -- Subordination" above.
Because the Company is a holding company, the Guarantee is effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, except to the extent the Company is a creditor of the subsidiary
recognized as such. See "Risk Factors -- Holding Company Structure; Reliance on
Dividends from Insurance Subsidiaries".
The Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first instituting
a legal proceeding against any other person or entity). The Guarantee will be
held for the benefit of the holders of the QUIPS. The Guarantee will not be
discharged except by payment of the Guarantee Payments in full to the extent not
paid by the Trust
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or upon distribution to the holders of the QUIPS of the Junior Subordinated
Debentures. The Guarantee does not place a limitation on the amount of Senior
Indebtedness that may be incurred by the Company. The Company expects from time
to time to incur indebtedness constituting Senior Indebtedness.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in QUIPS Liquidation Amount of the QUIPS will have the
right to (a) waive any past event of default under the Guarantee and its
consequences, whereby such event of default shall cease to exist and any event
of default under the Guarantee arising therefrom shall be deemed to have been
cured for every purpose of the Guarantee and (b) direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Guarantee.
Any holder of the QUIPS may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first instituting
a legal proceeding against the Trust, the Guarantee Trustee or any other person
or entity.
The Company, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company will covenant that, so long as any QUIPS
remain outstanding, if there shall have occurred any event that is or would
constitute an event of default under the Guarantee, that is continuing, or the
Declaration, then the Company will not take any of the prohibited actions
described under "-- Description of the Junior Subordinated Debentures -- Certain
Covenants of the Company".
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the QUIPS (in which case no approval will be required),
the Guarantee may not be amended without the prior approval of the holders of a
majority in QUIPS Liquidation Amount of such outstanding QUIPS. The manner of
obtaining any such approval will be as set forth under "-- Description of the
QUIPS -- Voting Rights; Amendment of the Declaration". All guarantees and
agreements contained in the Guarantee Agreement shall bind the successors,
assigns, receivers, trustees and representatives of the Company and shall inure
to the benefit of the holders of the QUIPS then outstanding.
TERMINATION
The Guarantee will terminate and be of no further force and effect upon
full payment of the Final Redemption Price of the QUIPS, upon full payment of
the amounts payable upon liquidation of the Trust, upon distribution of the
Junior Subordinated Debentures to the holders of the QUIPS or at such other time
when there are no longer any QUIPS outstanding. The Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
holder of the QUIPS must restore payment of any sums paid under the QUIPS or the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee may be appointed or removed by the Guarantor without
cause at any time, except during an event of default under the Guarantee. The
Guarantee Trustee is under no
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obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of QUIPS, unless offered reasonable indemnity against the
costs, expenses and liabilities which might be incurred thereby. The Guarantee
Trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if it reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
The Company or its affiliates maintain certain business relationships with
the Guarantee Trustee and its affiliates in the ordinary course of business.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
RELATIONSHIP AMONG THE QUIPS, THE JUNIOR SUBORDINATED DEBENTURES AND THE
GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the QUIPS (to the extent
the Trust has funds on hand legally available for the payment of such
Distributions) will be irrevocably guaranteed by the Company as and to the
extent set forth under "Description of the Guarantee". If and to the extent that
the Company does not make the required payments on the Junior Subordinated
Debentures, the Trust will not have sufficient funds to make the related
payments, including Distributions, on the QUIPS. The Guarantee will not cover
any such payment unless and until the Trust has sufficient funds for the payment
therefor. The Guarantee, when taken together with the Company's obligations
under the Junior Subordinated Debentures, the Indenture and the Declaration,
including its obligations to pay costs, expenses, debts and liabilities of the
Trust (other than with respect to the Trust Securities), will provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on the QUIPS. The obligations of the Company
under the Guarantee will be unsecured and subordinate and rank junior in right
of payment to all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the QUIPS, primarily because: (a) the
aggregate principal amount of the Junior Subordinated Debentures will be equal
to the aggregate liquidation amount of the QUIPS and Common Trust Securities;
(b) the interest rate and interest and other payment dates on the Junior
Subordinated Debentures will match the QUIPS Distribution Rate and Distribution
and other payment dates for the Trust Securities; (c) the Company shall pay for
all and any costs, expenses and liabilities of the Trust except the Trust's
obligations to holders of Trust Securities under such Trust Securities; and (d)
the Declaration will provide that the Trust is not authorized to engage in any
activity that is not consistent with the limited purposes thereof.
ENFORCEMENT OF RIGHTS OF HOLDERS OF QUIPS
If the Company fails to make interest or other payments on the Junior
Subordinated Debentures when due (after giving effect to any Extension Period),
the Declaration provides a mechanism whereby the holders of the QUIPS (or, for
so long as QUIPS underlie Normal Units, the holders of the Normal Units) may
direct the Property Trustee to enforce its rights under the Junior Subordinated
Debentures. If the Property Trustee fails to enforce its rights under the Junior
Subordinated Debentures after a majority in liquidation amount of QUIPS have so
directed the Property Trustee, a holder of record of the QUIPS (or, for so long
as QUIPS underlie Normal Units, a holder of record of Normal Units) may, to the
fullest extent permitted by law, institute a legal proceeding against the
Company to enforce the Property Trustee's rights under the Junior Subordinated
Debentures
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without first instituting any legal proceedings against the Property Trustee or
any other person or entity. Notwithstanding the foregoing, if an Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay principal or interest on the Junior Subordinated
Debentures on the respective dates such principal or interest is payable, after
giving effect to any Extension Period, then a holder of record of QUIPS (or, for
so long as QUIPS underlie Normal Units, a holder of record of Normal Units) may
institute a Direct Action for payment to such holder of the portion of such
principal or interest attributable to Junior Subordinated Debentures having a
principal amount equal to the aggregate QUIPS Liquidation Amount of the QUIPS
held by such holder (or underlying such holder's Normal Units). In connection
with such Direct Action, the Company will be subrogated to the rights of such
holder of QUIPS (or Normal Units) under the Declaration to the extent of any
payment made by the Company to such holder of QUIPS (or Normal Units) in such
Direct Action; provided, however, that no such subrogation right may be
exercised so long as an Event of Default has occurred and is continuing.
In addition, a holder of QUIPS may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Declaration. However, in the
event of payment defaults under, or acceleration of, Senior Indebtedness, the
subordination provisions of the Indenture will provide that no payments may be
made in respect of the Junior Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on Junior Subordinated
Debentures would constitute an Event of Default under the Declaration.
LIMITED PURPOSE OF THE TRUST
The QUIPS will represent preferred undivided beneficial interests in the
assets of the Trust, and the Trust exists for the sole purpose of issuing and
selling the Trust Securities, using the proceeds from the sale of the Trust
Securities to acquire the Junior Subordinated Debentures and engaging in only
those other activities necessary or incidental thereto.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary liquidation or bankruptcy of the Company,
the Property Trustee, as holder of the Junior Subordinated Debentures, would be
a subordinated creditor of the Company, subordinated in right of payment to all
Senior Indebtedness as set forth in the Indenture, but entitled to receive
payment in full of principal (and premium, if any) and interest, before any
stockholders of the Company receive payments or distributions. Since the Company
will be the guarantor under the Guarantee and will agree to pay for all costs,
expenses and liabilities of the Trust (other than the Trust's obligations to the
holders of its Trust Securities), the positions of a holder of QUIPS and a
holder of Junior Subordinated Debentures relative to other creditors and to
stockholders of the Company in the event of liquidation or bankruptcy of the
Company are expected to be substantially the same.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the principal U.S. federal income tax consequences
of the purchase, ownership and disposition of Units, QUIPS and Common Stock is
based on the views of Sullivan & Cromwell, special tax counsel to the Company.
No statutory, judicial or administrative authority directly addresses the tax
treatment of Units or instruments similar to Units for U.S. Federal income tax
purposes. As a result, no assurance can be given that the IRS will agree with
the tax consequences described herein or that these consequences will not be
successfully challenged. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSULT THEIR
TAX ADVISORS CONCERNING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE UNITS.
The summary deals only with Units, QUIPS, and Common Stock held as capital
assets by purchasers who purchase in conjunction with the initial offering at
the issue price and who or which are (i) citizens or residents of the United
States, (ii) corporations or partnerships created or organized in or under the
laws of the United States or any state thereof or the District of Columbia,
(iii) estates the income of which is subject to United States federal income
taxation without regard to source, or (iv) trusts if a court within the United
States is able to exercise primary supervision over the administration of such
trust and one or more United States persons have the authority to control all
substantial decisions of such trust. It does not address consequences to special
classes of holders, including dealers in securities or currencies, financial
institutions, insurance companies, tax-exempt entities, taxpayers subject to the
alternative minimum tax, non-United States persons or taxpayers holding the
Purchase Contracts, QUIPS or Common Stock as part of a "straddle" or a hedging
or conversion transaction or other integrated investment. Moreover, the effect
of any applicable estate and gift tax laws or state, local or foreign tax laws
is not discussed. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS CONCERNING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE UNITS,
INCLUDING THE APPLICATION OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
This summary is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations issued thereunder, published rulings and
court decisions, each as currently in effect and all of which are subject to
change. Any such changes may be applied retroactively in a manner that could
cause the tax consequences to vary substantially from the consequences described
below, possibly adversely affecting a holder of Units, QUIPS or Common Stock.
This discussion assumes that, in connection with the formation of the
Units, the Underwriters will be acting on behalf of the holders and will (a)
sell the Call Options to the Call Option Holder and apply the proceeds from such
sale (the "Call Premium", which term includes the proceeds received in respect
of each of a holder's Units or the proceeds received in respect of all of a
holder's Units, as the context may require) together with the amount paid
directly by the holders to the Underwriters (the "Purchase Price", which term
includes the amount paid in respect of each of a holder's Units or the amount
paid in respect of all of a holder's Units, as the context may require) to the
purchase of the QUIPS and (b) enter into the Purchase Contracts with the Company
and that holders will assume the rights and obligations arising from these
actions undertaken on their behalf.
CLASSIFICATION OF THE TRUST
The Trust will, for U.S. Federal income tax purposes, not be classified as
an association taxable as a corporation. As a result, each holder of QUIPS will
be required to include in gross income the items of income realized with respect
to the holder's allocable share of the Junior Subordinated Debentures.
TREATMENT OF THE CALL PREMIUM
A holder will not be subject to tax in respect of the receipt of the Call
Premium at the time the Call Premium is received. Rather, the amount of the Call
Premium will be included in the amount
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realized by a holder when the Call Options are exercised (see "-- Exercise of
the Call Option and Ownership of Treasury Securities" below) or, in the case of
Normal Units sold prior to the exercise or expiration of the Call Options, when
such Normal Units are sold (see "-- Sale or Disposition of Units" below). If the
Call Options expire unexercised, the amount of the Call Premium will be taxable
to the holder as short-term capital gain. Such short-term capital gain may,
subject to certain limitations, be offset, however, by long-term capital loss
recognized on maturity of the QUIPS (see "-- Sale or Retirement of QUIPS"
below), or effectively offset by prior amortization of premium on the QUIPS.
(See "-- Tax Basis of QUIPS" below).
TAX BASIS OF QUIPS
The amount paid by a holder for a Unit, which, for U.S. federal income tax
purposes, will equal the sum of the Purchase Price plus the amount of the Call
Premium received by such holder and paid to the Company in partial payment of
the Units, will be allocated between the QUIPS and the Purchase Contract
included in such Unit in proportion to their respective fair market values at
the time of purchase. Such allocation will establish each holder's initial tax
basis in the QUIPS and the Purchase Contracts. Consistent with the
documentation, and reasonably consistent with the facts and circumstances, the
Company intends to take the position that, at the time of issuance of the Units,
the fair market value of the Purchase Contracts equals zero, and the entire
amount paid for the Units, including the Call Premium, is allocable to the
QUIPS. The Company's position will be binding upon each holder unless the holder
explicitly discloses a contrary position on a statement attached to the holder's
timely filed U.S. federal income tax return for the taxable year in which the
Units are acquired by such holder.
Assuming the above allocation, the holder's basis in the QUIPS (and in the
undivided beneficial interest in the Junior Subordinated Debentures represented
by the QUIPS) will exceed the amount payable at maturity with respect to the
QUIPS by the amount of the Call Premium. In general, this excess amount will be
"bond premium", which, at the election of the holder, may be "amortized" over
the life of the QUIPS. Because of the existence of the Call Options and the
Junior Subordinated Debenture Put Options, however, there may be some
uncertainty regarding the exact amount of bond premium and the period over which
such premium may be amortized. As a result, holders who wish to make an election
to amortize bond premium should consult their tax advisors.
A holder who makes an election to amortize bond premium will reduce the
amount of interest included in income each year with respect to the QUIPS by the
amount of amortizable bond premium allocable to such year under currently
applicable Treasury regulations, and the holder's basis in the QUIPS will be
reduced by the same amount. As a result of such reduction in basis, such a
holder may recognize a corresponding amount of capital gain, if and when the
Call Option is exercised, equal to the excess of the amount realized from the
sale of the QUIPS over the basis of the QUIPS. See "-- Exercise of the Call
Option and Ownership of Treasury Securities", below. Holders should consult a
tax advisor before making an election to amortize bond premium, as the election
will generally apply to other debt instruments acquired at a premium by a
holder.
INTEREST RECEIVED ON QUIPS
Under applicable Treasury regulations, stated interest on a debt instrument
is generally not "qualified stated interest" and, therefore, will give rise to
OID unless such interest is unconditionally payable in cash or in property
(other than debt instruments of the issuer) at least annually at a single fixed
rate. Interest is considered to be unconditionally payable only if reasonable
legal remedies exist to compel timely payment or the debt instrument otherwise
provides terms and conditions that make the likelihood of late payment or
non-payment "remote".
The Company has the right, at any time and from time to time during the
term of the Junior Subordinated Debentures, to defer payments of interest by
extending the interest payment period, provided that no Extension Period may
extend beyond the QUIPS and Debenture Maturity Date.
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During any Extension Period, the Company may not take any of the prohibited
actions set forth under "Description of the Units -- Description of the Junior
Subordinated Debentures -- Certain Covenants of the Company". The Company
currently believes that the adverse impact that the imposition of such
restrictions would have on the Company and on the value of its equity securities
makes the likelihood of its exercising its right to defer payments of interest
on the Junior Subordinated Debentures remote. Based on the foregoing, the
Company believes that the Junior Subordinated Debentures should not be
considered to have been issued with OID, and, accordingly, a holder should
include in gross income such holder's allocable share of interest on the Junior
Subordinated Debentures as it is paid or accrued, in accordance with the
holder's normal method of tax accounting.
If the Company were to exercise its right to defer payments of interest on
the Junior Subordinated Debentures, the Junior Subordinated Debentures would be
treated, solely for purposes of the OID rules, as being re-issued at such time
with OID and the Junior Subordinated Debentures would be considered to have OID
at all times thereafter. Under these rules, a holder of QUIPS would be required
to include OID in income as ordinary income, on a current basis, over the period
that the QUIPS were held, even though the Company would not make any actual cash
payments during the Extension Period. The amount of OID includible in the
taxable income of a holder of QUIPS would be determined on the basis of a
constant yield method over the remaining term of the instruments, and the actual
payment of stated interest on the Junior Subordinated Debentures would not be
separately reported as taxable income. Any OID included in income would increase
such holder's tax basis in the QUIPS, and actual payments would reduce such tax
basis.
Because income with respect to the QUIPS will constitute interest for U.S.
Federal income tax purposes, corporate holders of Units will not be entitled to
a dividends-received deduction in respect of such income.
CONTRACT FEES
The holders of Units may be required to pay Contract Fees to the Company,
or the Company may be required to pay Contract Fees to the holders of the Units,
as specified under "Description of the Units -- General" above.
There is no authority for the treatment of the Contract Fees under current
law. In the event that the Company is required to pay Contract Fees to holders,
the Company intends to file information returns on the basis that the Contract
Fees are ordinary income to holders for the taxable year of receipt. Because any
Contract Fees received by a holder will not constitute dividends for U.S.
federal income tax purposes, corporate holders will not be entitled to a
dividends-received deduction as a result of receiving such fees. Holders should
consult their own tax advisors concerning the treatment of the Contract Fees,
including the possibility that the Contract Fees may not be treated as current
income to holders, but would instead reduce a holder's basis in the Common Stock
received upon exercise of the Purchase Contracts, by analogy to the treatment of
rebates. In the event the Company is required to pay Contract Fees to holders,
the Company does not intend to deduct the Contract Fees, because it views them
as a cost of issuing the Common Stock. Contract Fees received by a regulated
investment company should be treated as income derived with respect to the
company's business of investing in stock and securities.
In the event that holders are required to pay Contract Fees to the Company,
it is unlikely that holders will be entitled to a current deduction in respect
of such payments. As a result, although the amount of cash distributions made to
holders in respect of the QUIPS or other Pledged Securities will be reduced by
the amount of Contract Fees payable to the Company, holders (including holders
of Stripped Units) will nevertheless recognize ordinary income each quarter
equal to the full amount of interest received or accrued with respect to the
QUIPS or other Pledged Securities held by such holder, without a corresponding
deduction for payment of the Contract Fees. Payment of the Contract Fees by
holders will, however, effectively increase the basis of the Common Stock
received
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under the Purchase Contract. See "-- Purchase of Common Stock under the Purchase
Contract" below.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES UPON LIQUIDATION OF THE TRUST
If the Company exercises its right to liquidate the Trust and cause the
Junior Subordinated Debentures to be distributed, on a pro rata basis, to
holders of QUIPS (or to the Collateral Agent on behalf of such holders), such
distribution, under current law, would not be taxable to such holders and each
holder's aggregate tax basis in the Junior Subordinated Debentures would be
equal to such holder's aggregate tax basis in the QUIPS. A holder's holding
period for the Junior Subordinated Debentures would include the period during
which the QUIPS were held by such holder.
EXERCISE OF THE CALL OPTIONS
Exercise of the Call Options will be a taxable event to holders of the
QUIPS (including holders of Normal Units). As a result, such holders will
recognize gain or loss equal to the difference between the amount realized from
the exercise of the Call Options (less any amount attributable to accrued but
unpaid interest) and the adjusted tax basis of the QUIPS. The amount realized
from the exercise of the Call Options will equal the aggregate of the Call
Premium and the fair market value of the Treasury Securities received.
Assuming, however, that (a) the entire purchase price of a Unit is properly
allocated to the QUIPS (see "-- Tax Basis of QUIPS" above), (b) the Purchase
Price is equal to both the principal amount of the QUIPS and the principal
amount of the Treasury Securities received by the holder, and (c) the holder has
not elected to amortize bond premium with respect to the QUIPS (see "-- Tax
Basis of QUIPS" above), a holder generally will not recognize any significant
gain or loss as a result of the exercise of the Call Options, because the amount
realized upon exercise of the Call Options (which will include the Call Premium)
will be approximately equal to the holder's basis in the QUIPS (which will
likewise include the Call Premium). See "-- Tax Basis of QUIPS" above. Any net
gain or loss attributable to the difference between the fair market value of the
Treasury Securities and the principal amount of the QUIPS should in any event be
effectively offset by net gain or loss recognized upon maturity of the Treasury
Securities, as discussed immediately below.
Any amount paid upon exercise of the Call Options attributable to accrued
but unpaid interest with respect to the QUIPS will be taxable as interest
income.
A holder who has made an election to amortize bond premium with respect to
the QUIPS will generally recognize gain upon sale of the QUIPS pursuant to
exercise of the Call Options in an amount equal to the excess of the amount
realized by the holder from the sale of the QUIPS over the holder's adjusted tax
basis in the QUIPS at such time. Except to the extent attributable to accrued
but unpaid interest, any such gain will be capital gain, and will be long-term
capital gain if the holder has held the QUIPS for more than one year.
OWNERSHIP OF TREASURY SECURITIES
A holder's initial basis in the Treasury Securities received as a result of
the exercise of the Call Options will be equal to the fair market value of such
Treasury Securities, determined as of the Call Settlement Date. In the case of a
holder of Stripped Units, such holder's initial basis in any Treasury Securities
purchased by such holder and deposited as Pledged Securities with the Collateral
Agent generally will equal the amount paid for such Treasury Securities by such
holder. Except to the extent any such Treasury Securities are "stripped" U.S.
Treasury securities ("Stripped Treasury Securities"), the treatment of which is
discussed in the immediately succeeding paragraph, (a) interest with respect to
a holder's portion of the Treasury Securities will be taxable as ordinary income
to such holder as it is received or accrued, in accordance with such holder's
normal method of accounting for United States federal income tax purposes, and
(b) any gain realized by a holder
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at maturity of the Treasury Securities will generally be treated as capital
gain, unless the Treasury Securities are considered to have more than a "de
minimis" amount of market discount.
A holder will be required to treat a Stripped Treasury Security acquired by
such holder (including any Stripped Treasury Security received by a holder of
Normal Units as a result of the exercise of the Call Options) as a bond that was
originally issued on the date acquired by such holder. Stripped Treasury
Securities (other than Stripped Treasury Securities with a remaining term of one
year or less) will be considered to have original issue discount (OID) in an
amount equal to the difference between the amount payable on such security and
the holder's initial basis in such security (determined as described in the
immediately preceding paragraph). As a result, a holder who acquires a Stripped
Treasury Security (other than a Stripped Treasury Security with a remaining term
of one year or less) will be required to include OID in income as ordinary
income over the remaining term of such security and will increase its basis in
the Stripped Treasury Security by the amount of OID included in income with
respect to such security.
Stripped Treasury Securities with a remaining term of one year or less
("Short-term Stripped Treasury Securities") generally should be considered to
have "acquisition discount" in an amount equal to the difference between the
principal amount of the Short-term Stripped Treasury Security and the taxpayer's
basis in the Short-term Stripped Treasury Security. A holder (other than a
holder on the accrual method of accounting or a holder who elects to accrue such
acquisition discount into income over the remaining term of the Short-term
Stripped Treasury Security) generally will recognize ordinary income upon
maturity of the Short-term Stripped Treasury Security equal to the amount of
such acquisition discount.
SALE OR DISPOSITION OF UNITS
A holder will generally recognize gain or loss upon the sale or other
disposition of Units. Such gain or loss will be separately calculated with
respect to the QUIPS, Junior Subordinated Debentures, or Treasury Securities, as
the case may be, and the related Purchase Contracts comprising such Units by
allocating the sum of any cash and the fair market value of any property
received between the two components in proportion to their respective fair
market values. The amount considered to be received by a holder of Normal Units
with respect to the sale of the QUIPS or Junior Subordinated Debentures
underlying such Normal Units will include the value of the assumption of the
holder's obligations under the Call Option, which, in the absence of any means
of independent valuation, will likely be deemed to equal the amount of the Call
Premium previously received by such holder. See "-- Treatment of the Call
Premium" above.
The amount of gain or loss with respect to each component will equal the
difference between the consideration so allocated to each component (reduced, in
the case of the QUIPS, Junior Subordinated Debentures or Treasury Securities, by
any amount attributable to accrued but unpaid interest, which will be taxable as
ordinary income) and the holder's adjusted tax basis in the respective
components. Any such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if the holder held the respective components for
more than one year at the time of such sale or disposition.
In general, application of the principles set out above should effectively
cause holders of Normal Units to recognize gain or loss upon a sale or
disposition of such Normal Units prior to the exercise or expiration of the Call
Options in an amount equal to the difference between (a) the amount received
from the sale of the Normal Units and (b) the Purchase Price, increased by the
amount of any Contract Fees paid to the Company and any accrued but unpaid OID
on the QUIPS or Junior Subordinated Debentures and decreased by (i) the amount
of any Contract Fees received by the holder and not yet included in income and
(ii) the amount of any amortization of bond premium.
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SALE OR RETIREMENT OF QUIPS OR JUNIOR SUBORDINATED DEBENTURES
If the Call Options are not exercised by the Call Option Holder, a holder
will recognize gain or loss on the sale or retirement of the QUIPS or Junior
Subordinated Debentures (including in either case a sale pursuant to the
exercise of a Junior Subordinated Debenture Put Option) in an amount equal to
the difference between the amount realized on the sale or retirement of the
QUIPS or Junior Subordinated Debentures (less any amount attributable to accrued
but unpaid interest, which will be taxable as ordinary income) and the holder's
adjusted tax basis in the QUIPS or Junior Subordinated Debentures at such time.
Any gain or loss will be capital gain or loss and will be long-term capital gain
or loss if the holder has held the QUIPS or Junior Subordinated Debentures for
more than one year.
PURCHASE OF COMMON STOCK UNDER THE PURCHASE CONTRACTS
Assuming that the initial basis of the Purchase Contracts will be zero (see
"-- Tax Basis in QUIPS" above), the tax basis of the Common Stock acquired under
a Purchase Contract will equal the amount of cash paid to purchase such Common
Stock (including cash applied by the Collateral Agent upon exercise of the
related Junior Subordinated Debenture Put Option or maturity of the related
Treasury Securities), increased by the amount of any Contract Fees paid by the
holder (as discussed above under "-- Contract Fees") and decreased by (a) the
amount of any Contract Fees received by the holder and not previously included
in income and (b) the amount of any cash received in lieu of fractional shares
of Common Stock. A holder will recognize capital gain or loss upon receipt of
cash in lieu of fractional shares of Common Stock equal to the difference
between the amount of cash received and the holder's basis in such fractional
shares. A holder's holding period in the Common Stock purchased pursuant to the
Purchase Contract will begin on the day after the purchase of such Common Stock.
OWNERSHIP OF COMMON STOCK ACQUIRED UNDER THE PURCHASE CONTRACTS
Assuming that the Company has current or accumulated earnings and profits
at least equal to the amount of the dividends, a holder will include a dividend
on the Common Stock in income when paid, and the dividend will be eligible for
the dividends received deduction if received by an otherwise qualifying
corporate holder which meets the holding period and other requirements for the
dividends received deduction.
Upon the sale, exchange or other disposition of Common Stock, the holder
will recognize gain or loss equal to the difference between the holder's tax
basis in the Common Stock and the amount realized on the disposition. The gain
or loss will be capital gain or loss, and will be long-term capital gain or loss
if the holder has held the stock for more than one year at the time of
disposition.
ADJUSTMENT OF SETTLEMENT RATE
Holders of Units might be treated as receiving a constructive distribution
from the Company if (a) the Settlement Rate is adjusted and as a result of such
adjustment, the proportionate interest of holders of Units in the assets or
earnings and profits of the Company is increased, and (b) the adjustment is not
made pursuant to a reasonable antidilution formula. An adjustment in the
Settlement Rate would not be considered made pursuant to such a formula if the
adjustment were made to compensate for certain taxable distributions with
respect to Common Stock. Thus, under certain circumstances, an increase in the
Settlement Rate is likely to be taxable to holders of Units as a dividend to the
extent of the current or accumulated earnings and profits of the Company.
Holders of Units would be required to include their allocable share of such
constructive dividends in gross income but would not receive any cash related
thereto.
90
<PAGE> 96
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, (a) the
Company has agreed to enter into the Purchase Contracts with each of the
Underwriters named below (the "Underwriters") underlying the respective number
of Units set forth opposite its name below, (b) the Company and the Trust have
agreed to sell to each of the Underwriters the QUIPS underlying the respective
number of Units set forth opposite its name below, and (c) each of such
Underwriters has severally agreed to enter into such Purchase Contracts with the
Company, purchase such QUIPS from the Company and the Trust, pledge under the
Pledge Agreement such QUIPS and sell (on behalf of the initial investors in the
Units) to the Call Option Holder the Call Options with respect to such Units:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF UNITS
----------- ---------
<S> <C>
Goldman, Sachs & Co. .......................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
Donaldson, Lufkin & Jenrette Securities Corporation.........
---------
Total............................................. 1,500,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to enter into Purchase Contracts, purchase and pledge
QUIPS and sell Call Options with respect to all of the Units offered hereby, if
any Purchase Contracts are entered into, QUIPS are taken and Call Options sold.
The Underwriters propose to offer the Units in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus and in part to certain securities dealers at such price less a
concession of $ per Unit. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per Unit to certain
brokers and dealers. After the Units are released for sale to the public, the
offering price and other selling terms may from time to time be varied by the
Underwriters.
The Company and the Trust have granted the Underwriters an option
exercisable for 30 days after the date of this Prospectus to enter into Purchase
Contracts and purchase QUIPS underlying up to an aggregate of 225,000 additional
Units solely to cover over-allotments, if any. If Purchase Contracts underlying
any such additional Units are entered into and QUIPS are purchased, the
Underwriters would pledge under the Pledge Agreement such QUIPS and would sell
to the Call Option Holder the Call Options underlying such Units. If the
Underwriters exercise their over-allotment option, each of the Underwriters has
severally agreed, subject to certain conditions, to effect the foregoing
transactions with respect to approximately the same percentage of such Units
that the respective number of Units set forth opposite its name in the foregoing
table bears to the 1,500,000 Units offered hereby.
The Company has agreed, subject to certain exceptions, that during the
period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of this Prospectus, it will not
offer, sell, contract to sell or otherwise dispose of any Common Stock (other
than pursuant to employee stock option or purchase plans existing, or on the
conversion or exchange of convertible or exchangeable securities or the exercise
of warrants outstanding, on the date of this Prospectus) or any securities of
the Company which are substantially similar to the Common Stock, or which are
convertible into or exchangeable for, or otherwise represent the right to
receive, Common Stock or any such other securities, without the prior written
consent of the Underwriters, except for shares of Common Stock offered in
connection with the Offering and the Common Stock Offering and for shares of
Common Stock or such other securities issued as consideration in future
acquisitions as long as either the entity to which the Company is issuing
consideration for such acquisitions or, in the case of consideration being paid
to shareholders of the acquired entity, all of the executive officers,
directors, other affiliates and shareholders owning 5% or more of the equity of
the entity being acquired have agreed in writing to such 180-day restriction.
91
<PAGE> 97
The Units will be a new issue of securities with no established trading
market. Application will be made to list the Units on the NYSE. The Underwriters
have advised the Company that they intend to make a market in the Units, but
they are not obligated to do so and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the Units.
In connection with the Offering, the Underwriters may purchase and sell the
Units or Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover short
positions created by the Underwriters in connection with the Offering.
Stabilizing transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Units or Common
Stock, as applicable; and short positions created by the Underwriters involve
the sale by the Underwriters of a greater number of Units than they are required
to purchase from the Company and the Trust in the Offering. The Underwriters
also may impose a penalty bid, whereby selling concessions allowed to
broker-dealers in respect of the Units sold in the Offering may be reclaimed by
the Underwriters if such Units are repurchased by the Underwriters in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Units or the Common Stock, which may
be higher than the price that might otherwise prevail in the open market, and
these activities, if commenced, may be discontinued at any time. These
transactions may be effected on the NYSE, in the over-the-counter market or
otherwise.
The Company and the Trust have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933.
Certain affiliates of Donaldson, Lufkin & Jenrette Securities Corporation
are deemed to beneficially own a number of shares of Common Stock representing
approximately 15.4% (approximately 12.4% after giving effect to the Common Stock
Offering) of the outstanding Common Stock.
VALIDITY OF THE SECURITIES
The validity of the Units, the QUIPS, the Purchase Contracts, the Common
Stock issuable upon settlement thereof, the Junior Subordinated Debentures and
the Guarantee being offered hereby will be passed upon for the Company and the
Trust by Weil, Gotshal & Manges LLP, New York, New York. The validity of the
Units, the Purchase Contracts, the Common Stock issuable upon settlement
thereof, the Junior Subordinated Debentures and the Guarantee being offered
hereby will be passed upon for the Underwriters by Sullivan & Cromwell, New
York, New York. Certain matters relating to United States Federal income tax
considerations will be passed upon for the Company by Sullivan & Cromwell,
special tax counsel to the Underwriters and the Company.
EXPERTS
The consolidated financial statements and schedule of the Company appearing
in the Company's Annual Report on Form 10-K for the year ended December 31,
1996, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements and schedule are incorporated by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended March 31, 1997 and March 31, 1996,
the three-month and six-month periods ended June 30, 1997 and June 30, 1996 and
the three-month and nine-month periods ended September 30, 1997 and September
30, 1996, incorporated by reference in this Prospectus, Ernst & Young LLP have
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
reports, included in the Company's Quarterly Report on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997, and
incorporated herein by reference, state that they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted
considering the limited nature of the review procedures applied. The independent
auditors are not subject to the liability provisions of Section 11 of the
Securities Act for their report on the unaudited interim financial information
because that report is not a "report" or a "part" of the Registration Statement
prepared or certified by the auditors within the meanings of Sections 7 and 11
of the Securities Act.
92
<PAGE> 98
INDEX OF DEFINED TERMS
Set forth below is a list of the defined terms used in this Prospectus and
the pages on which the definitions of such terms may be found.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Sums............................................. 74
Administrators.............................................. 18
Aggregate Consideration Deliverable on Exercise of the Call
Options................................................... 6
Applicable Market Value..................................... 5
Applicable Put Price........................................ 75
Business Day................................................ 63
Call Option................................................. 5
Call Option Agreement....................................... 54
Call Option Expiration Date................................. 6
Call Option Holder.......................................... 5
Call Settlement Date........................................ 58
Current Market Price........................................ 57
Call Premium................................................ 85
Closing Price............................................... 55
Collateral Agent............................................ 6
Common Stock................................................ i
Common Stock Offering....................................... 10
Common Trust Securities..................................... 8
Contract Fee Rate........................................... 5
Contract Fees............................................... 5
Debenture Event of Default.................................. 76
Debenture Trustee........................................... 9
Declaration................................................. 4
Deferral Rate............................................... 8
Delaware Trustee............................................ 18
Depositary.................................................. 61
Direct Action............................................... 16
Direct Participants......................................... 61
Distribution Date........................................... 66
Distributions............................................... 66
Effective Call Option Price................................. 75
Extension Period............................................ 66
Final Put Date.............................................. 66
Final Redemption Price...................................... 66
Global Security Certificates................................ 61
Guarantee................................................... 9
Guarantee Payments.......................................... 80
Guarantee Trustee........................................... 9
Indenture................................................... 9
Indirect Participants....................................... 61
Interest Payment Date....................................... 73
Issuer Trustees............................................. 4
IRS......................................................... 15
Junior Subordinated Debenture............................... 8
</TABLE>
93
<PAGE> 99
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Junior Subordinated Debenture Put Option.................... 75
Like Amount................................................. 66
Liquidation Distribution.................................... 67
Master Unit Agreement....................................... 54
Normal Unit................................................. 6
OID......................................................... 15
Participants................................................ 61
Paying Agent................................................ 72
Pledge Agreement............................................ 54
Pledged Securities.......................................... 6
Principal Agreements........................................ 54
Property Account............................................ 19
Property Trustee............................................ 18
Purchase Contract........................................... 5
Purchase Price.............................................. 85
Put Agent................................................... 67
Put Dates................................................... 66
Quarterly Payment Dates..................................... 4
QUIPS....................................................... 5
QUIPS and Debenture Maturity Date........................... 8
QUIPS Distribution Rate..................................... 8
QUIPS Liquidation Amount.................................... 8
Senior Indebtedness......................................... 79
Settlement Rate............................................. 4
Short-term Stripped Treasury Securities..................... 89
Sponsor..................................................... 4
Stated Amount............................................... 4
Stock Purchase Date......................................... 4
Stripped Treasury Securities................................ 88
Stripped Units.............................................. 7
Successor Securities........................................ 70
Surplus Debentures.......................................... 48
Tax Allocation Agreement.................................... 13
Tax Event................................................... 74
Threshold Appreciation Price................................ 5
Trading Day................................................. 55
Treasury Securities......................................... 6
Trust....................................................... 4
Trust Indenture Act......................................... 4
Trust Securities............................................ 8
Underwriters................................................ 7
Unit Agent.................................................. 55
Unit........................................................ 7
</TABLE>
94
<PAGE> 100
=======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-looking Statements............. i
Available Information.................. ii
Incorporation of Certain Documents by
Reference............................ iii
Prospectus Summary..................... 1
Risk Factors........................... 13
The Trust.............................. 18
Use of Proceeds........................ 19
Ratio of Earnings to Fixed Charges..... 19
Price Range of Common Stock and
Dividends............................ 20
Capitalization......................... 21
Accounting Treatment................... 22
Selected Consolidated Financial Data... 23
Recent Developments.................... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 28
Business............................... 37
Management............................. 51
Description of the Units............... 53
Certain Federal Income Tax
Consequences......................... 85
Underwriting........................... 91
Validity of the Securities............. 92
Experts................................ 92
Index of Defined Terms................. 93
</TABLE>
=======================================================
=======================================================
1,500,000 UNITS
LIFE RE CORPORATION
LIFE RE CAPITAL TRUST II
% ADJUSTABLE CONVERSION-RATE
EQUITY SECURITY UNITS
------------------------
[LIFE RE CORPORATION LOGO]
------------------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
=======================================================
<PAGE> 101
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the offering of the securities being registered hereby. All amounts shown
are estimates, except the Securities and Exchange Commission registration fee
and the New York Stock Exchange listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 67,681
New York Stock Exchange listing fee......................... 11,063
Legal fees and expenses..................................... 100,000
Accounting fees and expenses................................ 50,000
Printing and engraving expenses............................. 50,000
Rating agencies' fees....................................... 45,000
Trustees' fees.............................................. 30,000
Miscellaneous............................................... 128,131
--------
Total..................................................... $481,875
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Life Re Corporation is a Delaware corporation. Reference is made to Section
145 of the Delaware General Corporation Law ("DGCL"), which provides that a
corporation may indemnify any person, including an officer or director, who is,
or is threatened to be made, party to any threatened, pending or completed legal
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation or is or was serving at the request of such
corporation as an officer, director, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise. The indemnity may
include expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding provided such officer, director, employee, or
agent acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the corporation's best interest and, with respect to criminal
proceedings, had no reasonable cause to believe that his or her conduct was
unlawful. Section 145 of the DGCL provides further that a Delaware corporation
may indemnify officers, directors, employees, or agents of the corporation in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer,
director, employee, or agent is adjudged to be liable to the corporation. Where
an officer, director, employee, or agent is successful on the merits or
otherwise in the defense of any action referred to above or any claim therein,
the corporation must indemnify him or her against the expenses that such person
actually and reasonably incurred.
Article Ten of the Company's Restated Certificate of Incorporation provides
that directors shall not be personally liable for monetary damages to the
Company or its stockholders for breach of fiduciary duty as directors, except to
the extent not permitted under the DGCL. Article Ten further stipulates that if
the DGCL is amended to authorize corporate action further eliminating or
limiting the personal liabilities of directors, then (without further actions by
the stockholders of the Company) the liability of the directors of the Company
shall be eliminated or limited to the fullest extent permitted by the DGCL, as
so amended from time to time. Article VIII of the By-laws of the Company
provides for the indemnification of any person (i) who is a party to or is
threatened to be made a party to or otherwise involved in any proceeding (other
than a proceeding by or in the right
II-1
<PAGE> 102
of the Company to procure a judgement for the Company), by reason of the fact
that such person is or was a director or officer of the Company, provided that
such person acted in good faith and in a manner that he reasonably believed to
be or not opposed to the best interests of the Company and, in the case of a
criminal proceeding, also had no cause to believe that his conduct was unlawful
or (ii) who is a party to or is threatened to be made a party to or otherwise
involved in any proceeding by or in the right of the Company to procure a
judgement in favor of the Company, by reason of the fact that such person is or
was a director or officer of the Company, if such person acted in good faith and
in a manner that he reasonably believed to be in the best interests of the
Company; provided, however, that no indemnification for expenses shall be made
in respect to any claim, issue or matter pursuant to clause (ii) which such
person shall have been adjudged to be liable to the Company unless the Delaware
Court of Chancery or any court in which such proceeding was brought or appealed
shall determine upon application that, despite the adjudication of liability but
in view of the circumstances of the case, such person is fairly and reasonably
entitled to indemnification for expenses as such court shall deem proper. Such
indemnity shall be to the fullest extent required or permitted under the laws of
the State of Delaware.
In addition, the Company has entered into certain employment and severance
agreements with certain members of its senior management which include
provisions for the indemnification by the Company of each of them to the full
extent permitted by the DGCL. In that connection, the Company also agreed to
maintain director and officer liability insurance policies (the "Insurance")
covering such management employees. Such Insurance also covers those directors
of the Company who are not also employees of the Company.
The Declaration of Trust for Life Re Capital Trust II (the "Trust")
provides that no Issuer Trustee or any of its Affiliates, or any officer,
director, shareholder, member, partner, employee, representative, custodian,
nominee or agent of any Issuer Trustee (each an "Fiduciary Indemnified Person"),
and no Administrator, Affiliate of any Administrator, or any officer, director,
shareholder, member, partner, employee, representative or agent of any Regular
Trustee or any Affiliate thereof, or any employee or agent of the Trust or any
of its Affiliates (each a "Company Indemnified Person") shall be liable,
responsible or accountable in damages or otherwise to the Trust or any officer,
director, shareholder, partner, member, representative, employee or agent of the
Trust or its Affiliates or to any holder of preferred securities for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Fiduciary Indemnified Person or Company Indemnified Person in good faith
on behalf of the Trust and in a manner such Fiduciary Indemnified Person or
Company Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Fiduciary Indemnified Person or Company Indemnified
Person by such Declaration of Trust or by law, except that a Fiduciary
Indemnified Person or Company Indemnified Person shall be liable for any such
loss, damage or claim incurred by reason of such Fiduciary Indemnified Person's
or Company Indemnified Person's gross negligence or willful misconduct with
respect to such acts or omissions.
The Declaration of Trust for the Trust also provides that to the full
extent permitted by law, the Company shall indemnify any Company Indemnified
Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of any such Trust) by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's conduct
was unlawful. The Declaration of Trust also provides that to the full extent
permitted by law, the Company shall indemnify any Company Indemnified Person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Trust to procure a
judgment in its favor by reason of the fact that such person is
II-2
<PAGE> 103
or was a Company Indemnified Person against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Trust and except that no such indemnification shall be made in
respect of any claim, issue or matter as to which such Company Indemnified
Person shall have been adjudged to be liable to the Trust unless and only to the
extent that the Court of Chancery of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such Court of Chancery or such other court shall deem proper. The Declaration of
Trust further provides that expenses (including attorneys' fees) incurred by a
Company Indemnified Person in defending a civil, criminal, administrative or
investigative action, suit or proceeding referred to in the immediately
preceding two sentences shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such Company Indemnified Person to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Company as authorized in such Declaration of Trust.
The Declaration of Trust also provides that the Company shall indemnify
each Fiduciary Indemnified Person against any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts under
such Declaration of Trust, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or investigating
any claim or liability in connection with the exercise or performance of any of
its powers or duties thereunder.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement with respect to the Units.
4.1 Restated Articles of Incorporation of Life Re Corporation,
dated November 13, 1997.*
4.2 By-laws of Life Re Corporation, dated August 5, 1992.*
4.3 Certificate of Trust of Life Re Capital Trust II.**
4.4 Declaration of Trust of Life Re Capital Trust II.**
4.5 Form of Amended and Restated Declaration of Trust of Life Re
Capital Trust II.
4.6 Form of Quarterly Income Preferred Security of Life Re
Capital Trust II (included in Exhibit 4.5 hereto).
4.7 Form of Indenture between Life Re Corporation and The Bank
of New York, as Trustee, pursuant to which the Junior
Subordinated Debentures are to be issued.
4.8 Form of Junior Subordinated Debenture (included in Exhibit
4.7 hereto).
4.9 Form of Guarantee Agreement with respect to the QUIPS.
4.10 Specimen Common Stock Certificate of Life Re Corporation.***
4.11 Form of Master Unit Agreement.
4.12 Form of Adjustable Conversion-rate Common Security Units
(included in Exhibit 4.11 hereto).
4.13 Form of Pledge Agreement.
4.14 Form of Call Option Agreement.
5.1 Opinion of Weil, Gotshal & Manges LLP.
8.1 Tax opinion of Sullivan & Cromwell.
12.1 Computation of Ratios of Earnings to Fixed Charges.**
15.1 Letter re unaudited interim financial information.
23.1 Consent of Weil, Gotshal & Manges LLP (included in Exhibit
5.1 hereto).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Sullivan & Cromwell (included in Exhibit 8.1
hereto).
</TABLE>
II-3
<PAGE> 104
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
25.1 Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of The Bank of New York,
as Trustee under the Indenture.
25.2 Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of The Bank of New York,
as Guarantee Trustee under the Guarantee Agreement.
25.3 Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of The Bank of New York,
as Property Trustee under the Amended and Restated
Declaration of Trust of Life Re Capital Trust II.
</TABLE>
- ---------------
* Incorporated herein by reference to Exhibits 3.1 and 3.2 to the Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1997 of
Life Re Corporation (File No. 1-1134).
** Previously filed.
*** Incorporated herein by reference to Exhibit 4.1 of the Company's
Registration Statement as Form S-1 (File No. 33-50556).
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the provisions under Item 15 above, or otherwise,
each of the Registrants has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrants of expenses incurred or paid by a director, officer
or controlling person of the Registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrants will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(c) The undersigned Registrants hereby undertake that (1) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
of 1933 shall be deemed to be part of this Registration Statement as of the time
it was declared effective; and (2) for the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 105
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Stamford, State of Connecticut, on March 9, 1998.
LIFE RE CORPORATION
By: /s/ RODNEY A. HAWES, JR.
------------------------------------
Name: Rodney A. Hawes, Jr.
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RODNEY A. HAWES, JR. Chairman of the Board, Chief March 9, 1998
- --------------------------------------------------- Executive Officer, Office of
Rodney A Hawes, Jr. the Chairman and Director
(principal executive
officer)
/s/ DOUGLAS M. SCHAIR Vice Chairman of the Board, March 9, 1998
- --------------------------------------------------- Chief Investment Officer,
Douglas M. Schair Office of the Chairman and
Director
/s/ JACQUES E. DUBOIS President, Chief Operating March 9, 1998
- --------------------------------------------------- Officer, Office of the
Jacques E. Dubois Chairman and Director
/s/ CHRIS C. STROUP Executive Vice President, March 9, 1998
- --------------------------------------------------- Chief Financial Officer and
Chris C. Stroup Director (principal
accounting officer and
principal financial officer)
/s/ SAMUEL V. FILOROMO Vice President -- Operations March 9, 1998
- --------------------------------------------------- and Director
Samuel V. Filoromo
/s/ CAROLYN K. MCCANDLESS Director March 9, 1998
- ---------------------------------------------------
Carolyn K. McCandless
/s/ K. FRED SKOUSEN Director March 9, 1998
- ---------------------------------------------------
K. Fred Skousen
/s/ T. BOWRING WOODBURY, II Director March 9, 1998
- ---------------------------------------------------
T. Bowring Woodbury, II
</TABLE>
II-5
<PAGE> 106
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Life Re Capital
Trust II certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Stamford, State of Connecticut, on March 9, 1998.
LIFE RE CORPORATION,
as Depositor
By: /s/ W. WELDON WILSON
------------------------------------
Name: W. Weldon Wilson
Title: Vice President, General Counsel
and
Secretary
II-6
<PAGE> 107
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<S> <C>
1.1 Form of Underwriting Agreement with respect to the Units.
4.1 Restated Articles of Incorporation of Life Re Corporation,
dated November 13, 1997.*
4.2 By-laws of Life Re Corporation, dated August 5, 1992.*
4.3 Certificate of Trust of Life Re Capital Trust II.**
4.4 Declaration of Trust of Life Re Capital Trust II.**
4.5 Form of Amended and Restated Declaration of Trust of Life Re
Capital Trust II.
4.6 Form of Quarterly Income Preferred Security of Life Re
Capital Trust II (included in Exhibit 4.5 hereto).
4.7 Form of Indenture between Life Re Corporation and The Bank
of New York, as Trustee, pursuant to which the Junior
Subordinated Debentures are to be issued.
4.8 Form of Junior Subordinated Debenture (included in Exhibit
4.7 hereto).
4.9 Form of Guarantee Agreement with respect to the QUIPS.
4.10 Specimen Common Stock Certificate of Life Re Corporation.***
4.11 Form of Master Unit Agreement.
4.12 Form of Adjustable Conversion-rate Equity Security Units
(included in Exhibit 4.11 hereto).
4.13 Form of Pledge Agreement.
4.14 Form of Call Option Agreement.
5.1 Opinion of Weil, Gotshal & Manges LLP.
8.1 Tax Opinion of Sullivan & Cromwell.
12.1 Computation of Ratios of Earnings to Fixed Charges.**
15.1 Letter re unaudited interim financial information.
23.1 Consent of Weil, Gotshal & Manges LLP (included in Exhibit
5.1 hereto).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Sullivan & Cromwell (included in Exhibit 8.1
hereto).
25.1 Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of The Bank of New York,
as Trustee under the Indenture.
25.2 Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of The Bank of New York,
as Guarantee Trustee under the Guarantee Agreement.
25.3 Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of The Bank of New York,
as Property Trustee under the Amended and Restated
Declaration of Trust of Life Re Capital Trust II.
</TABLE>
- ---------------
* Incorporated herein by reference to exhibits 3.1 and 3.2 to the Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1997 of
Life Re Corporation (File No. 1-1134).
** Previously filed.
*** Incorporated herein by reference to Exhibit 4.1 of the Company's
Registration Statement as Form S-1 (File No. 33-50556).
<PAGE> 1
Exhibit 1.1
LIFE RE CORPORATION
LIFE RE CAPITAL TRUST II
.....% ADJUSTABLE CONVERSION-RATE EQUITY SECURITY UNITS
(STATED AMOUNT $........... PER UNIT)
UNDERWRITING AGREEMENT
.......................,1998
Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette Securities Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Life Re Corporation, a Delaware corporation (the "Company"), and the
several Underwriters named in Schedule I hereto (the "Underwriters") propose,
subject to the terms and conditions stated herein, to enter into the Purchase
Contracts referred to in the Master Unit Agreement (herein so called) to be
dated as of .................., 1998, between the Company and
............................................, as Master Unit Agent (the "Unit
Agent"), underlying an aggregate of 1,500,000 ......% Adjustable Conversion-rate
Equity Security Units (the "Firm Securities"). In connection therewith, Life Re
Capital Trust II (the "Trust"), a statutory business trust created under the
Business Trust Act of the State of Delaware (the "Delaware Business Trust Act"),
and the Company propose, subject to the terms and conditions stated herein, that
the Trust issue and sell to the Underwriters an aggregate liquidation amount of
$1,500,000 .....% Quarterly Income Preferred Securities (liquidation amount
$...... per QUIP) (the "QUIPS(sm)") representing undivided preferred beneficial
interests in the assets of the Trust, which will be guaranteed by the Company as
to the payment of distributions, and as to payments on liquidation or
redemption, to the extent that the Trust has funds on hand legally available
therefor, as set forth in a guarantee agreement (the "Guarantee Agreement")
among the Company and The Bank of New York, as trustee (the "Guarantee
Trustee"). Further in connection therewith the Underwriters will, on behalf of
the initial holders of the Units (as defined herein), sell Call Options (the
"Call Options") to Goldman, Sachs & Co. (in its capacity as the holder of the
Call Options, the "Call Option Holder") which will entitle the Call Option
Holder to acquire such QUIPS (or Junior Subordinated Debentures substituted
therefore), on or before the Call Option Expiration Date (as defined in the Call
Options), in exchange for the Aggregate Consideration Deliverable on Exercise of
the Call Options (as defined in the Call Options). In connection with the Master
Unit Agreement and the Call Options, pursuant to the Pledge Agreement, to be
dated as of .................................., 1998 (the "Pledge Agreement"),
among the Company, the Unit Agent, the Call Option Holder and __________, as
collateral agent (the "Collateral Agent"), the QUIPS underlying the Units will
be pledged by the Unit Agent on behalf of the holders of the Units to secure the
holders' obligations to the Company and the Call Option Holder under the
Purchase Contract and Call Option underlying such Unit. The rights to
<PAGE> 2
purchase newly issued common stock, par value $.001 per share, of the Company
(the "Common Stock") under a Purchase Contract, together with the QUIPS or other
Pledged Securities securing such Purchase Contract, subject to (a) the
obligations owed to the Company under such Purchase Contract, (b) the
obligations owed to the Call Option Holder under the Call Option relating to
such QUIPS or other Pledged Securities and (c) the pledge arrangements under the
Pledge Agreement securing the foregoing obligations, collectively constitute an
Adjustable Conversion-rate Equity Security Units (a "Unit"). In addition,
subject to the terms and conditions herein, the Company proposes to grant the
Underwriters an option to enter into Purchase Contracts underlying up to 225,000
additional Units and the Trust and the Company propose to grant the Underwriters
an option to purchase up to 225,000 additional QUIPS, and, in the event the
Underwriters enter into any such additional Purchase Contracts, the Underwriters
propose to purchase a number of additional QUIPS equal to such number of
additional Purchase Contracts, pledge such QUIPS to the Collateral Agent and
sell Call Options relating to such QUIPS to the Call Option Holder (the Units
resulting therefrom being the "Optional Securities"). The Firm Securities and
any Optional Securities purchased by the Underwriters are herein called the
"Securities".
The proceeds of the sale of the QUIPS and of the common securities of the
Trust (the "Common Trust Securities" and, together with the QUIPS, the "Trust
Securities") to be sold by the Trust to the Company are to be invested in __%
Junior Subordinated Debentures (the "Junior Subordinated Debentures") of the
Company to be issued pursuant to an Indenture (the "Indenture") among the
Company and The Bank of New York, as trustee (the "Debenture Trustee"). The
Trust Securities will be issued pursuant to, and be governed by the Amended and
Restated Declaration, dated as of ....................., 1998 (the
"Declaration") among the Company, The Bank of New York, as property trustee (the
"Property Trustee"), The Bank of New York (Delaware), as the Delaware Trustee
(the "Delaware Trustee"), the Administrators named therein and the holders from
time to time of the beneficial interests in the assets of the Trust. The
Declaration will be qualified under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act").
Concurrently with the transactions contemplated by this Agreement, the
Company and certain stockholders of the Company are entering into underwriting
agreements pursuant to which the Company proposes to issue and sell an aggregate
3,300,000 shares of Common Stock and certain stockholders of the Company propose
to sell up to an aggregate of 725,000 shares of Common Stock to the underwriters
that are the parties to such underwriting agreements. Such transactions are
collectively referred to herein as the "Other Offering".
Capitalized terms used herein without definition shall be used as defined
in the Prospectus.
1. The Company and the Trust, jointly and severally represent and
warrant to, and agree with, each of the Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-46213) (the
"Initial Registration Statement") in respect of the Securities, including
the Purchase Contracts underlying the Securities, the shares of Common
Stock (the "Shares") to be purchased upon settlement of the Purchase
Contracts underlying such Securities, the QUIPS, the Junior Subordinated
Debentures, the Guarantee and the Call Options, has been filed with the
Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto but
including all documents incorporated
2
<PAGE> 3
by reference in the prospectus contained therein, to you for each of
the other Underwriters, have been declared effective by the Commission
in such form; other than a registration statement, if any, increasing
the size of the offering (a "Rule 462(b) Registration Statement"),
filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended (the "Act"), which became or hereafter becomes effective upon
filing, no other document with respect to the Initial Registration
Statement or document incorporated by reference therein has heretofore
been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any,
has been issued and no proceeding for that purpose has been initiated
or, to the knowledge of the Company, threatened by the Commission (any
preliminary prospectus included in the Initial Registration Statement,
or filed with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act, is hereinafter called a
"Preliminary Prospectus"; the various parts of the Initial Registration
Statement and the Rule 462(b) Registration Statement, if any, including
all exhibits thereto but excluding Form T-1 and including (i) the
information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to
be part of the Initial Registration Statement at the time it was
declared effective, and (ii) the documents incorporated by reference in
the prospectus contained in the registration statement at the time such
part of the registration statement became effective or such part of the
Rule 462(b) Registration Statement, if any, became or hereafter becomes
effective, each as amended at the time such part of the Initial
Registration Statement became effective, are hereinafter collectively
called the "Registration Statement"; such final prospectus, in the form
first filed pursuant to Rule 424(b) under the Act, is hereinafter
called the "Prospectus"; any reference herein to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the Act, as of the date of such Preliminary Prospectus
or Prospectus, as the case may be; any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after the date of
such Preliminary Prospectus or Prospectus, as the case may be, under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and incorporated by reference in such Preliminary Prospectus or
Prospectus, as the case may be; and any reference to any amendment to
the Registration Statement shall be deemed to refer to and include any
annual report of the Company filed pursuant to Section 13(a) or 15(d)
of the Exchange Act after the effective date of the Registration
Statement that is incorporated by reference in the Registration
Statement);
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the Trust
Indenture Act, and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in
3
<PAGE> 4
reliance upon and in conformity with information furnished in writing to
the Company by an Underwriter through Goldman, Sachs & Co. expressly for
use therein;
(c) The documents incorporated by reference in the Prospectus, when
they were filed with the Commission, conformed in all material respects to
the requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement
thereto, when such documents are filed with the Commission will conform in
all material respects to the requirements of the Exchange Act and the
rules and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply
to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment thereto
and as of the applicable filing date as to the Prospectus and any
amendment or supplement thereto, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein either (i) in the case of the
Registration Statement or any amendment thereto, not misleading or (ii) in
the case of the Prospectus or any amendment or supplement thereto, in
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply
to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(e) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus; and, since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or increase
in long-term debt of the Company or any of its subsidiaries, or any
material adverse change, or any development that could reasonably be
expected to involve a prospective material adverse change, in or affecting
the general affairs, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries considered as
a whole, otherwise than as set forth or contemplated in the Prospectus;
4
<PAGE> 5
(f) The Company and its subsidiaries have good title in fee simple
to all real property and good title to all material personal property
owned by them, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries;
(g) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and insurance regulatory) to own its
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases properties or conducts any business so as to
require such qualification, except for those failures to be so qualified
or in good standing in any such jurisdiction that would not individually
or in the aggregate have a material adverse effect on the business,
operations, financial condition or results of operations of the Company
and its subsidiaries considered as a whole (a "Material Adverse Effect");
and each Significant Subsidiary (as defined in Section (1)(aa)) of the
Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation;
(h) The Company has made all required filings under applicable
insurance holding company statutes, and has received approvals of
acquisition of control and/or affiliate transactions, in each jurisdiction
in which such filings or approvals are required, except (i) where the
failure to have made such filings or receive such approvals in any such
jurisdiction would not have, individually or in the aggregate, a Material
Adverse Effect or (ii) in the case of pending acquisitions, in which case
such filings have been made or such approvals have been applied for; each
of the Company's subsidiaries that is required to be organized and
licensed as an insurance company in its jurisdiction of incorporation is
duly organized and licensed as an insurance company in its respective
jurisdiction of incorporation, and each such subsidiary is duly licensed
or authorized as an insurer in each other jurisdiction in which such
licensing or authorization is required, except where the failure to be so
licensed or authorized in any such jurisdiction would not have,
individually or in the aggregate, a Material Adverse Effect; the Company
and each of its subsidiaries have all other necessary authorizations,
approvals, orders, consents, certificates, permits, registrations or
qualifications of and from all insurance regulatory and other governmental
authorities to conduct their respective businesses as described in the
Prospectus, except where the failure to have such authorizations,
approvals, orders, consents, licenses, certificates, permits,
registrations or qualifications would not have, individually or in the
aggregate, a Material Adverse Effect; each of the Company and each of its
subsidiaries that engages in the insurance business have fulfilled and
performed all obligations necessary to maintain the insurance licenses
("Insurance Licenses") from the insurance regulatory agencies of the
various jurisdictions where it conducts business
5
<PAGE> 6
except where the failure to so fulfill or perform would not,
individually or in the aggregate, have a Material Adverse Effect; there
is no pending or, to the knowledge of the Company, threatened action,
suit, proceeding or investigation that could reasonably be expected to
lead to the revocation, termination or suspension of any such license,
certificate or permit (including, without limitation, the Insurance
Licenses), the revocation, termination or suspension of which would
have, individually or in the aggregate, a Material Adverse Effect; and
except as disclosed in the Prospectus, no insurance regulatory agency
or body has issued any order or decree impairing, restricting or
prohibiting the payment of dividends by any subsidiary to its parent
which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(i) The Company and each of its subsidiaries that is an
insurance company is in compliance with the requirements of the
insurance laws and regulations of its jurisdiction of incorporation and
the insurance laws and regulations of other jurisdictions which are
applicable to the Company and each such subsidiary, and has filed all
notices, reports, documents or other information required to be filed
thereunder, except where the failure to so comply or file would not,
individually or in the aggregate, have a Material Adverse Effect;
(j) At September 30, 1997, the Company had an authorized
capitalization as set forth in the column entitled "actual" under the
caption "Capitalization" in the Prospectus, and all of the issued
shares of capital stock of the Company have been duly authorized and
validly issued, are fully paid and non-assessable and conform to the
description of the Common Stock incorporated by reference in the
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued,
are fully paid and non-assessable and (except as set forth in the
Prospectus) are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(k) All retrocessional treaties and arrangements to which any
of the subsidiaries of the Company is a party are in full force and
effect and none of the subsidiaries is in violation of, or in default
in the performance, observance or fulfillment of, any obligation,
agreement, covenant or condition contained therein, except to the
extent that any such violation or default would not, individually or in
the aggregate, have a Material Adverse Effect; none of the Significant
Subsidiaries of the Company has received any notice from any of the
other parties to such treaties, contracts or agreements that such other
party intends not to perform in any material respect such treaty,
contract or agreement and, to the best knowledge of the Company, the
Company has no reason to believe that any of the other parties to such
treaties or arrangements will be unable to perform such treaty or
arrangement;
(l) The unissued Shares to be issued and sold by the Company
pursuant to the Purchase Contracts and the Master Unit Agreement have
been duly authorized and reserved for issuance and, when issued and
delivered against payment therefor as provided in the Purchase
Contracts and the Master Unit Agreement, will be validly issued and
fully paid and non-assessable and will conform to the description of
the Common Stock incorporated by reference in the Prospectus;
6
<PAGE> 7
(m) The entry into the Purchase Contracts underlying the Firm
Securities and the Optional Securities by the Company, the issue and
sale of the QUIPS underlying the Firm Securities and the Optional
Securities and the Common Securities by the Trust, the issue and sale
of the Junior Subordinated Debentures underlying such Trust Securities
by the Company, the issue and sale of the Shares by the Company
pursuant to the Purchase Contracts, the compliance by the Company and
the Trust, as applicable, with the provisions of this Agreement, such
Purchase Contracts, the Master Unit Agreement, the Pledge Agreement,
the Guarantee Agreement, the Declaration and the Indenture and the
consummation of the transactions herein and therein contemplated and
the Other Offering (i) will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound
or to which any of the property or assets of the Company or any of its
subsidiaries is subject, (ii) will not result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company and (iii) will not result in any violation of the provisions of
any statute or any order, rule or regulation of any court, insurance
regulatory authority or other governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties, except in the case of clauses (i) and (iii) for such
conflicts, breaches, violations or defaults that would not,
individually or in the aggregate, have a Material Adverse Effect; and
no consent, approval, authorization, order, registration or
qualification of or with any such court, insurance regulatory authority
or other governmental agency or body is required for the entry into the
Purchase Contracts underlying the Firm Securities and the Optional
Securities by the Company, the issue and sale of the QUIPS underlying
the Firm Securities and the Optional Securities and the Common
Securities by the Trust, the issue and sale of the Junior Subordinated
Debentures underlying such Trust Securities by the Company, the issue
and sale of the Shares by the Company pursuant to the Purchase
Contracts, the compliance by the Company and the Trust, as applicable,
with all of the provisions of this Agreement, such Purchase Contracts,
the Master Unit Agreement, the Pledge Agreement, the Guarantee
Agreement, the Declaration or the Indenture or the consummation of the
transactions herein or therein contemplated or the Other Offering
except the registration under the Act of the Securities and the Shares
to be issued upon settlement of the Purchase Contracts and the Stock to
be issued in the Other Offering and the approval and registration of
the Securities with the New York Stock Exchange and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state or foreign securities or Blue Sky laws in
connection with the purchase and distribution of the Securities by the
Underwriters or the Other Offering;
(n) The issue and sale of the QUIPS underlying the Firm
Securities and the Optional Securities and the Common Trust Securities
by the Trust, the purchase of the Junior Subordinated Debentures
underlying such Trust Securities by the Trust, and the compliance by
the Trust with all of the provisions of the Declaration and this
Agreement, and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any agreement or instrument to which the Trust is a party or by which
the Trust is bound or to which any of the property or assets of the
Trust is subject, nor will such
7
<PAGE> 8
action result in any violation of the provisions of any statute or any
order, rule or regulation of any court, insurance regulatory authority
or other governmental agency or body having jurisdiction over the Trust
or any of its properties; and no consent, approval, authorization,
order, registration or qualification of or with any such court,
insurance regulatory authority or other governmental agency or body is
required for the issue and sale of the QUIPS underlying the Firm
Securities and the Optional Securities and the Common Securities by the
Trust, the purchase of the Junior Subordinated Debentures underlying
such Trust Securities by the Trust or the consummation by the Trust of
the transactions contemplated by this Agreement or the Declaration,
except the registration under the Act of the Securities, and such
consents, approvals, authorizations, registrations or qualifications as
may be required under state or foreign securities or Blue Sky laws in
connection with the purchase and distribution of the Securities by the
Underwriters;
(o) The Trust has been duly created and is validly existing as
a statutory business trust in good standing under the Delaware Business
Trust Act with the power and authority to enter into this Agreement and
to perform its obligations; the Trust has conducted no business to date
other than as contemplated by this Agreement and the Declaration; the
Trust is not a party to or bound by any agreement or instrument other
than this Agreement, the Declaration, and the agreements and
instruments contemplated by the Declaration and described in the
Prospectus; the Trust has no liabilities or obligations other than
those arising out of the transactions contemplated by this Agreement
and the Declaration and described in the Prospectus; based on current
law, the Trust is not and will not be classified as an association
taxable as a corporation for United States federal income tax purposes;
and the Trust is not a party to or subject to any action, suit or
proceeding of any nature; and the Declaration has been duly qualified
under the Trust Indenture Act;
(p) The Purchase Contracts underlying the Firm Securities and
the Optional have been duly and authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and
legally binding instruments, enforceable in accordance with their
terms, subject, as the enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and the
Purchase Contracts will conform to the descriptions thereof in the
Prospectus;
(q) The Master Unit Agreement, and the Pledge Agreement, have
been duly authorized by the Company and, when executed and delivered by
the other parties thereto, will constitute a valid and binding
instrument enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights and
to general equity principles;
(r) The QUIPS underlying the Firm Securities and the Optional
Securities have been duly authorized, and, when issued, delivered and
paid for pursuant to this Agreement, will have been validly issued and
fully paid and non-assessable beneficial interests in the Trust
entitled to the benefits of the Declaration and will conform to the
description of the QUIPS contained in the Prospectus; the holders of
the QUIPS will be entitled to the same limitation of personal liability
extended to stockholders of private
8
<PAGE> 9
corporations for profit organized under the General Corporation Law of the
State of Delaware;
(s) The Common Trust Securities have been duly authorized and at
each Time of Delivery (as defined herein), will be validly issued and
fully paid and non-assessable beneficial interests in the assets of the
Trust; the issuance of the Common Trust Securities is not subject to
preemptive or other similar rights; and at each Time of Delivery, all of
the issued and outstanding Common Trust Securities of the Trust will be
directly owned by the Company free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; and the Common Trust
Securities and the QUIPS are the only interests authorized to be issued by
the Trust;
(t) The Guarantee Agreement, the Declaration, the Indenture and the
Junior Subordinated Debentures, each have been duly authorized and at each
Time of Delivery, will constitute a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; the Junior Subordinated Debentures will be entitled to
the benefits of the Indenture; and the Guarantee Agreement, the
Declaration, the Indenture and the Junior Subordinated Debentures will
conform to the descriptions thereof in the Prospectus;
(u) Neither the Company nor any of its subsidiaries is (i) in
violation of its Certificate of Incorporation or By-laws or (ii) in
default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument to
which it is a party or by which it or any of its properties may be bound
except in the case of clause (ii) for such defaults that, individually or
in the aggregate, would not have a Material Adverse Effect;
(v) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a Material Adverse Effect; and, to the Company's knowledge, no such
proceedings are threatened by governmental authorities or threatened by
others;
(w) No "forward looking statement" (as defined in Rule 175 under the
Act) contained in the Registration Statement, any Preliminary Prospectus
or the Prospectus was made or reaffirmed without a reasonable basis or was
disclosed other than in good faith;
(x) Neither the Company nor the Trust is and, after giving effect to
the offering and sale of the Securities, neither will be an "investment
company" or an entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(y) None of the Company, any of its affiliates or the Trust, does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida Statutes
(Chapter 92-128, Laws of Florida);
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(z) Ernst & Young, who have certified certain financial statements
of the Company and its subsidiaries, are independent public accountants
within the meaning of Regulation S-X under the Act and the rules and
regulations of the Commission thereunder; and
(aa) Each of TexasRe Life Insurance Company ("TexasRe"), Life
Reassurance Corporation of America ("Life Reassurance"), Reassure America
Life Insurance Company ("REALIC") and American Merchants Life Insurance
Company ("AML") is referred to herein as a "Significant Subsidiary"; all
of the other subsidiaries of the Company in the aggregate do not
constitute a "Significant Subsidiary" as defined in Regulation S-X under
the Act;
2. Subject to the terms and conditions herein set forth, (a) the
Company and each of the Underwriters, severally and not jointly, agree to enter
into the Purchase Contracts underlying the number of Firm Securities set forth
opposite the name of such Underwriter in Schedule I hereto, (b) the Company and
the Trust agree that the Trust will sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from the
Trust, at a purchase price of $______ per QUIPS, the number of QUIPS underlying
the number of Firm Securities set forth opposite the name of such Underwriter in
Schedule 1 hereto, and (c) in the event and to the extent that the Underwriters
shall exercise the election to enter into additional Purchase Contracts
underlying Optional Securities as provided below, the Company and each of the
Underwriters, severally and not jointly, agree to enter into that number of
additional Purchase Contracts as to which such election shall have been
exercised (to be adjusted by you so as to eliminate fractional Purchase
Contracts) determined by multiplying such number of additional Purchase
Contracts by a fraction, the numerator of which is the maximum number of
Optional Securities set forth opposite the name of such Underwriter in Schedule
I hereto and the denominator of which is the maximum number of Optional
Securities set forth in total opposite the names of all such Underwriters in
Schedule I hereto and the Company and the Trust agree that the Trust will sell
to each of the Underwriters and each of the Underwriters agrees, severally and
not jointly, to purchase from the Trust at the purchase price set forth in
clause (a) of this Section 2, a number of QUIPS equal to such number of
additional Purchase Contracts.
The Company hereby grants to the Underwriters the right to enter into at
their election up to 225,000 Purchase Contracts underlying Optional Securities
and the Company and the Trust hereby grant the Underwriters the right to
purchase from the Trust at their election up to 225,000 QUIPS, for the sole
purpose of covering overallotments in the sale of the Firm Securities. Any such
election to enter into such additional Purchase Contracts and purchase such
QUIPS may be exercised only by written notice from you to the Company and the
Trust, given within a period of 30 calendar days after the date of this
Agreement and setting forth the aggregate number of such additional Purchase
Contracts to be entered into and QUIPS to be purchased (which shall be an
identical number) and the date on which the related Optional Securities are to
be delivered, as determined by you but in no event earlier than the First Time
of Delivery (as defined in Section 4 hereof) or, unless you and the Company
otherwise agree in writing, earlier than two or later than ten business days
after the date of such notice.
The Underwriters agree to pledge to the Collateral Agent the QUIPS
underlying the Firm Securities and the Optional Securities with respect to which
the Company and the Underwriters have entered into Purchase Contracts. Such
pledge shall be effected by the delivery to the
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<PAGE> 11
Collateral Agent in New York by the Underwriters of the QUIPS to be pledged at
the appropriate Time of Delivery (as defined below) in accordance with the
Pledge Agreement.
The Underwriters further agree to sell, on behalf of the initial
purchasers of the Units, to the Call Option Holder a Call Option with respect to
each Security purchased at a purchase price of $______ per Call Option at the
appropriate Time of Delivery.
Unless the context otherwise requires, for purposes of this Agreement, the
act of entering into a Purchase Contract underlying a Security, purchasing a
QUIPS underlying a Security and selling a Call Option with respect to such QUIPS
shall be referred to as a "purchase" of such Security.
3. Upon the authorization by you of the release of the Firm Securities,
the several Underwriters propose to offer the Firm Securities for sale upon the
terms and conditions set forth in the Prospectus.
4. (a) The Securities to be purchased by each Underwriter to be
purchased by each Underwriter hereunder will be represented by one or more
definitive global Units in book-entry form which will be deposited by or
on behalf of the Company with The Depository Trust Company ("DTC") or its
designated custodian and delivered to Goldman, Sachs & Co., for the
account of each Underwriter, against payment by or on behalf of such
Underwriter of the purchase price by certified or official bank check or
checks, payable to the order of, or by wire transfer to the account
designated by, the Trust, in immediately available (same day) funds and
delivery to the Collateral Agent of the QUIPS relating to such Securities.
The Company will cause the certificates representing the Securities to be
made available to Goldman, Sachs & Co. for checking at least twenty-four
hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with
respect to the Firm Securities, 9:30 a.m., New York City time, on
....................., 1998 or such other time and date as Goldman, Sachs
& Co. and the Company may agree upon in writing, and, with respect to the
Optional Securities, 9:30 a.m., New York City time, on the date specified
by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs &
Co. of the Underwriters' election to purchase such Optional Securities, or
such other time and date as Goldman, Sachs & Co. and the Company may agree
upon in writing. Such time and date for delivery of the Firm Securities is
herein called the "First Time of Delivery", such time and date for
delivery of the Optional Securities, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date
for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by
the Underwriters pursuant to Section 7(l) hereof, will be delivered at the
offices of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004
(the "Closing Location"), and the Securities will be delivered at the
Designated Office, all at each Time of Delivery. A meeting will be held at
the Closing Location at 2:00 p.m., New York City time, on the New York
Business Day next preceding each Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties
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<PAGE> 12
hereto. For the purposes of this Section 4, "New York Business Day" shall
mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company and the Trust jointly and severally agree with each of
the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus prior to the last Time of Delivery which shall be disapproved
by you promptly after reasonable notice thereof; to advise you, promptly
after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and for so
long as the delivery of a prospectus is required in connection with the
offering or sale of the Securities; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any Preliminary
Prospectus or prospectus, of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event
of the issuance of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the withdrawal
of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under
the securities and insurance securities laws of such jurisdictions as you
may request and to comply with such laws so as to permit the continuance
of sales and dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Securities, provided that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to or take any action
that would subject the Company to service of process in any jurisdiction
or taxation in any jurisdiction where it is not now subject;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement, to furnish the
Underwriters with copies of the Prospectus in New York City in such
quantities as you may from time to time reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration
of nine months after the time of issue of the Prospectus in connection
with the offering or sale of the Securities and if at such time any events
shall have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue
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<PAGE> 13
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or, if for any other reason it
shall be necessary during such period to amend or supplement the
Prospectus or to file under the Exchange Act any document incorporated by
reference in the Prospectus in order to comply with the Act, the Exchange
Act or the Trust Indenture Act, to notify you and upon your request to
file such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may from
time to time reasonably request of an amended Prospectus or a supplement
to the Prospectus which will correct such statement or omission or effect
such compliance; and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Securities at any time
nine months or more after the time of issue of the Prospectus, upon your
request but at the expense of such Underwriter, to prepare and deliver to
such Underwriter as many copies as you may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) If the Company and the Trust elect to rely upon Rule 462(b), the
Company and the Trust shall file a Rule 462(b) Registration Statement with
the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington,
D.C. time, on the date of this Agreement, and the Company shall at the
time of filing either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act;
(e) To make generally available to its security holders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and
the rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(f) During the period beginning from the date of the Prospectus and
continuing to and including the date 180 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose of,
except as provided hereunder and in connection with the Other Offering,
any Common Stock or securities of the Company that are substantially
similar to the Common Stock, or which are convertible into or exchangeable
for, or that represent the right to receive, Common Stock or any such
substantially similar securities other than (i) pursuant to employee stock
option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Agreement and (ii) shares of Common Stock or such other securities issued
as consideration in future acquisitions as long as either the entity to
which the Company is issuing consideration for such acquisitions or, in
the case of consideration being paid to shareholders of the acquired
entity, all of the executive officers, directors, other affiliates and
shareholders owning 5% or more of the equity of the entity being acquired
have agreed in writing to such 180-day restriction, without your prior
written consent;
(g) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries
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<PAGE> 14
certified by independent public accountants) and, as soon as practicable
after the end of each of the first three quarters of each fiscal year
(beginning with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of the
Company and its subsidiaries for such quarter in reasonable detail;
(h) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission);
(i) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds"; and
(j) To use its best efforts to list, subject to notice of issuance,
the Securities on the New York Stock Exchange (the "Exchange").
6. The Company and the Trust jointly and severally covenant and agree
with the several Underwriters that the Company will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Securities under the Act
and all other expenses in connection with the preparation, printing and filing
of the Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Indenture, the Blue Sky
Memorandum, closing documents (including any compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Securities; (iii) all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as provided in
Section 5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) any fees charged by securities rating services for rating
the Securities; (v) all fees and expenses in connection with listing the
Securities on the Exchange; (vi) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Securities; (vi) the cost of preparing the Securities;
(vii) the fees and expenses of the Trust and the trustees thereunder incident to
the performance by the Trust of its obligations hereunder; (viii) the fees and
expenses of the Unit Agent, Collateral Agent and Debenture Trustee and any agent
of the Unit Agent, Collateral Agent and Debenture Trustee and the fees and
disbursements of any counsel for the Unit Agent, Collateral Agent or Trustee in
connection with the Master Unit Agreement, the Pledge Agreement, the Call Option
Agreement, the Indenture and the Junior Subordinated Debentures, as the case may
be; and (ix) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in
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<PAGE> 15
this Section. It is understood, however, that, except as provided in this
Section, and Sections 8 and 11 hereof, the Underwriters will pay all of their
own costs and expenses, including the fees of their counsel, transfer taxes on
resale of any of the Securities by them, and any advertising expenses connected
with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Securities
to be delivered at each Time of Delivery, shall be subject, in their discretion,
to the condition that all representations and warranties of the Company and the
Trust herein are, at and as of such Time of Delivery, true and correct, the
condition that the Company and the Trust shall have performed all of its and
their obligations hereunder theretofore to be performed, and the following
additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5 (a) hereof; no stop order suspending the effectiveness of
the Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened by
the Commission; and all requests for additional information on the part of
the Commission shall have been complied with to your reasonable
satisfaction; if the Company has elected to rely upon Rule 462(b), the
Rule 462(b) Registration Statement shall have become effective by 10:00
P.M., Washington, D.C. time, on the date of this Agreement;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions, dated such Time of Delivery,
with respect to the incorporation of the Company, this Agreement, the
validity of the Securities being delivered at such Time of Delivery, the
Registration Statement, the Prospectus and such other related matters as
you may reasonably request, and such counsel shall have received such
papers and information as they may reasonably request to enable them to
pass upon such matters;
(c) Weil, Gotshal & Manges LLP, counsel for the Company, shall
have furnished to you their written opinion (a draft of each such opinion
is attached as Annex II(a) hereto), dated such Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own
its properties and to carry on its business as described in the
Prospectus;
(ii) The authorized capital stock of the Company consists of
40,000,000 shares of common stock, par value $.001 per share. Based
solely upon such counsel's review of (A) a certificate of the
Company's transfer agent and (B) the minute books of the Company in
the form provided to such counsel, as of September 30, 1997, there
were 15,830,785 shares of common stock issued of which [2,196,469]
shares were treasury stock and [13,634,316] were outstanding. All of
the outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and non-assessable. The
Common Stock to be issued
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<PAGE> 16
pursuant to this Agreement have been duly authorized, validly
issued, fully paid and non-assessable;
(iii) The unissued Shares to be issued and sold by the Company
pursuant to the Purchase Contracts and the Master Unit Agreement
have been duly authorized and reserved for issuance and, when issued
and delivered against payment therefor as provided in the Purchase
Contracts and the Master Unit Agreement, will be validly issued and
fully paid and non-assessable and will conform to the description of
the Common Stock incorporated by reference in the Prospectus;
(iv) The Company is duly qualified to transact business and
is in good standing as a foreign corporation in each jurisdiction
where the character of its activities requires such qualification,
except where the failure of the Company to be so qualified would not
have a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries considered
as a whole (such counsel being entitled to rely in respect of the
opinion in this clause upon opinions of local counsel and in respect
of matters of fact upon certificates of officers of the Company,
provided that such counsel shall state that they are relying upon
such opinions and certificates);
(v) Each Significant Subsidiary of the Company is a
corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation; and all of the
outstanding shares of capital stock of each of TexasRe, Life
Reassurance and REALIC, and 79% of the outstanding shares of capital
stock of AML are duly authorized, validly issued, fully paid and
non-assessable, and are owned of record by the Company or its
directly or indirectly wholly owned subsidiary and, to such
counsel's knowledge, beneficially by the Company, free and clear, to
such counsel's knowledge , of all liens, claims and other
encumbrances (such counsel being entitled to rely in respect of the
opinion in this clause upon opinions of local counsel and in respect
of matters of fact upon certificates of officers of the Company or
its subsidiaries, provided that such counsel shall state that they
are relying upon such opinions and certificates);
(vi) The Company and its subsidiaries have good and
marketable title in fee simple to all real property owned by them,
in each case free and clear of all liens, encumbrances and defects
except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any real property and buildings
held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use
made and proposed to be made of such property and buildings by the
Company and its subsidiaries (in giving the opinion in this clause,
such counsel may state that no examination of record titles for the
purpose of such opinion has been made, and that they are relying
upon a general review of the titles of the Company and its
subsidiaries, upon opinions of local counsel and abstracts, reports
and policies of title companies rendered or issued at or subsequent
to the
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<PAGE> 17
time of acquisition of such property by the Company or its
subsidiaries, upon opinions of counsel to the lessors of such
property and, in respect of matters of fact, upon certificates of
officers of the Company or its subsidiaries, provided that such
counsel shall state that they believe that both you and they are
justified in relying upon such opinions, abstracts, reports,
policies and certificates);
(vii) To such counsel's knowledge and other than as set forth
in the Prospectus, there are no legal or governmental proceedings
pending or overtly threatened against the Company or any of its
subsidiaries which, if adversely determined, would have a Material
Adverse Effect;
(viii) The execution and delivery of this Agreement have been
duly authorized by all necessary corporate action on the part of the
Company and the Trust. This Agreement has been duly executed and
delivered by the Company and the Trust;
(ix) The Master Unit Agreement, the Purchase Contracts
underlying the Securities being delivered at such Time of Delivery
and the Pledge Agreement have been duly authorized, executed and
delivered by the Company and each is a valid and legally binding
agreement of the Company (and together they create, to the extent
provided therein, a valid interest of the holders of the Securities
in the QUIPS) enforceable against the Company in accordance with its
terms, (except to the extent that enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws now or hereafter in effect
relating to or affecting creditors' rights generally and by general
principles of equity, provided, however, that the rights and
remedies of the Unit Agent and the Collateral Agent provided in
Sections [402] and [508] of the Master Unit Agreement and Section
[4(a)] of the Pledge Agreement upon the occurrence of a Termination
Event will not be limited under the Bankruptcy Code (11 U.S.C. 101
et seq.) as a consequence of Section 365(e)(2) thereof; the Pledge
Agreement creates, as collateral security for the performance when
due by the holders from time to time of the Securities of their
respective obligations under the Purchase Contracts and Call Options
constituting part of such Securities, a legal, valid and perfected
security interest (as that term is defined in the Uniform Commercial
Code, as adopted and in effect in the State of New York), in favor
of the Collateral Agent, in the right, title and interest of such
holders in the Pledged Securities (as defined in the Pledge
Agreement) constituting a part of such Securities;
(x) The Trust has been duly created and is validly existing
as a statutory business trust in good standing under the Delaware
Business Trust Act with the power and authority to enter into this
Agreement and to perform its obligations; based on current law, the
Trust is not and will not be classified as an association taxable as
a corporation for United States federal income tax purposes; and the
Declaration has been duly qualified under the Trust Indenture Act;
(xi) The QUIPS underlying the Firm Securities and the
Optional Securities have been duly authorized, and are duly and
validly issued and fully paid and non-assessable beneficial
interests in the Trust entitled to the benefits of the
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<PAGE> 18
Declaration and conform to the description of the QUIPS contained in
the Prospectus; the holders of the QUIPS are entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law
of the State of Delaware;
(xii) The Common Trust Securities have been authorized and
are duly and validly issued and fully paid and non-assessable
beneficial interests in the assets of the Trust; the issuance of the
Common Trust Securities is not subject to preemptive or other
similar rights; and all of the issued and outstanding Common Trust
Securities of the Trust are directly owned by the Company free and
clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity; and the Common Trust Securities and the QUIPS are
the only interests authorized to be issued by the Trust;
(xiii) The Guarantee Agreement, the Declaration, the Indenture
and the Junior Subordinated Debentures, each have been duly
authorized and constitute a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general equity principles; the Junior Subordinated
Debentures are entitled to the benefits of the Indenture; and the
Guarantee Agreement, the Declaration, the Indenture and the Junior
Subordinated Debentures conform to the descriptions thereof in the
Prospectus;
(xiv) The entry into the Purchase Contracts underlying the
Firm Securities and the Optional Securities by the Company, the
issue and sale of the QUIPS underlying the Firm Securities and the
Optional Securities and the Common Securities by the Trust, the
issue and sale of the Junior Subordinated Debentures underlying such
Trust Securities by the Company, the issue and sale of the Shares by
the Company pursuant to the Purchase Contracts, the compliance by
the Company and the Trust, as applicable, with the provisions of
this Agreement, such Purchase Contracts, the Master Unit Agreement,
the Pledge Agreement, the Guarantee Agreement, the Declaration and
the Indenture and the consummation of the transactions contemplated
herein and therein and the Other Offering will not conflict with,
constitute a default under or violate any of the terms or provisions
of, any material document, agreement or other instrument known to
such counsel to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound,
nor will such action violate the provisions of the Certificate of
Incorporation or By-laws of the Company or any New York, Delaware
corporate or federal law or regulation (other than state or foreign
securities or Blue Sky laws, as to which such counsel need not
express an opinion) or any judgment, writ, injunction, decree, order
or ruling known to such counsel of any court, insurance regulatory
authority or other governmental authority binding on the Company or
any of its subsidiaries; no consent, approval, waiver, license or
authorization or other action by or filing with any New York,
Delaware or federal government authority is required for the entry
into the Purchase Contracts underlying the Firm Securities and the
Optional Securities by the Company, the
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<PAGE> 19
issue and sale of the QUIPS underlying the Firm Securities and the
Optional Securities and the Common Securities by the Trust, the
issue and sale of the Junior Subordinated Debentures underlying such
Trust Securities by the Company, the issue and sale of the Shares by
the Company pursuant to the Purchase Contracts, the compliance by
the Company and the Trust, as applicable, with all of the provisions
of this Agreement, such Purchase Contracts, the Master Unit
Agreement, the Pledge Agreement, the Guarantee Agreement, the
Declaration or the Indenture or the consummation of the transactions
herein or therein contemplated or the Other Offering except for
those already obtained and for such consents, approvals,
authorizations, registrations or qualifications as may be required
under state or foreign securities or Blue Sky laws in connection
with the purchase and distribution of the Securities by the
Underwriters or the Other Offering;
(xv) The issue and sale of the QUIPS underlying the Firm
Securities and the Optional Securities and the Common Trust
Securities by the Trust, the purchase of the Junior Subordinated
Debentures underlying such Trust Securities by the Trust, and the
compliance by the Trust with all of the provisions of the
Declaration and this Agreement, and the consummation of the
transactions contemplated herein and therein will not conflict with,
constitute a default under or violate of any of the terms or
provisions of, any material document, agreement or other instrument
known to such counsel to which the Trust is a party or by which the
Trust is bound, nor will such action violate the provisions of the
Declaration of the Trust or any New York, Delaware corporate or
federal law or regulation (other than state or foreign securities or
Blue Sky laws, as to which such counsel need not express an opinion)
or any judgment, writ, injunction, decree, order or ruling known to
such counsel of any court, insurance regulatory authority or other
governmental authority binding on the Trust; and no consent,
approval, waiver, license or authorization or other action by or
filing with any New York, Delaware or federal governmental authority
is required for the issue and sale of the QUIPS underlying the Firm
Securities and the Optional Securities and the Common Securities by
the Trust, the purchase of the Junior Subordinated Debentures
underlying such Trust Securities by the Trust or the consummation by
the Trust of the transactions contemplated by this Agreement or the
Declaration, except for those already obtained and for such
consents, approvals, authorizations, registrations or qualifications
as may be required under state or foreign securities or Blue Sky
laws in connection with the purchase and distribution of the
Securities by the Underwriters;
(xvi) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in
default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its
properties may be bound;
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(xvii) To the best of such counsel's knowledge, the Company
has made all required filings under applicable insurance holding
company statutes, and has received approvals of acquisition of
control and/or affiliate transactions, in each jurisdiction in which
such filings or approvals are required, except where the failure to
have made such filings or to receive such approvals in any such
jurisdiction would not have, individually or in the aggregate, a
material adverse effect on the business, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, considered as a whole; each of the Company's
subsidiaries that is required to be organized and licensed as an
insurance company in its jurisdiction of incorporation is duly
organized and licensed as an insurance company in its respective
jurisdiction of incorporation, and each such subsidiary is duly
licensed or authorized as an insurer in each other jurisdiction in
which such licensing or authorization is required, except where the
failure to be so licensed or authorized in any such jurisdiction
would not have, individually or in the aggregate, a material adverse
effect on the business, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries,
considered as a whole; the Company and each of its subsidiaries have
all other necessary authorizations, approvals, orders, consents,
certificates, permits, registrations or qualifications of and from
all insurance regulatory and other governmental authorities to
conduct their respective businesses as described in the Prospectus,
except where the failure to have such authorizations, approvals,
orders, consents, licenses, certificates, permits, registrations or
qualifications would not, individually or in the aggregate, have a
material adverse effect on the business, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, considered as a whole; each of the Company and each of
its subsidiaries that engages in the insurance business have
fulfilled and performed all obligations necessary to maintain the
Insurance Licenses from the insurance regulatory agencies of the
various jurisdictions where it conducts business; there is no
pending or, to the knowledge of the Company, threatened action,
suit, proceeding or investigation that may reasonably be expected to
lead to the revocation, termination or suspension of any such
license, certificate or permit (including, without limitation, the
Insurance Licenses), the revocation, termination or suspension of
which would have, individually or in the aggregate, a material
adverse effect on the business, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries,
considered as a whole; and except as disclosed in the Prospectus, no
insurance regulatory agency or body has issued any order or decree
impairing, restricting or prohibiting the payment of dividends by
any subsidiary to its parent which could reasonably be expected to
have, individually or in the aggregate, a material adverse effect on
the business, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, considered as a
whole;
(xviii) Each of the Company's subsidiaries that is an
insurance company and, to the best of such counsel's knowledge, the
Company, is in compliance with the requirements of the insurance
laws and regulations of its jurisdiction of incorporation and the
insurance laws and regulations of other jurisdictions which
20
<PAGE> 21
are applicable to the Company and each such subsidiary, and has
filed all notices, reports, documents or other information required
to be filed thereunder, except where the failure to so comply or
file would not have, individually or in the aggregate with other
such failures, a material adverse effect on the financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, considered as a whole;
(xix) To the best of such counsel's knowledge, all
retrocessional treaties and arrangements to which any of the
subsidiaries of the Company is a party are in full force and effect
and none of the subsidiaries is in violation of, or in default in
the performance, observance or fulfillment of, any obligation,
agreement, covenant or condition contained therein, except to the
extent that any such violation or default would not, individually or
in the aggregate, have a material adverse effect on the business,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, considered as a whole; none of the
subsidiaries of the Company has received any notice from any of the
other parties to such treaties, contracts or agreements that such
other party intends not to perform in any material respect such
treaty, contract or agreement and, to the best knowledge of such
counsel, such counsel has no reason to believe that any of the other
parties to such treaties or arrangements will be unable to perform
such treaty or arrangement;
(xx) Neither the Company nor the Trust is an "investment
company" or an entity "controlled" by an "investment company", as
such terms are defined in the Investment Company Act;
(xxi) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made by
the Company and the Trust prior to such Time of Delivery (other than
the financial statements and related schedules therein and the other
financial and accounting data included or incorporated by reference
therein, as to which such counsel need express no opinion), when
they were filed with the Commission, appear on their face to have
complied as to form in all material respects with the requirements
of the Exchange Act, and the rules and regulations of the Commission
thereunder; and
(xxii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company and
the Trust prior to such Time of Delivery (other than the financial
statements and related schedules therein and the other financial and
accounting data included or incorporated by reference therein, as to
which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the Trust
Indenture Act and the rules and regulations thereunder;
Such counsel shall also have furnished a written statement
addressed to the Underwriters to the effect that such counsel has
participated in conferences with directors, officers and other
representatives of the Company and the Trust, representatives of the
independent public accountants for the Company,
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<PAGE> 22
representatives of the Underwriters and representatives of counsel
for the Underwriters, at which conferences the contents of the
Registration Statement and the Prospectus and related matters were
discussed and although such counsel have not independently verified
and are not passing upon and do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained
in the Registration Statement or the Prospectus, no facts have come
to such counsel's attention which lead such counsel to believe that,
as of its effective date, the Registration Statement or any further
amendment thereto made by the Company and the Trust prior to such
Time of Delivery (other than the financial statements and related
schedules therein and the other financial and accounting data
included or incorporated by reference therein, as to which such
counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements contained therein
not misleading or that, as of its date or as of such Time of
Delivery, the Prospectus or any further amendment or supplement
thereto made by the Company and the Trust prior to such Time of
Delivery (other than the financial statements and related schedules
therein and the other financial and accounting data included or
incorporated by reference therein, as to which such counsel need
express no opinion) contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary
to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading
In rendering such opinion, such counsel may state that its opinions are
limited to the laws of the State of New York, the corporate laws of the
State of Delaware and the federal laws of the United States and that such
counsel express no opinion as to the laws of any other jurisdiction.
(d) W. Weldon Wilson, General Counsel of the Company, shall have
furnished to you his written opinion (a draft of such opinion is attached hereto
as Annex II(b)) dated such Time of Delivery, in form and substance satisfactory
to you, to the effect that:
(i) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(ii) The entry into the Purchase Contracts underlying the Firm
Securities and the Optional Securities by the Company, the issue and sale
of the QUIPS
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<PAGE> 23
underlying the Firm Securities and the Optional Securities and the Common
Securities by the Trust, the issue and sale of the Junior Subordinated
Debentures underlying such Trust Securities by the Company, the issue and
sale of the Shares by the Company pursuant to the Purchase Contracts, the
compliance by the Company and the Trust, as applicable, with all of the
provisions of this Agreement, such Purchase Contracts, the Master Unit
Agreement, the Pledge Agreement, the Guarantee Agreement, the Declaration
and the Indenture and the consummation of the transactions herein and
therein contemplated and the Other Offering will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such counsel to which
the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound, or to which any of the property or
assets of the Company or any of its subsidiaries is subject, nor will such
action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order, rule
or regulation known to such counsel of any court, insurance regulatory
authority or other governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties; no
consent, approval, authorization, order, registration or qualification of
or with any such court or governmental agency or body is required for the
entry into the Purchase Contracts underlying the Firm Securities and the
Optional Securities by the Company, the issue and sale of the QUIPS
underlying the Firm Securities and the Optional Securities and the Common
Securities by the Trust, the issue and sale of the Junior Subordinated
Debentures underlying such Trust Securities by the Company, the issue and
sale of the Shares by the Company pursuant to the Purchase Contracts, the
compliance by the Company and the Trust, as applicable, with all of the
provisions of this Agreement, such Purchase Contracts, the Master Unit
Agreement, the Pledge Agreement, the Guarantee Agreement, the Declaration
or the Indenture or the consummation of the transactions herein or therein
contemplated or the Other Offering except for those already obtained and
for such consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign securities or
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Underwriters or the Other Offering;
(iii) The issue and sale of the QUIPS underlying the Firm Securities
and the Optional Securities and the Common Trust Securities by the Trust,
the purchase of the Junior Subordinated Debentures underlying such Trust
Securities by the Trust, and the compliance by the Trust with all of the
provisions of the Declaration and this Agreement, and the consummation of
the transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any agreement or instrument known to such
counsel to which the Trust is a party or by which the Trust is bound or to
which any of the property or assets of the Trust is subject, nor will such
action result in any violation of the provisions of any statute or any
order, rule or regulation of any court, insurance regulatory authority or
other governmental
23
<PAGE> 24
agency or body having jurisdiction over the Trust or any of its
properties; and no consent, approval, authorization, order, registration
or qualification of or with any such court, insurance regulatory authority
or other governmental agency or body is required for the issue and sale of
the QUIPS underlying the Firm Securities and the Optional Securities and
the Common Securities by the Trust, the purchase of the Junior
Subordinated Debentures underlying such Trust Securities by the Trust or
the consummation by the Trust of the transactions contemplated by this
Agreement or the Declaration, except the registration under the Act of the
Securities, and such consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign securities or
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Underwriters;
(iv) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default in
the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound;
(v) The documents incorporated by reference in the Prospectus or
any further amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion), when
they became effective or were filed with the Commission, as the case may
be, complied as to form in all material respects with the requirements of
the Act or the Exchange Act, as applicable, and the rules and regulations
of the Commission thereunder; and such counsel has no reason to believe
that any of such documents, when such documents became effective or were
so filed, as the case may be, contained, in the case of a registration
statement which became effective under the Act, an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or, in
the case of other documents which were filed under the Exchange Act with
the Commission, an untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such documents
were so filed, not misleading; and
(vi) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the
rules and regulations thereunder; although they do not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus, such
counsel has no reason to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made by the
Company
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<PAGE> 25
prior to such Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel need
express no opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading or that, as of such Time of Delivery, either the Registration
Statement or the Prospectus or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to the
Registration Statement or required to be incorporated by reference into
the Prospectus or required to be described in the Registration Statement
or the Prospectus which are not filed or incorporated by reference or
described as required.
(e) Sullivan & Cromwell, special tax counsel for the Company and the
Underwriters, shall have furnished to you their written opinion, dated the Time
of Delivery, in form and substance satisfactory to you, to the effect that the
discussion set forth in the Prospectus under the heading "Certain Federal Income
Tax Consequences", insofar as it relates to matters of United States federal
income tax law, is accurate in all material respects;
(f) On the date of the Prospectus at a time prior to the execution of this
Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, Ernst & Young shall
have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a draft of the
form of letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(g) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus, and
(ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or increase
in
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<PAGE> 26
long-term debt of the Company or any of its subsidiaries, or any change,
or any development that could reasonably be expected to involve a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries considered as a whole, otherwise than as set
forth or contemplated in the Prospectus, the effect of which, in any such
case described in Clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Securities being delivered at such Time of Delivery on the terms and in
the manner contemplated in the Prospectus;
(h) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities or preferred
stock or the financial strength or claims paying ability of the Company or
any of its subsidiaries by either any "nationally recognized statistical
rating organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, or A.M. Best Company, Inc., and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the Company's debt securities or preferred stock or the financial
strength or claims paying ability of the Company or any of its
subsidiaries;
(i) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in the Company's securities on the New York
Stock Exchange; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York State authorities; or
(iv) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war, if
the effect of any such event specified in this Clause (iv) in the judgment
of the Representatives makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Securities being delivered
at such Time of Delivery on the terms and in the manner contemplated in
the Prospectus;
(j) The Securities shall have been duly listed, subject to notice of
issuance, on the Exchange;
(k) The Company and the Trust shall have complied with the
provisions of Section 5(c) hereof with respect to the furnishing of
prospectuses on the New York Business Day next succeeding the date of this
Agreement; and
(l) The Company and the Trust shall have furnished or caused to be
furnished to you at such Time of Delivery certificates of officers of the
Company and the Trust satisfactory to you as to the accuracy of the
representations and warranties of the Company and the Trust herein at and
as of such Time of Delivery, as to the performance by the Company and the
Trust of all of their respective obligations hereunder to be performed at
or prior to such Time of Delivery, as to the matters set forth in
subsections (a) and (g) of this Section and as to such other matters as
you may reasonably request.
8. (a) Each of the Company and the Trust, jointly and severally, will
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several,
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<PAGE> 27
to which such Underwriter may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that neither the Company nor the Trust
shall be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through Goldman, Sachs & Co.
expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company and the
Trust against any losses, claims, damages or liabilities to which the Company
and the Trust may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through Goldman, Sachs & Co. expressly for use therein; and will reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (which shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No
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<PAGE> 28
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Trust on the one hand and the Underwriters on the other
from the offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the Trust
on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Trust on the one hand and the Underwriters on the other shall be deemed to be in
the same proportion as the total net proceeds from the purchase of the
Securities purchased under this Agreement (before deducting expenses) received
by the Company and the Trust bear to the total underwriting discounts and
commissions received by the Underwriters with respect to the Securities
purchased under this Agreement, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Trust on the one hand or
the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Trust and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
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<PAGE> 29
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Trust under this Section 8
shall be in addition to any liability which the Company or the Trust may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company and to each person, if any, who controls the Company or the Trust within
the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Securities on the terms contained herein. If within thirty-six
hours after such default by any Underwriter you do not arrange for the purchase
of such Securities, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Securities on such terms. In the event
that, within the respective prescribed periods, you notify the Company that you
have so arranged for the purchase of such Securities, or the Company notifies
you that it has so arranged for the purchase of such Securities, you or the
Company shall have the right to postpone such Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Securities which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
of the Securities to be purchased at such Time of Delivery, then the Company
shall have the right to require each non-defaulting Underwriter to purchase the
number of Securities which such Underwriter agreed to purchase hereunder at such
Time of Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Securities which such
Underwriter agreed to purchase hereunder) of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Securities which
remains unpurchased exceeds one-eleventh of the aggregate number of all of the
Securities to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Securities of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations
29
<PAGE> 30
of the Underwriters to purchase and of the Company to sell the Optional
Securities) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the several Underwriters, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
the Trust or any officer or director or controlling person of the Company or the
Trust, and shall survive delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company and the Trust shall not then be under any liability to any
Underwriter except as provided in Sections 6 and 8 hereof; but, if for any other
reason, the Securities are not delivered by or on behalf of the Company and the
Trust as provided herein, the Company will reimburse the Underwriters through
you for all out-of-pocket expenses approved in writing by you, including fees
and disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Securities (not so
delivered), but the Company shall then be under no further liability to any
Underwriter in respect of the Securities not so delivered except as provided in
Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company or the Trust shall be delivered or sent by
mail, telex or facsimile transmission to the address of the Company or the Trust
set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by you upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company, the Trust or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Securities from any Underwriter shall be deemed a successor or assign
by reason merely of such purchase.
30
<PAGE> 31
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
31
<PAGE> 32
If the foregoing is in accordance with your understanding, please sign and
return to us seven counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination, upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
Life Re Corporation
By:____________________________________
Name:
Title:
Life Re Capital Trust II
By:____________________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette Securities Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
By:_____________________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
32
<PAGE> 33
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL SECURITIES
TOTAL NUMBER OF TO BE DELIVERED IF
UNDERWRITER FIRM SECURITIES MAXIMUM OPTION
TO BE DELIVERED EXERCISED
<S> <C> <C>
Goldman, Sachs & Co....................................................
Donaldson, Lufkin & Jenrette Securities Corporation....................
Merrill Lynch, Pierce, Fenner & Smith Incorporated.....................
--------------------- -----------------------
Total................................................
===================== =======================
</TABLE>
33
<PAGE> 34
ANNEX I
Pursuant to Section 7 (e) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance with
standards established by the American Institute of Certified Public
Accountants of the consolidated interim financial statements, selected
financial data, pro forma financial information, financial forecasts
and/or condensed financial statements derived from audited financial
statements of the Company for the periods specified in such letter, as
indicated in their reports thereon, copies of which have been separately
furnished to the representatives of the Underwriters (the
"Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus and/or included in the Company's quarterly report on Form 10-Q
incorporated by reference into the Prospectus as indicated in their
reports thereon copies of which have been separately furnished to the
Representatives; and on the basis of specified procedures including
inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i)
below comply as to form in the related in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and the
related published rules and regulations, nothing came to their attention
that caused them to believe that the unaudited condensed consolidated
financial statements do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Exchange
Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Prospectus
and included or incorporated by reference in Item 6 of the Company's
Annual Report on Form 10-K for the most recent fiscal year agrees with the
corresponding amounts (after restatement where applicable) in the audited
consolidated financial statements for such five fiscal years which were
included or incorporated by reference in the Company's Annual Reports on
Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and
on the basis of limited
<PAGE> 35
procedures specified in such letter nothing came to their attention as a
result of the foregoing procedures that caused them to believe that this
information does not conform in all material respects with the disclosure
requirements of Items 301, 302, 402 and 503(d), respectively, of
Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of
the minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included or incorporated by reference
in the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus and/or included or
incorporated by reference in the Company's Quarterly Reports on Form
10-Q incorporated by reference in the Prospectus do not comply as to
form in all material respects with the applicable accounting
requirements of the Exchange Act and the related published rules and
regulations, or (ii) any material modifications should be made to
the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q incorporated by reference in the
Prospectus, for them to be in conformity with generally accepted
accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any such
unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included or
incorporated by reference in the Company's Annual Report on Form
10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived the unaudited
condensed financial statements referred to in Clause (A) and any
unaudited income statement data and balance sheet items included in
the Prospectus and referred to in Clause (B) were not determined on
a basis substantially consistent with the basis for the audited
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal
year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus
do not comply
2
<PAGE> 36
as to form in all material respects with the applicable accounting
requirements of the Act and the published rules and regulations
thereunder or the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those
statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon
earn-outs of performance shares and upon conversions of convertible
securities, in each case which were outstanding on the date of the
latest balance sheet included or incorporated by reference in the
Prospectus) or any increase in the consolidated long-term debt of
the Company and its subsidiaries, or any decreases in consolidated
net current assets or stockholders' equity or other items specified
by the Representatives, or any increases in any items specified by
the Representatives, in each case as compared with amounts shown in
the latest balance sheet included or incorporated by reference in
the Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus
to the specified date referred to in Clause (E) there were any
decreases in consolidated net revenues or operating profit or the
total or per share amounts of consolidated net income or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with the
comparable period of the preceding year and with any other period of
corresponding length specified by the Representatives, except in
each case for increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such letter;
and
(vii) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures referred
to in paragraphs (iii) and (vi) above, they have carried out certain specified
procedures, not constituting an examination in accordance with generally
accepted auditing standards, with respect to certain amounts, percentages and
financial information specified by the Representatives which are derived from
the general accounting records of the Company and its subsidiaries, which appear
in the Prospectus (excluding documents incorporated by reference) or in Part II
of, or in exhibits and schedules to, the Registration Statement specified by the
Representatives or in documents incorporated by reference in the Prospectus
specified by the Representatives, and have compared certain of such amounts,
percentages and financial information with the accounting records of the Company
and its subsidiaries and have found them to be in agreement.
3
<PAGE> 1
Exhibit 4.5
AMENDED AND RESTATED DECLARATION
OF TRUST
Life Re Capital Trust II
Dated as of March __, 1998
<PAGE> 2
AMENDED AND RESTATED DECLARATION
OF TRUST
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions........................................................................... 1
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application...................................................... 9
SECTION 2.2 Lists of Holders of Securities........................................................ 9
SECTION 2.3 Reports by the Property Trustee....................................................... 10
SECTION 2.4 Periodic Reports to Property Trustee.................................................. 10
SECTION 2.5 Evidence of Compliance with Conditions Precedent...................................... 10
SECTION 2.6 Events of Default; Waiver............................................................. 10
SECTION 2.7 Event of Default; Notice.............................................................. 12
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.................................................................................. 13
SECTION 3.2 Office................................................................................ 13
SECTION 3.3 Purpose............................................................................... 13
SECTION 3.4 Authority............................................................................. 14
SECTION 3.5 Title to Property of the Trust........................................................ 14
SECTION 3.6 Powers and Duties of the Administrators............................................... 14
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.................................. 17
SECTION 3.8 Powers and Duties of the Property Trustee............................................. 17
SECTION 3.9 Certain Duties and Responsibilities of the Property
Trustee............................................................................... 20
SECTION 3.10 Certain Rights of the Property Trustee................................................ 21
SECTION 3.11 Delaware Trustee...................................................................... 23
SECTION 3.12 Execution of Documents................................................................ 24
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities................................ 24
SECTION 3.14 Duration of Trust..................................................................... 24
SECTION 3.15 Mergers............................................................................... 24
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities............................................... 26
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.2 Responsibilities of the Sponsor....................................................... 26
SECTION 4.3 Right to Proceed...................................................................... 27
ARTICLE V
TRUSTEES AND ADMINISTRATORS
SECTION 5.1 Number of Trustees: Appointment of Co-Trustee......................................... 27
SECTION 5.2 Delaware Trustee...................................................................... 27
SECTION 5.3 Property Trustee; Eligibility......................................................... 28
SECTION 5.4 Certain Qualifications of Administrators and Delaware
Trustee Generally..................................................................... 29
SECTION 5.5 Administrators........................................................................ 29
SECTION 5.6 Delaware Trustee...................................................................... 30
SECTION 5.7 Appointment, Removal and Resignation of Trustees...................................... 30
SECTION 5.8 Vacancies among Trustees.............................................................. 31
SECTION 5.9 Effect of Vacancies................................................................... 31
SECTION 5.10 Meetings.............................................................................. 32
SECTION 5.11 Delegation of Power................................................................... 32
SECTION 5.12 Merger, Conversion, Consolidation or Succession to
Business.............................................................................. 32
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions......................................................................... 33
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities............................................... 33
SECTION 7.2 Execution and Authentication.......................................................... 34
SECTION 7.3 Form and Dating....................................................................... 35
SECTION 7.4 Registrar, Paying Agent and Exchange Agent............................................ 36
SECTION 7.5 Paying Agent to Hold Money in Trust................................................... 36
SECTION 7.6 Replacement Securities................................................................ 37
SECTION 7.7 Outstanding Capital Securities........................................................ 37
SECTION 7.8 Capital Securities in Treasury........................................................ 38
SECTION 7.9 Temporary Securities.................................................................. 38
SECTION 7.10 Cancellation.......................................................................... 39
SECTION 7.11 CUSIP Numbers......................................................................... 39
ARTICLE VIII
DISSOLUTION OF TRUST
SECTION 8.1 Dissolution of Trust.................................................................. 39
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities................................................................ 40
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 9.2 Transfer Procedures and Restrictions.................................................. 41
SECTION 9.3 Deemed Security Holders............................................................... 47
SECTION 9.4 Book Entry Interests.................................................................. 47
SECTION 9.5 Notices to Clearing Agency............................................................ 48
SECTION 9.6 Appointment of Successor Clearing Agency.............................................. 48
ARTICLE X
LIMITATION OF LIABILITY OF HOLDERS OF
SECURITIES, TRUSTEES, ADMINISTRATORS OR OTHERS
SECTION 10.1 Liability............................................................................. 48
SECTION 10.2 Exculpation........................................................................... 49
SECTION 10.3 Fiduciary Duty........................................................................ 49
SECTION 10.4 Indemnification....................................................................... 50
SECTION 10.5 Outside Businesses.................................................................... 53
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year........................................................................... 53
SECTION 11.2 Certain Accounting Matters............................................................ 53
SECTION 11.3 Banking............................................................................... 54
SECTION 11.4 Withholding........................................................................... 54
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments............................................................................ 55
SECTION 12.2 Meetings of the Holders; Action by Written Consent.................................... 57
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.................................... 58
SECTION 13.2 Representations and Warranties of Delaware Trustee.................................... 59
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices............................................................................... 59
SECTION 14.2 Governing Law......................................................................... 60
SECTION 14.3 Intention of the Parties.............................................................. 61
SECTION 14.4 Headings.............................................................................. 61
SECTION 14.5 Successors and Assigns................................................................ 61
SECTION 14.6 Partial Enforceability................................................................ 61
SECTION 14.7 Counterparts.......................................................................... 61
FORM OF REVERSE OF SECURITY
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
ASSIGNMENT
ANNEX I TERMS OF SECURITIES.................................................................................... I-1
EXHIBIT A-1 FORM OF QUARTERLY INCOME PREFERRED SECURITIES................................................. A1-1
EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE........................................................... A2-1
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED DECLARATION
OF TRUST
OF
LIFE RE CAPITAL TRUST II
March __, 1998
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of March __, 1998, by the Trustees (as defined herein), the Sponsor
(as defined herein), the Administrators (as defined herein) and by the holders,
from time to time, of undivided beneficial interests in the assets of the Trust
to be issued pursuant to this Declaration;
WHEREAS, Life Re Capital Trust II (the "Trust") has been established as
a trust created under the Business Trust Act (as defined herein) pursuant to a
Declaration of Trust dated as of February 10, 1998 (the "Original Declaration")
and a Certificate of Trust executed and filed with the Secretary of State of the
State of Delaware on February 10, 1998, for the sole purpose of issuing and
selling certain securities representing undivided beneficial interests in the
assets of the Trust and investing the proceeds thereof in certain Debentures of
the Debenture Issuer (each as hereinafter defined);
WHEREAS, the parties hereto, by this Declaration, amend and restate
each and every term and provision of the Original Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined
in the preamble above have the respective meanings assigned to them in this
Section 1.1;
1
<PAGE> 7
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this Declaration"
are to this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and
Sections and Annexes and Exhibits are to Articles and Sections of and Annexes
and Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires;
(f) a term defined in the Indenture (as defined herein) and
the Master Unit Agreement (as defined herein) has the same meaning when used in
this Declaration unless otherwise defined in this Declaration or the context
otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Administrators" means each of Rodney A. Hawes,
Jacques E. Dubois and W. Weldon Wilson solely in such Person's capacity as
Administrator of the Trust created and continued hereunder and not in such
Person's individual capacity, or such Administrator's successor in interest in
such capacity, or any successor appointed as herein provided.
"Affiliate" has the same meaning as given to that
term in Rule 405 under the Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent, Registrar or Exchange
Agent.
"Authorized Officer" of a Person means any other
Person that is authorized to legally bind such former Person.
"Bankruptcy Event" means, with respect to any Person:
(a) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of such Person in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs and such decree or order shall remain unstayed and in effect for a
period of 90 consecutive days; or
(b) such Person shall commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent
2
<PAGE> 8
to the entry of an order for relief in an involuntary case under any such law,
or shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of such Person of any substantial part of its property, or shall make
any general assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due.
"Book Entry Interest" means a beneficial interest in
a Global Security registered in the name of a Clearing Agency or its nominee,
ownership and transfers of which shall be maintained and made through book
entries by a Clearing Agency as described in Section 9.4.
"Business Day" means any day other than a Saturday or
a Sunday or a day on which banking institutions in The City of New York or
Wilmington, Delaware, are authorized or required by law or executive order to
close.
"Business Trust Act" means Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. Section 3801 et seq., as it may be amended from
time to time, or any successor legislation.
"Clearing Agency" means an organization registered as
a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting
as depositary for the QUIPS and in whose name or in the name of a nominee of
that organization shall be registered a Global Security and which shall
undertake to effect book entry transfers and pledges of the QUIPS.
"Clearing Agency Participant" means a broker, dealer,
bank, other financial institution or other Person for whom from time to time the
Clearing Agency effects book entry transfers and pledges of securities deposited
with the Clearing Agency.
"Closing Time" means the "First Time of Delivery"
under the Underwriting Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor legislation.
"Commission" means the United States Securities and
Exchange Commission as from time to time constituted, or if any time after the
execution of this Declaration such Commission is not existing and performing the
duties now assigned to it under applicable federal securities laws, then the
body performing such duties at such time.
"Common Trust Securities" has the meaning specified
in Section 7.1(a).
"Common Trust Securities Guarantee" means the
guarantee agreement dated as of March __, 1998 of the Sponsor in respect of the
Common Trust Securities.
3
<PAGE> 9
"Common Trust Securities Subscription Agreement"
means the Common Trust Securities Subscription Agreement, dated March __, 1998,
by and between the Debenture Issuer and the Trust.
"Company Indemnified Person" means (a) any
Administrator; (b) any Affiliate of any Administrator; (c) any officers,
directors, shareholders, members, partners, employees, representatives or agents
of any Administrator; or (d) any officer, employee or agent of the Trust or its
Affiliates.
"Corporate Trust Office" means the office of the
Property Trustee at which the corporate trust business of the Property Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Agreement is located at The Bank of New York, 101
Barclay Street, 21st Floor West, New York, New York 10286.
"Covered Person" means: (a) any officer, director,
shareholder, partner, member, representative, employee or agent of (i) the Trust
or (ii) the Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means Life Re Corporation, a
Delaware corporation, or any successor entity resulting from any consolidation,
amalgamation, merger or other business combination, in its capacity as issuer of
the Debentures under the Indenture.
"Debenture Subscription Agreement" means the
Debenture Subscription Agreement, dated March __, 1998, by and between the
Debenture Issuer and the Trust.
"Debenture Trustee" means The Bank of New York, a New
York banking corporation, as trustee under the Indenture until a successor is
appointed thereunder, and thereafter means such successor trustee.
"Debentures" means the % Junior Subordinated
Deferrable Interest Debentures due March __, 2003 of the Debenture Issuer issued
pursuant to the Indenture.
"Default" means an event, act or condition that with
notice or lapse of time, or both, would constitute an Event of Default.
"Definitive QUIPS" shall have the meaning set forth
in Section 7.3(c).
"Delaware Trustee" has the meaning set forth in
Section 5.2.
"Direct Action" shall have the meaning set forth in
Section 3.8(e).
"Distribution" means a distribution payable to
Holders in accordance with Section 6.1.
4
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"DTC" means The Depository Trust Company, the initial
Clearing Agency.
"Event of Default" in respect of the Securities means
an Event of Default (as defined in the Indenture) that has occurred and is
continuing in respect of the Debentures.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor legislation.
"Fiduciary Indemnified Person" has the meaning set
forth in Section 10.4(b).
"Final Redemption Price" has the meaning set forth in
Section 4 of Annex I hereto.
"Fiscal Year" has the meaning set forth in Section
11.1.
"Global Security" has the meaning set forth in
Section 7.3(a).
"Holder" means a Person in whose name a Security is
registered, such Person being a beneficial owner within the meaning of the
Business Trust Act.
"Indemnified Person" means a Company Indemnified
Person or a Fiduciary Indemnified Person.
"Indenture" means the Indenture dated as of March __,
1998, between the Debenture Issuer and The Bank of New York, as amended from
time to time.
"Investment Company" means an investment company as
defined in the Investment Company Act.
"Investment Company Act" means the Investment Company
Act of 1940, as amended from time to time, or any successor legislation.
"Legal Action" has the meaning set forth in Section
3.6(g).
"Like Amount" has the meaning set forth in Section 3
of Annex I hereto.
"Majority in liquidation amount" means, with respect
to the Trust Securities, except as provided in the terms of the QUIPS or by the
Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together
as a single class or, as the context may require, Holders of outstanding QUIPS
or Holders of outstanding Common Trust Securities voting separately as a class,
who are the record owners of more than 50% of the aggregate liquidation amount
(including the stated amount that would be paid on redemption,
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liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all outstanding Securities of
the relevant class.
"Master Unit Agreement" shall mean the Master Unit
Agreement between Life Re Corporation and The Bank of New York, as Unit Agent,
dated as of March ___, 1998.
"Officers' Certificate" means, with respect to any
Person, a certificate signed by two of the following: the Chairman, a Vice
Chairman, the Chief Executive Officer, the President, the Chief Financial
Officer, a Vice President (whether or not designated by a number or a word or
words added before or after such title), the Comptroller, or the Secretary or an
Assistant Secretary of such Person. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Declaration shall include:
(i) a statement that each officer signing the Certificate has
read the covenant or condition and the definitions relating thereto;
(ii) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering the
Certificate;
(iii) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" shall mean a written opinion of
counsel, who may be an employee of the Sponsor, and who shall be acceptable to
the Property Trustee.
"Participants" shall have the meaning set forth in
Section 7.3(b).
"Paying Agent" has the meaning specified in Section
7.4.
"Payment Amount" has the meaning set forth in Section
6.1.
"Person" means a legal person, including any
individual, corporation, estate, partnership, joint venture, association, joint
stock company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Property Trustee" has the meaning set forth in
Section 5.3(a).
"Property Trustee Account" has the meaning set forth
in Section 3.8(c).
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"Quorum" means a majority of the Administrators or,
if there are only two Administrators, both of them.
"QUIPS" has the meaning specified in Section 7.1(a).
"QUIPS Guarantee" means the guarantee agreement of
the Sponsor dated as of March __, 1998 in respect of the QUIPS.
"QUIPS Beneficial Owner" means, with respect to a
Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"Registrar" has the meaning set forth in Section 7.4.
"Registration Statements" has the meaning set forth
in Section 3.6(b).
"Related Party" means, with respect to the Sponsor,
any direct or indirect wholly owned subsidiary of the Sponsor or any other
Person that owns, directly or indirectly, 100% of the outstanding voting
securities of the Sponsor.
"Responsible Officer" means, with respect to the
Property Trustee, any vice president, any assistant vice president, any
assistant secretary, any assistant treasurer, any trust officer or assistant
trust officer, or any other officer or assistant officer of the Property Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
"Securities" or "Trust Securities" means the Common
Trust Securities and the QUIPS.
"Securities Act" means the Securities Act of 1933, as
amended from time to time, or any successor legislation.
"Securities Guarantees" means the Common Trust
Securities Guarantee and the QUIPS Guarantee.
"Sponsor" means Life Re Corporation, a Delaware
corporation, or any successor entity resulting from any merger, consolidation,
amalgamation or other business combination, in its capacity as sponsor of the
Trust.
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"Subscription Agreements" means the Common Trust
Securities Subscription Agreement and the Debenture Subscription Agreement.
"Successor Delaware Trustee" has the meaning set
forth in Section 5.7(b)(ii).
"Successor Entity" has the meaning set forth in
Section 3.15(b)(i).
"Successor Property Trustee" has the meaning set
forth in Section 3.8(f).
"Successor Securities" has the meaning set forth in
Section 3.15(b)(i)(B).
"Super Majority" has the meaning set forth in Section
2.6(a)(ii).
"10% in liquidation amount" means, with respect to
the Trust Securities, except as provided in the terms of the QUIPS or by the
Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together
as a single class or, as the context may require, Holders of outstanding QUIPS
or Holders of outstanding Common Trust Securities voting separately as a class,
who are the record owners of 10% or more of the aggregate liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities of the relevant
class.
"Treasury Regulations" means the income tax
regulations, including temporary and proposed regulations, promulgated under the
Code by the United States Treasury, as such regulations may be amended from time
to time (including corresponding provisions of succeeding regulations).
"Trust Indenture Act" means the Trust Indenture Act
of 1939, as amended from time to time, or any successor legislation.
"Trustee" or "Trustees" means each Person who has
signed this Declaration as a trustee, so long as such Person shall continue in
office in accordance with the terms hereof, and all other Persons who may from
time to time be duly appointed, qualified and serving as Trustees in accordance
with the provisions hereof, and references herein to a Trustee or the Trustees
shall refer to such Person or Persons solely in their capacity as trustees
hereunder.
"Underwriting Agreement" means the Underwriting
Agreement among Life Re Corporation, the Trust and the underwriters named
therein, dated as of March __, 1998, for the initial offering and sale of the
Units.
"Units" means __% Adjustable Conversion-rate Equity
Security Units initially consisting of (i) a purchase contract under which the
holder will purchase from Life
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Re Corporation a number of shares of its capital stock equal to the Settlement
Rate (as defined in the Master Unit Agreement) and (ii) QUIPS.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration and shall, to the
extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a
Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by Sections
310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Administrators on behalf of
the Trust shall provide the Property Trustee, unless the Property Trustee is
Registrar for the Securities (i) on a quarterly basis on each record date for
payment of Distributions, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Holders ("List of
Holders") as of such record date, and (ii) at such other times as the Property
Trustee may request in writing, within 30 days of receipt by the Trust, of such
written request, a List of Holders as of a date not more than 15 days prior to
the time such List of Holders is furnished to the Property Trustee. The Property
Trustee shall preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it or which it receives in
the capacity as Paying Agent (if acting in such capacity), provided that the
Property Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations
under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.
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SECTION 2.3 Reports by the Property Trustee.
If required by Section 313(a) of the Trust Indenture Act, the
Property Trustee shall, within sixty days after each ____ __, following the date
of this Indenture, commencing ___ __, 1999, deliver to the Holders of QUIPS a
brief report, dated as of such ___ __, 1999, which complies with the provisions
of such Section 313(a). The Property Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee.
Each of the Sponsor and the Administrators on behalf of the
Trust shall provide to the Property Trustee such documents, reports and
information as are required by Section 314 of the Trust Indenture Act (if any)
and the compliance certificate required by Section 314 of the Trust Indenture
Act in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act. Delivery of such documents, reports and information to the
Trustee is for informational purposes only and the Property Trustee's receipt of
such shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Trust's compliance with any of its covenants hereunder (as to which the Property
Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Administrators on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent provided for in this Declaration that relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate
or opinion required to be given by an officer pursuant to Section 314(c) (1) of
the Trust Indenture Act may be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of QUIPS
may, by vote, on behalf of the Holders of all of the QUIPS, waive any past Event
of Default in respect of the QUIPS and its consequences, provided that, if the
underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture, the Event of
Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a
majority in aggregate principal amount of the holders of the Debentures (a
"Super Majority") to be waived under the Indenture, the Event of Default under
the Declaration may only be waived by the vote of the Holders of at least the
proportion in aggregate liquidation amount of the QUIPS that the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding.
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The foregoing provisions of this Section 2.6(a) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the QUIPS
arising therefrom shall be deemed to have been cured, for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or an Event of Default with respect to the QUIPS or impair any right consequent
thereon. Any waiver by the Holders of the QUIPS of an Event of Default with
respect to the QUIPS shall also be deemed to constitute a waiver by the Holders
of the Common Trust Securities of any such Event of Default with respect to the
Common Trust Securities for all purposes of this Declaration without any further
act, vote, or consent of the Holders of the Common Trust Securities.
The Holders of a Majority in liquidation amount of the QUIPS
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee or to direct the
exercise of any trust or power conferred upon the Property Trustee, including
the right to direct the Property Trustee to exercise the remedies available to
it as holder of the Debentures; provided, however, that (subject to the
provisions of Section 3.9) the Property Trustee shall have the right to decline
to follow any such direction if the Property Trustee shall determine that the
action so directed would be unjustly prejudicial to the Holders not taking part
in such direction or if the Property Trustee, being advised by counsel,
determines that the action or proceeding so directed may not lawfully be taken
or if the Property Trustee, in good faith, by its board of directors or
trustees, executive committee, or a trust committee of directors or trustees
and/or Responsible Officers, shall determine that the action or proceedings so
directed would involve the Property Trustee in personal liability. If the
Property Trustee fails to enforce its rights under the Debentures after the
Holders of a Majority in liquidation amount of the QUIPS have so directed the
Property Trustee, a holder of record of such QUIPS (or, for as long as QUIPS
underlie Units, a holder of record of Units) may, to the fullest extent
permitted by law, institute a legal proceeding against the Debenture Issuer to
enforce the Property Trustee's rights under the Debentures without first
instituting any legal proceeding against the Property Trustee or any other
Person.
(b) The Holders of a Majority in liquidation amount of the
Common Trust Securities may, by vote, on behalf of the Holders of all of the
Common Trust Securities, waive any past Event of Default with respect to the
Common Trust Securities and its consequences, provided that, if the underlying
Event of Default under the Indenture:
(i) is not waivable under the Indenture, except where
the Holders of the Common Trust Securities are deemed to have waived such Event
of Default under the Declaration as provided below in this Section 2.6(b), the
Event of Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of a Super Majority
to be waived, except where the Holders of the Common Trust Securities are deemed
to have waived such Event of Default under the Declaration as provided below in
this Section 2.6(b), the Event of Default under the Declaration may only be
waived by the vote of the Holders of at least the proportion
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in aggregate liquidation amount of the Common Trust Securities that the relevant
Super Majority represents of the aggregate principal amount of the Debentures
outstanding;
provided further, each Holder of Common Trust Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Trust Securities and its consequences until all Events of Default with
respect to the QUIPS have been cured, waived or otherwise eliminated, and until
such Events of Default have been so cured, waived or otherwise eliminated, the
Property Trustee will be deemed to be acting solely on behalf of the Holders of
the QUIPS and only the Holders of the QUIPS will have the right to direct the
Property Trustee in accordance with the terms of the Securities. The foregoing
provisions of this Section 2.6(b) shall be in lieu of Sections 316(a)(1)(A) and
316(a)(1)(B) of the Trust Indenture Act and such Sections 316(a)(1)(A) and
316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this
Declaration and the Securities, as permitted by the Trust Indenture Act. Subject
to the foregoing provisions of this Section 2.6(b), upon such waiver, any such
default shall cease to exist and any Event of Default with respect to the Common
Trust Securities arising therefrom shall be deemed to have been cured for every
purpose of this Declaration, but no such waiver shall extend to any subsequent
or other default or Event of Default with respect to the Common Trust Securities
or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Property Trustee, at the direction of the Holders of the QUIPS, constitutes a
waiver of the corresponding Event of Default under this Declaration. The
foregoing provisions of this Section 2.6(c) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Event of Default; Notice.
(a) The Property Trustee shall, within 90 days after the
occurrence of a default, transmit by mail, first class postage prepaid, to the
Holders, notices of all defaults with respect to the Securities actually known
to a Responsible Officer of the Property Trustee, unless such defaults have been
cured before the giving of such notice (the term "defaults" for the purposes of
this Section 2.7(a) being hereby defined to be an Event of Default as defined in
the Indenture, not including any periods of grace provided for therein and
irrespective of the giving of any notice provided therein); provided that,
except for a default in the payment of principal of (or premium, if any) or
interest on any of the Debentures, the Property Trustee shall be protected in
withholding such notice if and so long as a Responsible Officer of the Property
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders.
(b) The Property Trustee shall not be deemed to have knowledge
of any default except:
(i) a default under Sections 5.01(a), 5.01(b) and
5.01(c) of the Indenture; or
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(ii) any default as to which the Property Trustee
shall have received written notice or of which a Responsible Officer of the
Property Trustee charged with the administration of the Declaration shall have
actual knowledge.
(c) Within ten Business Days after the occurrence of any Event
of Default actually known to the Property Trustee, the Property Trustee shall
transmit notice of such Event of Default to the holders of the QUIPS, the
Administrators and the Sponsor, unless such Event of Default shall have been
cured or waived. The Sponsor and the Administrators shall file annually with the
Property Trustee a certification as to whether or not they are in compliance
with all the conditions and covenants applicable to them under this Declaration.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "Life Re Capital Trust II" as such name may
be modified from time to time by the Administrators following written notice to
the Holders of Securities. The Trust's activities may be conducted under the
name of the Trust or any other name deemed advisable by the Administrators.
SECTION 3.2 Office.
The address of the principal office of the Trust is c/o Life
Re Corporation, 969 High Ridge Road, Stamford, Connecticut 06905. On ten
Business Days written notice to the Property Trustee, the Delaware Trustee and
the Holders of Securities, the Administrators may designate another principal
office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to
issue and sell the Securities, (b) use the proceeds from the sale of the
Securities to acquire the Debentures, and (c) except as otherwise limited
herein, to engage in only those other activities necessary or incidental
thereto. The Trust shall not borrow money, issue debt or reinvest proceeds
derived from investments, mortgage or pledge any of its assets, or otherwise
undertake (or permit to be undertaken) any activity that would cause the Trust
not to be classified for United States Federal income tax purposes as a grantor
trust.
SECTION 3.4 Authority.
Subject to the limitations provided in this Declaration and to
the specific duties of the Property Trustee, the Administrators shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Administrators or any of them in accordance with their
powers shall constitute the act of and serve to bind the Trust and an
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action taken by the Property Trustee on behalf of the Trust in accordance with
its powers shall constitute the act of and serve to bind the Trust. In dealing
with the Trustees acting on behalf of the Trust, no Person shall be required to
inquire into the authority of the Trustees to bind the Trust. Persons dealing
with the Trust are entitled to rely conclusively on the power and authority of
the Trustees as set forth in this Declaration. The Administrators shall have
only those ministerial duties set forth herein with respect to accomplishing the
purposes of the Trust and are not intended to be trustees or fiduciaries with
respect to the Trust or the Holders. The Property Trustee shall have the right,
but shall not be obligated except as provided in Section 3.6, to perform those
duties assigned to the Administrators.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the
Debentures and the Property Trustee Account or as otherwise provided in this
Declaration, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of the
Trust, but shall have an undivided beneficial interest in the assets of the
Trust.
SECTION 3.6 Powers and Duties of the Administrators.
The Administrators shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Securities in accordance with this
Declaration; provided, however, that except, in the case of (i) and (ii), as
contemplated in Section 7.1(a), (i) the Trust may issue no more than one series
of QUIPS and no more than one series of Common Trust Securities, (ii) there
shall be no interests in the Trust other than the Securities, and (iii) the
issuance of Securities shall be limited to a simultaneous issuance of both QUIPS
and Common Trust Securities at the Closing Time;
(b) in connection with the registration, issue and sale of the
QUIPS, to:
(i) execute on behalf of the Trust, (a) a
registration statement, including pre-effective or post-effective amendments to
such registration statement and any and all amendments to registration
statements filed pursuant to Rule 462(b) promulgated under the Securities Act,
relating to the registration under the Securities Act, of the Securities (the
"1933 Act Registration Statement"), and (b) a registration statement on Form 8-A
or other appropriate form (the "1934 Act Registration Statement" and together
with the 1933 Act Registration Statement, the "Registration Statements")
(including all pre-effective and post-effective amendments thereto) relating to
the registration of the Securities of the Trust under the Exchange Act;
(ii) execute on behalf of the Trust such
applications, reports, surety bonds, irrevocable consents, appointments of
attorney for service of process and other papers and documents as the Sponsor,
on behalf of the Trust, may deem necessary or desirable to register the
Securities under the securities or "Blue Sky" laws of any applicable
jurisdiction;
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(iii) execute a listing application and all other
applications, statements, certificates, agreements and other instruments as
shall be necessary or desirable to permit the QUIPS (or Units) to trade or be
quoted or listed in or on the New York Stock Exchange or any other securities
exchange, quotation system or the Nasdaq National Market;
(iv) execute, deliver and perform on behalf of the
Trust such underwriting or purchase agreements with one or more underwriters,
purchasers or agents relating to the offering of the Securities as the Sponsor,
on behalf of the Trust, may deem necessary or desirable; and
(v) execute and deliver letters, documents or
instruments with DTC and other Clearing Agencies relating to the QUIPS.
(c) to acquire the Debentures with the proceeds of the sale of
the QUIPS and the Common Trust Securities; provided, however, that the
Administrators shall cause legal title to the Debentures to be held of record in
the name of the Property Trustee for the benefit of the Holders;
(d) to establish a record date with respect to all actions to
be taken hereunder that require a record date be established, including and with
respect to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of QUIPS and Holders of Common Trust Securities as to
such actions and applicable record dates;
(e) to take all actions and perform such duties as may be
required of the Administrators pursuant to the terms of the Securities;
(f) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action, or otherwise adjust claims or demands of or against the
Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee
has the exclusive power to bring such Legal Action;
(g) to employ or otherwise engage employees and agents (who
may be designated as officers with titles) and managers, contractors, advisors,
and consultants and pay reasonable compensation for such services;
(h) to cause the Trust to comply with the Trust's obligations
under the Trust Indenture Act;
(i) to give the certificate required by Section 314(a)(4) of
the Trust Indenture Act to the Property Trustee, which certificate may be
executed by any Administrator;
(j) to incur expenses that are necessary or incidental to
carry out any of the purposes of the Trust;
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(k) to act as, or appoint another Person to act as, Registrar
and Exchange Agent for the Securities or to appoint a Paying Agent for the
Securities as provided in Section 7.4 except for such time as such power to
appoint a Paying Agent is vested in the Property Trustee;
(l) to give prompt written notice to the Property Trustee and
to Holders of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;
(m) to execute all documents or instruments, perform all
duties and powers, and do all things for and on behalf of the Trust in all
matters necessary or incidental to the foregoing;
(n) to take all action that may be necessary or appropriate
for the preservation and the continuation of the Trust's valid existence,
rights, franchises and privileges as a statutory business trust under the laws
of the State of Delaware and of each other jurisdiction in which such existence
is necessary to protect the limited liability of the Holders of the QUIPS or to
enable the Trust to effect the purposes for which the Trust was created;
(o) to take any action, not inconsistent with this
Declaration, the certificate of trust of the Trust or with applicable law, that
the Administrators determine in their discretion to be necessary or desirable in
carrying out the activities of the Trust as set out in this Section 3.6 (as long
as such action does not materially adversely affect the interests of the Holders
of the Securities), including, but not limited to:
(i) causing the Trust not to be deemed to be an
Investment Company required to be registered under the Investment Company Act;
(ii) causing the Trust not to be classified for
United States Federal income tax purposes as an association taxable as a
corporation or as other than a grantor trust;
(iii) cooperating with the Debenture Issuer to ensure
that the Debentures will be treated as indebtedness of the Debenture Issuer for
United States Federal income tax purposes; and
(p) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with respect
to the Trust to be duly prepared and filed by the Administrators, on behalf of
the Trust.
The Administrators must exercise the powers set forth in this
Section 3.6 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3 and with the intentions of the parties set
forth in Section 14.3, and the Administrators shall not take any action that is
inconsistent with the purposes and functions of the Trust and intentions of the
parties set forth in Section 3.3 and Section 14.3, respectively.
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Subject to this Section 3.6, the Administrators shall have
none of the powers or the authority of the Property Trustee set forth in Section
3.8.
Any expenses incurred by the Administrators pursuant to this
Section 3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
(a) The Trust shall not, and the Trustees (including the
Property Trustee) shall not, engage in any activity other than as required or
authorized by this Declaration. The Trust shall not and the Trustees (including
the Property Trustee) shall cause the Trust not to:
(i) invest any proceeds received by the Trust from
holding the Debentures, but shall distribute all such proceeds to Holders
pursuant to the terms of this Declaration and of the Securities;
(ii) acquire any assets other than as expressly
provided herein;
(iii) possess Trust property for other than a Trust
purpose;
(iv) make any loans or incur any indebtedness other
than loans represented by the Debentures, execute mortgages or pledge any of its
assets;
(v) possess any power or otherwise act in such a way
as to vary the Trust assets or the terms of the Securities in any way
whatsoever;
(vi) issue any securities or other evidences of
beneficial ownership of, or beneficial interest in, the Trust other than the
Securities; or
(vii) other than as provided in this Declaration or
Annex I, (A) direct the time, method and place of conducting any proceeding with
respect to any remedy available to the Debenture Trustee, or exercising any
trust or power conferred upon the Debenture Trustee with respect to the
Debentures, (B) waive any past default that is waivable under the Indenture, (C)
exercise any right to rescind or annul any declaration that the principal of all
the Debentures shall be due and payable, or (D) consent to any amendment,
modification or termination of the Indenture or the Debentures where such
consent shall be required, unless the Trust shall have received an opinion of
counsel experienced in such matters to the effect that such action will not
cause more than an insubstantial risk that for United States Federal income tax
purposes the Trust will not be classified as a grantor trust.
SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and
held of record in the name of the Property Trustee in trust for the benefit of
the Holders. The right, title and interest of the Property Trustee to the
Debentures shall vest automatically in each Person who
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may hereafter be appointed as Property Trustee in accordance with Section 5.7.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents with regard to the Debentures have been executed and
delivered.
(b) The Property Trustee shall not transfer its right, title
and interest in the Debentures to the Administrators or to the Delaware Trustee
(if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest
bearing trust account (the "Property Trustee Account") in the name of and under
the exclusive control of the Property Trustee on behalf of the Holders and, upon
the receipt of payments of funds made in respect of the Debentures held by the
Property Trustee, deposit such funds into the Property Trustee Account and make
payments to the Holders of the QUIPS and Holders of the Common Trust Securities
from the Property Trustee Account in accordance with Section 6.1. Funds in the
Property Trustee Account shall be held uninvested until disbursed in accordance
with this Declaration. The Property Trustee Account shall be maintained by the
Property Trustee with The Bank of New York (in its separate corporate capacity
and not in its capacity as Property Trustee) in its trust department;
(ii) engage in such ministerial activities as shall
be necessary or appropriate to effect the repurchase or redemption of the
Securities to the extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by
the Administrators in accordance with the terms of the Securities, engage in
such ministerial activities as shall be necessary or appropriate to effect the
distribution of the Debentures to Holders of Securities upon the occurrence of
certain events.
(d) The Property Trustee shall take all actions and perform
such duties as may be specifically required of the Property Trustee pursuant to
the terms of this Declaration and the Securities.
(e) Subject to Section 3.9(a), the Property Trustee may take
any Legal Action which arises out of or in connection with an Event of Default
of which a Responsible Officer of the Property Trustee has actual knowledge or
the Property Trustee's duties and obligations under this Declaration or the
Trust Indenture Act and if such Property Trustee shall have failed to take such
Legal Action, the Holders of the QUIPS, to the fullest extent permitted by
applicable law, may take such Legal Action, to the same extent as if such
Holders of QUIPS held an aggregate principal amount of Debentures equal to the
aggregate liquidation amount of such QUIPS, without first proceeding against the
Property Trustee or the Trust; provided however, that if an Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Debenture Issuer to pay the principal of or premium, if any, or interest on the
Debentures on the date such principal, premium, if any, or interest is otherwise
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payable (after giving effect to any permitted deferral of payment of such
interest), then a Holder of QUIPS (or, for so long as QUIPS underlie Units, a
holder of record of Units) may directly institute a proceeding against the
Debenture Issuer for enforcement of payment to such Holder of the principal of
or premium, if any, or interest on the Debentures having a principal amount
equal to the aggregate liquidation amount of the QUIPS of such Holder (or
underlying such Holder's Units) (a "Direct Action") on or after the respective
due date specified in the Debentures. In connection with such Direct Action, the
rights of the Holders of the Common Trust Securities will be subrogated to the
rights of such Holder of QUIPS (or Units) to the extent of any payment made by
the Debenture Issuer to such Holder of QUIPS (or Units) in such Direct Action;
provided, however, that no such subrogation right may be exercised so long as an
Event of Default has occurred and is continuing. Except as provided in the
preceding sentences, the Holders of QUIPS will not be able to exercise directly
any other remedy available to the holders of the Debentures.
(f) The Property Trustee shall continue to serve as a Trustee
until either:
(i) the Trust has been completely liquidated and the
proceeds of the liquidation distributed to the Holders pursuant to the terms of
the Securities; or
(ii) a Successor Property Trustee has been appointed
and has accepted that appointment in accordance with Section 5.7 (a "Successor
Property Trustee").
(g) The Property Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of Debentures
under the Indenture and, if an Event of Default actually known to a Responsible
Officer of the Property Trustee occurs and is continuing, the Property Trustee
shall, for the benefit of Holders, enforce its rights as holder of the
Debentures subject to the rights of the Holders pursuant to this Declaration
(including Annex I) and the terms of the Securities.
(h) The Property Trustee shall be authorized to undertake any
actions set forth in Section 317(a) of the Trust Indenture Act.
(i) For such time as the Property Trustee is the Paying Agent,
the Property Trustee may authorize one or more Persons to act as additional
Paying Agents and to pay Distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to all securities and any such
Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any
such additional Paying Agent may be removed by the Property Trustee at any time
the Property Trustee remains as Paying Agent and a successor Paying Agent or
additional Paying Agents may be (but are not required to be) appointed at any
time by the Property Trustee.
(j) Subject to this Section 3.8, the Property Trustee shall
have none of the duties, liabilities, powers or the authority of the
Administrators set forth in Section 3.6.
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The Property Trustee must exercise the powers set forth in
this Section 3.8 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.3 and with the intentions of the parties set
forth in Section 14.3, and the Property Trustee shall not take, nor shall the
Sponsor or any Administrator direct the Property Trustee to take, any action
that is inconsistent with the purposes and functions of the Trust and intentions
of the parties set out in Section 3.3 and Section 14.3, respectively.
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.
(a) The Property Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Declaration and in the Securities and no implied covenants shall be read
into this Declaration against the Property Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6) of
which a Responsible Officer of the Property Trustee has actual knowledge, the
Property Trustee shall exercise such of the rights and powers vested in it by
this Declaration, and use the same degree of care and skill in their exercise,
as a prudent person would exercise or use under the circumstances in the conduct
of his or her own affairs.
(b) No provision of this Declaration shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default
and after the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the
Property Trustee shall be determined solely by the express provisions of this
Declaration and in the Securities and the Property Trustee shall not be liable
except for the performance of such duties and obligations as are specifically
set forth in this Declaration and in the Securities, and no implied covenants or
obligations shall be read into this Declaration against the Property Trustee;
and
(B) in the absence of bad faith on the part
of the Property Trustee, the Property Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Property Trustee and
conforming to the requirements of this Declaration; provided, however, that in
the case of any such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Property Trustee, the Property
Trustee shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Declaration;
(ii) the Property Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts;
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(iii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a Majority in
liquidation amount of the QUIPS or the Common Trust Securities, as applicable,
relating to the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under this Declaration;
(iv) no provision of this Declaration shall require
the Property Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Declaration or indemnity reasonably
satisfactory to the Property Trustee against such risk or liability is not
reasonably assured to it;
(v) the Property Trustee's sole duty with respect to
the custody, safe keeping and physical preservation of the Debentures and the
Property Trustee Account shall be to deal with such property in a similar manner
as the Property Trustee deals with similar property for its own account, subject
to the protections and limitations on liability afforded to the Property Trustee
under this Declaration and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or
liability for or with respect to the value, genuineness, existence or
sufficiency of the Debentures or the payment of any taxes or assessments levied
thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for
any interest on any money received by it except as it may otherwise agree in
writing with the Sponsor, and money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the Property
Trustee Account maintained by the Property Trustee pursuant to Section 3.8(c)(i)
and except to the extent otherwise required by law; and
(viii) the Property Trustee shall not be responsible
for monitoring the compliance by the Administrators or the Sponsor with their
respective duties under this Declaration, nor shall the Property Trustee be
liable for any default or misconduct of the Administrators or the Sponsor.
SECTION 3.10 Certain Rights of the Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may conclusively rely and
shall be fully protected in acting or refraining from acting upon any
resolution, opinion of counsel, written representation of Holder or transferee,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed, sent or presented by the proper party or
parties;
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(ii) any direction or act of the Sponsor or the
Administrators contemplated by this Declaration may be sufficiently evidenced by
an Officers' Certificate;
(iii) whenever in the administration of this
Declaration, the Property Trustee shall deem it desirable that a matter be
proved or established before taking, suffering or omitting any action hereunder,
the Property Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and conclusively rely upon
an Officers' Certificate which, upon receipt of such request, shall be promptly
delivered by the Sponsor or the Administrators;
(iv) the Property Trustee shall have no duty to see
to any recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or securities laws)
or any rerecording, refiling or registration thereof;
(v) the Property Trustee may consult with counsel or
other experts of its selection and the advice or opinion of such counsel and
experts with respect to legal matters or advice within the scope of such
experts' area of expertise shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or opinion, such counsel may be
counsel to the Sponsor or any of its Affiliates, and may include any of its
employees. The Property Trustee shall have the right at any time to seek
instructions concerning the administration of this Declaration from any court of
competent jurisdiction;
(vi) the Property Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Declaration at the request or direction of any Holder, unless such Holder shall
have provided to the Property Trustee security and indemnity, reasonably
satisfactory to the Property Trustee, against the costs, expenses (including
reasonable attorneys' fees and expenses and the expenses of the Property
Trustee's agents, nominees or custodians) and liabilities that might be incurred
by it in complying with such request or direction, including such reasonable
advances as may be requested by the Property Trustee provided, that, nothing
contained in this Section 3.10(a)(vi) shall be taken to relieve the Property
Trustee, upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Property Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either directly or by
or through agents, custodians, nominees or attorneys and the Property Trustee
shall not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder;
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(ix) any action taken by the Property Trustee or its
agents hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Property Trustee or its agents alone shall be sufficient and
effective to perform any such action and no third party shall be required to
inquire as to the authority of the Property Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration, both of
which shall be conclusively evidenced by the Property Trustee's or its agent's
taking such action;
(x) whenever in the administration of this
Declaration the Property Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other action
hereunder, the Property Trustee (i) may request instructions from the Holders
which instructions may only be given by the Holders of the same proportion in
liquidation amount of the Securities as would be entitled to direct the Property
Trustee under the terms of the Securities in respect of such remedy, right or
action, (ii) may refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (iii) shall be protected
in conclusively relying on or acting in accordance with such instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Declaration;
(xii) the Property Trustee shall not be liable for
any action taken, suffered, or omitted to be taken by it in good faith, without
negligence, and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Declaration; and
(xiii) the Property Trustee shall not be deemed to
have notice of any Default or Event of Default unless a Responsible Officer of
the Property Trustee has actual knowledge thereof or unless written notice of
any event which is in fact such a default is received by the Property Trustee at
the Principal Office of the Property Trustee, and such notice references the
QUIPS and this Declaration.
(b) No provision of this Declaration shall be deemed to impose
any duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other
than Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Administrators or the Property
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Trustee described in this Declaration. Except as set forth in Section 5.2, the
Delaware Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Business Trust Act and taking
such actions as are required to be taken by the Delaware Trustee under the
Business Trust Act.
SECTION 3.12 Execution of Documents.
Except as otherwise required by the Business Trust Act or
applicable law, any Administrator is authorized to execute on behalf of the
Trust any documents that the Administrators have the power and authority to
execute pursuant to Section 3.6.
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities
shall be taken as the statements of the Sponsor, and the Trustees do not assume
any responsibility for their correctness. The Trustees make no representations
as to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.14 Duration of Trust.
The Trust, unless dissolved pursuant to the provisions of
Article VIII hereof, shall have existence for seven years from February 10,
1998.
SECTION 3.15 Mergers.
(a) The Trust may not merge or convert with or into,
consolidate, amalgamate, or be replaced by, or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to any
Person, except as described in Section 3.15(b) and (c) or Section 3 of Annex I.
(b) The Trust may, at the request of the Holders of a Majority
in liquidation amount of the Common Trust Securities and without the consent of
the other Holders, the Delaware Trustee or the Property Trustee, merge or
convert with or into, consolidate, amalgamate, or be replaced by, or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to, a trust organized as such under the laws of any State; provided
that:
(i) such successor entity (the "Successor Entity")
either:
(A) expressly assumes all of the obligations
of the Trust with respect to the Securities; or
(B) substitutes for the Securities other
securities having substantially the same terms as the Securities (the "Successor
Securities") so long as the
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Successor Securities rank the same as the Securities rank with respect to
Distributions and payments upon liquidation, redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the
Successor Entity that possesses the same powers and duties as the Property
Trustee as the Holder of the Debentures;
(iii) the Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the QUIPS are then
listed or quoted, if any;
(iv) such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
QUIPS (including any Successor Securities) or Units to be downgraded by any
nationally recognized statistical rating organization, if then so rated;
(v) such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders of Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of such Holders' interests in the new entity);
(vi) such Successor Entity has a purpose
substantially identical to that of the Trust;
(vii) prior to such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Sponsor has received an opinion of an independent counsel to the Trust
experienced in such matters to the effect that:
(A) such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders of Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the Holders' interest in the new entity);
(B) following such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor the Successor Entity will be required to register as an Investment
Company; and
(C) following such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Trust or the Successor Entity will continue to be classified as a grantor trust
for United States Federal income tax purposes.
(viii) the Sponsor or any permitted successor or
assignee owns all of the common securities of such Successor Entity and
guarantees the obligations of such Successor Entity under the Successor
Securities at least to the extent provided by the QUIPS Guarantee and the Common
Trust Securities Guarantee.
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(c) Notwithstanding Section 3.15(b), the Trust shall not,
except with the consent of Holders of 100% in liquidation amount of the
Securities, consolidate, amalgamate, merge or convert with or into, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to, any other entity or permit any
other entity to consolidate, amalgamate, merge or convert with or into, or
replace it if such consolidation, amalgamation, merger, conversion, replacement,
conveyance, transfer or lease would cause the Trust or the Successor Entity to
be classified as an association taxable as a corporation or as other than a
grantor trust for United States Federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Trust Securities.
At the Closing Time, the Sponsor will purchase all of the
Common Trust Securities then issued by the Trust, in an amount at least equal to
3% of the total capital of the Trust, at the same time as the QUIPS are issued
and sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the QUIPS, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities (and any actions taken by the Sponsor in furtherance of the
following prior to the date of this Declaration are hereby ratified and
confirmed in all respects):
(a) to prepare and file with the Commission and to execute, in
the case of the Registration Statements, on behalf of the Trust, (a) the 1933
Act Registration Statement, including pre-effective or post-effective amendments
to such registration statement and any and all amendments to such registration
statement filed pursuant to Rule 462(b) promulgated under the Securities Act,
relating to the registration under the Securities Act of the Securities, (b) any
preliminary prospectus or prospectus or supplement thereto relating to the
Securities required to be filed pursuant to the Securities Act, and (c) the 1934
Act Registration Statement (including all pre-effective and post-effective
amendments thereto) relating to the registration of the Securities of the Trust
under the Exchange Act;
(b) to determine the jurisdictions in which to take
appropriate action to qualify or register for sale all or part of the QUIPS and
to do any and all such acts, other than actions which must be taken by the
Trust, and advise the Trust of actions it must take, and prepare for execution
and filing any documents to be executed and filed by the Trust, as the Sponsor
deems necessary or advisable to register the Securities and in order to comply
with the securities or "Blue Sky" laws of any applicable jurisdiction;
(c) to prepare, execute and file a listing application and all
other applications, statements, certificates, agreements and other instruments
as shall be necessary or
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desirable to permit the QUIPS to trade or be quoted or listed in or on the New
York Stock Exchange or any other securities exchange, quotation system or the
Nasdaq National Market;
(d) to negotiate the terms of, and execute, the Underwriting
Agreement and the Subscription Agreements, and to enter into and execute and
deliver the same on behalf of the Trust; and
(e) notwithstanding anything to the contrary contained herein,
the Trust shall be authorized to issue and sell the QUIPS at an offering price
per QUIPS to be determined by the Sponsor in its sole and absolute discretion,
including, without limitation, at an offering price that is less than the
liquidation amount of $1,000 per QUIPS (the "Liquidation Amount"), which
offering price shall be specified in the Prospectus relating to the Securities,
and the Common Trust Securities shall be issued and sold at an offering price
per Common Trust Security that is equal to the offering price per QUIPS.
SECTION 4.3 Right to Proceed.
The Sponsor acknowledges the rights of the Holders of QUIPS,
in the event that a failure of the Trust to pay Distributions on the QUIPS is
attributable to the failure of the Debenture Issuer to pay interest or principal
on the Debentures, to institute a proceeding directly against the Debenture
Issuer for enforcement of its payment obligations on the Debentures.
ARTICLE V
TRUSTEES AND ADMINISTRATORS
SECTION 5.1 Number of Trustees: Appointment of Co-Trustee.
The number of Trustees initially shall be two (2), and:
(a) at any time before the issuance of any Securities, the
Sponsor may, by written instrument, increase or decrease the number of Trustees
and Administrators; and
(b) after the issuance of any Securities, the number of
Trustees and Administrators may be increased or decreased by vote of the Holders
of a Majority in liquidation amount of the Common Trust Securities voting as a
class at a meeting of the Holders of the Common Trust Securities; provided,
however, that, there shall be a Delaware Trustee if required by Section 5.2; and
there shall be one Trustee who shall be the Property Trustee, and such Trustee
may also serve as Delaware Trustee if it meets the applicable requirements.
Notwithstanding the above, unless an Event of Default shall have occurred and be
continuing, at any time or times, for the purpose of meeting the legal
requirements of any jurisdiction in which any part of the Trust's property may
at the time be located, the Holders of a Majority in liquidation amount of the
Common Trust Securities acting as a class at a meeting of the Holders of the
Common Trust Securities, and the Administrators shall have
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power to appoint one or more persons either to act as a co-trustee, jointly with
the Property Trustee, of all or any part of the Trust's property, or to act as
separate trustee of any such property, in either case with such powers as may be
provided in the instrument of appointment, and to vest in such person or persons
in such capacity any property, title, right or power deemed necessary or
desirable, subject to the provisions of this Declaration. In case an Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make any such appointment of a co-trustee.
SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be:
(a) a natural person who is a resident of the State of
Delaware; or
(b) if not a natural person, an entity which has its principal
place of business in the State of Delaware, and otherwise meets the requirements
of applicable law; provided that, if the Property Trustee has its principal
place of business in the State of Delaware and otherwise meets the requirements
of applicable law, then the Property Trustee shall also be the Delaware Trustee
and Section 3.11 shall have no application.
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee (the "Property
Trustee") which shall act as Property Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a Person organized and doing business under
the laws of the United States of America or any State or Territory thereof or of
the District of Columbia, or a Person permitted by the Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000), and subject to supervision or
examination by Federal, State, Territorial or District of Columbia authority. If
such Person publishes reports of condition at least annually, pursuant to law or
to the requirements of the supervising or examining authority referred to above,
then for the purposes of this Section 5.3(a)(ii), the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
(b) If at any time the Property Trustee shall cease to be
eligible to so act under Section 5.3(a), the Property Trustee shall immediately
resign in the manner and with the effect set forth in Section 5.7(c).
(c) If the Property Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Property Trustee and the
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Holder of the Common Trust Securities (as if it were the obligor referred to in
Section 310(b) of the Trust Indenture Act) shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
(d) The QUIPS Guarantee shall be deemed to be specifically
described in this Declaration for purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be:
The Bank of New York
101 Barclay Street
21st Floor West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
SECTION 5.4 Certain Qualifications of Administrators and Delaware Trustee
Generally.
Each Administrator and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more Authorized Officers.
SECTION 5.5 Administrators.
The initial Administrators shall be:
Rodney A. Hawes, Jr.
c/o Life Re Corporation
969 High Ridge Road
Stamford, CT 06905
Jacques E. Dubois, Jr.
c/o Life Re Corporation
969 High Ridge Road
Stamford, CT 06905
W. Weldon Wilson
c/o Life Re Corporation
969 High Ridge Road
Stamford, CT 06905
(a) Except as expressly set forth in this Declaration and
except if a meeting of the Administrators is called with respect to any matter
over which the Administrators have power to act, any power of the Administrators
may be exercised by, or with the consent of, any one such Administrator. W.
Weldon Wilson is not a Trustee.
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(b) An Administrator may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purposes of signing any documents which the Administrators
have power and authority to cause the Trust to execute pursuant to Section 3.6.
(c) The Holders of a Majority in liquidation amount of the
Common Trust Securities may appoint or remove any Administrator without cause at
any time.
(d) An Administrator appointed to office shall hold office
until his successor shall have been appointed or until his death, removal or
resignation. Any Administrator may resign from office (without need for prior or
subsequent accounting) by an instrument in writing signed by the Administrator
and delivered to the Sponsor and the Property Trustee, which resignation shall
take effect upon such delivery or upon such later date as is specified therein.
SECTION 5.6 Delaware Trustee.
The initial Delaware Trustee shall be:
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, DE 19711
Attention: Corporate Trust Department
SECTION 5.7 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.7(b) and to Section 6(b) of Annex I
hereto, Trustees may be appointed or removed without cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor;
(ii) unless an Event of Default shall have occurred
and be continuing after the issuance of any Securities, by vote of the Holders
of a Majority in liquidation amount of the Common Trust Securities voting as a
class at a meeting of the Holders of the Common Trust Securities; and
(iii) if an Event of Default shall have occurred and
be continuing after the issuance of the Securities, with respect to the Property
Trustee or the Delaware Trustee only, by vote of Holders of a Majority in
liquidation amount of the QUIPS voting as a class at a meeting of Holders of the
QUIPS.
(b)(i) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.7(a) until a Successor Property Trustee has
been appointed and has
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accepted such appointment by written instrument executed by such Successor
Property Trustee and delivered to the Administrators and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall
not be removed in accordance with Section 5.7(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under Sections 5.2 and
5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware Trustee
and delivered to the Administrators and the Sponsor.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided, however,
that:
(i) No such resignation of the Trustee that acts as
the Property Trustee shall be effective:
(A) until a Successor Property Trustee has
been appointed and has accepted such appointment by instrument executed by such
Successor Property Trustee and delivered to the Trust, the Sponsor and the
resigning Property Trustee; or
(B) until the assets of the Trust have been
completely liquidated and the proceeds thereof distributed to the Holders of the
Securities; and
(ii) no such resignation of the Trustee that acts as
the Delaware Trustee shall be effective until a Successor Delaware Trustee has
been appointed and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
resigning Delaware Trustee.
(d) The Holders of the Common Trust Securities shall use their
best efforts to promptly appoint a Successor Delaware Trustee or Successor
Property Trustee, as the case may be, if the Property Trustee or the Delaware
Trustee delivers an instrument of resignation in accordance with this Section
5.7.
(e) If no Successor Property Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided in this
Section 5.7 within 60 days after delivery of an instrument of resignation or
removal, the Property Trustee or Delaware Trustee resigning or being removed, as
applicable, may petition, at the expense of the Sponsor, any court of competent
jurisdiction for appointment of a Successor Property Trustee or Successor
Delaware Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper and prescribe, appoint a Successor Property Trustee
or Successor Delaware Trustee, as the case may be.
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(f) No Property Trustee or Delaware Trustee shall be liable
for the acts or omissions to act of any Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
SECTION 5.8 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the
number of Trustees is not reduced pursuant to Section 5.1, or if the number of
Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A
resolution certifying the existence of such vacancy by the Trustees or, if there
are more than two, a majority of the Trustees shall be conclusive evidence of
the existence of such vacancy. The vacancy shall be filled with a Trustee
appointed in accordance with Section 5.7.
SECTION 5.9 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of a
Trustee shall not operate to dissolve, terminate or annul the Trust. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled by
the appointment of a Trustee in accordance with Section 5.7, the Property
Trustee shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by this Declaration.
SECTION 5.10 Meetings.
If there is more than one Administrator, meetings of the
Administrators shall be held from time to time upon the call of any
Administrator. Regular meetings of the Administrators may be held at a time and
place fixed by resolution of the Administrators. Notice of any in-person
meetings of the Administrators shall be hand delivered or otherwise delivered in
writing (including by facsimile, with a hard copy by overnight courier) not less
than 24 hours before such meeting. Notice of any telephonic meetings of the
Administrators or any committee thereof shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 24 hours before a meeting. Notices shall contain a brief
statement of the time, place and anticipated purposes of the meeting. The
presence (whether in person or by telephone) of an Administrator at a meeting
shall constitute a waiver of notice of such meeting except where an
Administrator attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been lawfully
called or convened. Unless provided otherwise in this Declaration, any action of
the Administrators may be taken at a meeting by vote of a majority of the
Administrators present (whether in person or by telephone) and eligible to vote
with respect to such matter, provided that a Quorum is present, or without a
meeting by the unanimous written consent of the Administrators. In the event
there is only one Administrator, any and all action of such Administrator shall
be evidenced by a written consent of such Administrator.
SECTION 5.11 Delegation of Power.
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(a) Any Trustee or Administrator may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purpose of executing any documents
contemplated in Section 3.6; and
(b) the Trustees shall have power to delegate from time to
time to such of their number or to other Persons the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Trustees or otherwise as the Trustees may deem expedient, to the extent
such delegation is not prohibited by applicable law or contrary to the
provisions of the Trust, as set forth herein.
SECTION 5.12 Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware Trustee, as
the case may be, that is not a natural person, may be merged or converted or
with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Property Trustee or the Delaware
Trustee, as the case may be, shall be a party, or any Person succeeding to all
or substantially all the corporate trust business of the Property Trustee or the
Delaware Trustee, as the case may be, shall be the successor of the Property
Trustee or the Delaware Trustee, as the case may be, hereunder, provided such
Person shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Each Holder shall receive Distributions pro rata in accordance
with the applicable terms of such Holder's Securities. If and to the extent that
the Debenture Issuer makes a payment of interest (including Compounded Interest
(as defined in the Indenture) and Additional Sums (as defined in the
Indenture)), premium and/or principal on the Debentures held by the Property
Trustee (the amount of any such payment being a "Payment Amount"), the Property
Trustee shall and is directed, to the extent funds are available for that
purpose, to make a distribution (a "Distribution") of the Payment Amount to
Holders in accordance with the respective terms of the Securities held by them.
In the event there is any money or other property held by or for the Trust that
is not accounted for hereunder, such property shall be distributed pro rata
among the Holders of Securities on the next Distribution Date.
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ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Administrators shall on behalf of the Trust issue one
class of securities representing undivided beneficial interests in the assets of
the Trust having such terms as are set forth in Annex I (the "QUIPS") and one
class of common securities representing undivided beneficial interests in the
assets of the Trust having such terms as are set forth in Annex I (the "Common
Trust Securities"). The Trust shall issue no securities or other interests in
the assets of the Trust other than the QUIPS and the Common Trust Securities and
the aggregate liquidation amount of all Securities issued by the Trust and
outstanding at any time shall not exceed $_______________.
(b) The QUIPS rank pari passu and payment thereon shall be
made pro rata with the Common Trust Securities except that, where an Event of
Default has occurred and is continuing, the rights of Holders of the Common
Trust Securities to payment in respect of Distributions and payments upon
liquidation, redemption, repurchase and otherwise are subordinated to the rights
to payment of the Holders of the QUIPS.
(c) The consideration received by the Trust for the issuance
of the Securities shall constitute a contribution to the capital of the Trust
and shall not constitute a loan to the Trust.
(d) Upon issuance of the QUIPS as provided in this
Declaration, the QUIPS so issued shall be deemed to be validly issued, fully
paid and non-assessable.
(e) Every Person, by virtue of having become a Holder or a
QUIPS Beneficial Owner in accordance with the terms of this Declaration, shall
be deemed to have expressly assented and agreed to the terms of, and shall be
bound by, this Declaration and the QUIPS Guarantee.
SECTION 7.2 Execution and Authentication.
(a) The Securities shall be signed on behalf of the Trust by
one or more Administrators. Such signature may be the manual or facsimile
signature of any Administrator. In case any Administrator of the Trust who shall
have signed any of the Securities shall cease to be such Administrator before
the Securities so signed shall be delivered by the Trust, such Securities
nevertheless may be delivered as though the person who signed such Securities
had not ceased to be such Administrator; and any Securities may be signed on
behalf of the Trust by such persons who, at the actual date of execution of such
Security, shall be the Administrators of the Trust, although at the date of the
execution and delivery of the Declaration any such person was not such a
Administrator.
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(b) A Common Trust Security shall be valid upon execution by
an Administrator without any act of the Property Trustee. A QUIPS shall not be
valid until authenticated by the manual signature of an authorized signatory of
the Property Trustee. Such signature shall be conclusive evidence that the QUIPS
has been authenticated under this Declaration.
Upon a written order of the Trust signed by one Administrator,
the Property Trustee shall authenticate the QUIPS for original issue. The
Property Trustee may appoint an authenticating agent acceptable to the Trust to
authenticate QUIPS. An authenticating agent may authenticate QUIPS whenever the
Property Trustee may do so. Each reference in this Declaration to authentication
by the Property Trustee includes authentication by such agent. An authenticating
agent has the same rights as the Property Trustee hereunder with respect to the
Sponsor or an Affiliate. The aggregate number of QUIPS outstanding at any time
shall not exceed the number set forth in the Terms in Annex I hereto except as
provided in Section 7.6.
SECTION 7.3 Form and Dating.
The QUIPS and the Property Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 and the Common
Trust Securities shall be substantially in the form of Exhibit A-2, each of
which is hereby incorporated in and expressly made a part of this Declaration.
Certificates representing the Securities may be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrators, as evidenced by their execution thereof. The Securities may
have letters, CUSIP or other numbers, notations or other marks of identification
or designation and such legends or endorsements required by law, stock exchange
rule, agreements to which the Trust is subject, if any, or usage (provided that
any such notation, legend or endorsement is in a form acceptable to the Trust).
The Trust at the direction of the Sponsor shall furnish any such legend not
contained in Exhibit A-1 to the Property Trustee in writing. Each QUIPS shall be
dated the date of its authentication. The terms and provisions of the Securities
set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and
A-2 are part of the terms of this Declaration and to the extent applicable, the
Property Trustee and the Sponsor, by their execution and delivery of this
Declaration, expressly agree to such terms and provisions and to be bound
thereby.
(a) Global Securities. As long as QUIPS constitute Pledged
Securities (as defined in the Master Unit Agreement), the QUIPS will be
represented in the form of one permanent global security in definitive, fully
registered form without distribution coupons with the global legend set forth in
Exhibit A-1 hereto (a "Global Security"), which shall be deposited on behalf of
the holders of the Units with the Property Trustee, at its New York office, as
custodian for the Clearing Agency, and registered in the name of the Clearing
Agency or a nominee of the Clearing Agency, duly executed by the Trust and
authenticated by the Property Trustee as hereinafter provided. The number of
QUIPS represented by the Global Security may from time to time be increased or
decreased by adjustments made on the records of the Property Trustee and the
Clearing Agency or its nominee as hereinafter provided. If the
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QUIPS cease to constitute Pledged Securities, the QUIPS may be represented by
one or more permanent global securities in definitive, full registered form.
(b) Book-Entry Provisions. This Section 7.3(b) shall apply
only to the Global Security and such other QUIPS in global form as may be
authorized by the Trust to be deposited with or on behalf of the Clearing
Agency.
The Trust shall execute and the Property Trustee shall, in
accordance with this Section 7.3, authenticate and make available for delivery
initially one or more Global Securities that (i) shall be registered in the name
of Cede & Co. or other nominee of such Clearing Agency and (ii) shall be
delivered by the Trustee to such Clearing Agency or pursuant to such Clearing
Agency's written instructions or held by the Property Trustee as custodian for
the Clearing Agency.
Members of, or participants in, the Clearing Agency
("Participants") shall have no rights under this Declaration with respect to any
Global Security held on their behalf by the Clearing Agency or by the Property
Trustee as the custodian of the Clearing Agency or under such Global Security,
and the Clearing Agency may be treated by the Trust, the Property Trustee and
any agent of the Trust or the Property Trustee as the absolute owner of such
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Trust, the Property Trustee or any agent of the
Trust or the Property Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Clearing Agency or impair, as
between the Clearing Agency and its Participants, the operation of customary
practices of such Clearing Agency governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(c) Definitive QUIPS. Except as provided in Section 7.9,
owners of beneficial interests in a Global Security will not be entitled to
receive physical delivery of certificated QUIPS ("Definitive QUIPS").
SECTION 7.4 Registrar, Paying Agent and Exchange Agent.
The Trust shall maintain in the Borough of Manhattan, The City
of New York, (i) an office or agency where QUIPS may be presented for
registration of transfer ("Registrar") and (ii) an office or agency where QUIPS
may be presented for payment ("Paying Agent"). The Registrar shall keep a
register of the QUIPS and of their transfer. The Property Trustee may appoint
the Registrar and the Paying Agent and may appoint one or more co-registrars and
one or more additional paying agents in such other locations as it shall
determine. The term "Registrar" includes any additional registrar and the term
"Paying Agent" includes any additional paying agent. The Property Trustee may
change any Paying Agent or Registrar without prior notice to any Holder. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Property Trustee (if not the Paying Agent) and the Administrators.
The Trust shall notify the Property Trustee of the name and address of any Agent
not a party to this Declaration. In the event that the Property Trustee Shall no
longer be the Paying Agent or the Registrar, the Administrators shall appoint
another
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entity as Registrar or Paying Agent. The Trust or any of its Affiliates may act
as Paying Agent or Registrar. The Trust shall act as Paying Agent and Registrar
for the Common Trust Securities.
The Property Trustee will initially act as Registrar and
Paying Agent for the QUIPS.
SECTION 7.5 Paying Agent to Hold Money in Trust.
The Trust shall require each Paying Agent other than the
Property Trustee to agree in writing that the Paying Agent will hold in trust
for the benefit of Holders or the Property Trustee all money held by the Paying
Agent for the payment of liquidation amounts or Distributions on the Securities,
and will notify the Property Trustee if there are insufficient funds for such
purpose. While any such insufficiency continues, the Property Trustee may
require a Paying Agent to pay all money held by it to the Property Trustee. The
Trust at any time may require a Paying Agent to pay all money held by it to the
Property Trustee and to account for any money disbursed by it. Upon payment over
to the Property Trustee, the Paying Agent (if other than the Trust or an
Affiliate of the Trust) shall have no further liability for the money. If the
Trust or the Sponsor or an Affiliate of the Trust or the Sponsor acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent.
SECTION 7.6 Replacement Securities.
If a Holder claims that a certificate evidencing the
securities owned by it has been lost, destroyed or wrongfully taken or if such
certificate is mutilated and is surrendered to the Trust, or in the case of a
certificate evidencing QUIPS, to the Property Trustee, and the Property Trustee
shall receive evidence to its satisfaction of the destruction, loss or theft of
such certificate and there shall be delivered to the Property Trustee and the
Administrators such security or indemnity as may be required by them to keep
each of them harmless, then, in the absence of notice that such certificate
shall have been acquired by a bonafide purchaser, an Administrator on behalf of
the Trust shall execute (and in the case of a certificate evidencing QUIPS, the
Property Trustee shall authenticate) and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen certificate, a new certificate of
like denomination. In connection with the issuance of any new certificate under
this Section 7.6, the Registrar or the Administrators may require the payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. Any duplicate certificate issued pursuant to
this Section 7.6 shall constitute conclusive evidence of or ownership interest
in the relevant Securities, as if originally issued, whether or not the lost,
stolen or destroyed certificate shall be found at any time.
SECTION 7.7 Outstanding QUIPS.
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The QUIPS outstanding at any time are all the QUIPS
authenticated by the Property Trustee except for those cancelled by it, those
delivered to it for cancellation, and those described in this Section as not
outstanding. If a QUIPS is replaced paid or purchased, pursuant to Section 7.6
or Section 7.10, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced QUIPS is held by a bona fide
purchaser. If QUIPS are considered paid in accordance with the terms of this
Declaration, they cease to be outstanding and Distributions on them shall cease
to accumulate.
A QUIPS does not cease to be outstanding because one of the
Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.
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SECTION 7.8 QUIPS in Treasury.
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, QUIPS owned by
the Trust, the Sponsor or an Affiliate of the Sponsor, as the case may be, shall
be disregarded and deemed not to be outstanding, except that for the purposes of
determining whether the Property Trustee shall be fully protected in relying on
any such direction, waiver or consent, only Securities which a Responsible
Officer of the Property Trustee actually knows are so owned shall be so
disregarded.
SECTION 7.9 Temporary Securities.
(a) Until definitive securities are ready for delivery, the
Trust may prepare and, in the case of the QUIPS, the Property Trustee shall
authenticate temporary securities. Temporary Securities shall be substantially
in the form of definitive securities but may have variations that the Trust
considers appropriate for temporary securities. Without unreasonable delay, the
Trust shall prepare and, in the case of the QUIPS, the Property Trustee shall
authenticate definitive securities in exchange for temporary securities.
(b) A Global Security deposited with the Clearing Agency or
with the Property Trustee as custodian for the Clearing Agency pursuant to
Section 7.3 shall be transferred to the beneficial owners thereof in the form of
Definitive QUIPS only if such transfer complies with Section 9.2 and (i) the
Clearing Agency notifies the Sponsor that it is unwilling or unable to continue
as Clearing Agency for such Global Security or if at any time such Clearing
Agency ceases to be a "clearing agency" registered under the Exchange Act and a
clearing agency is not appointed by the Sponsor within 90 days of such notice,
(ii) a Default or an Event of Default has occurred and is continuing, or (iii)
the Trust at its sole discretion elects to cause the issuance of Definitive
QUIPS.
(c) Any Global Security that is transferable to the beneficial
owners thereof in the form of Definitive QUIPS pursuant to this Section 7.9
shall be surrendered by the Clearing Agency to the Property Trustee to be so
transferred, in whole or from time to time in part, without charge, and the
Property Trustee shall authenticate and make available for delivery, upon such
transfer of each portion of such Global Security, an equal aggregate liquidation
amount of Securities of authorized denominations in the form of Definitive
QUIPS. Any portion of a Global Security transferred pursuant to this Section
shall be registered in such names as the Clearing Agency shall direct.
(d) Subject to the provisions of Section 7.9(c), the Holder of
a Global Security may grant proxies and otherwise authorize any Person,
including Participants and Persons that may hold interests through Participants,
to take any action which such Holder is entitled to take under this Declaration
or the Securities.
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(e) In the event of the occurrence of any of the events
specified in Section 7.9(b), the Trust will promptly make available to the
Property Trustee a reasonable supply of Definitive QUIPS in fully registered
form without distribution coupons.
SECTION 7.10 Cancellation.
The Trust at any time may deliver QUIPS to the Property
Trustee for cancellation. The Registrar and Paying Agent shall forward to the
Property Trustee any QUIPS surrendered to them for registration of transfer,
redemption, repurchase, exchange or payment. The Property Trustee shall promptly
cancel all QUIPS surrendered for registration of transfer, redemption,
repurchase, exchange, payment, replacement or cancellation and shall dispose of
cancelled QUIPS as the Trust directs, provided that the Property Trustee shall
not be obligated to destroy QUIPS. The Trust may not issue new QUIPS to replace
QUIPS that it has paid or that have been delivered to the Property Trustee for
cancellation or that any holder has exchanged.
SECTION 7.11 CUSIP Numbers.
The Trust in issuing the QUIPS may use "CUSIP" numbers (if
then generally in use), and, if so, the Property Trustee shall use "CUSIP"
numbers in notices of exercise of the Debenture Put Options as a convenience to
Holders of QUIPS; provided that any such notice may state that no representation
is made as to the correctness of such numbers either as printed on the QUIPS or
as contained in any such notice and that reliance may be placed only on the
other identification numbers printed on the QUIPS, and any such exercise shall
not be affected by any defect in or omission of such numbers. The Sponsor will
promptly notify the Property Trustee of any change in the "CUSIP" numbers.
ARTICLE VIII
DISSOLUTION OF TRUST
SECTION 8.1 Dissolution of Trust.
(a) The Trust shall automatically dissolve:
(i) upon a Bankruptcy Event of the Sponsor;
(ii) upon the filing of a certificate of dissolution or
liquidation or its equivalent with respect to the Sponsor; or the revocation of
the Sponsor's charter and the expiration of 90 days after the date of revocation
without a reinstatement thereof;
(iii) after satisfaction of liabilities to creditors of
the Trust as required by applicable law, following the distribution of a Like
Amount of the Debentures to the Holders, provided that the Property Trustee has
received written notice from the Sponsor, as holder of
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all of the issued and outstanding Common Trust Securities directing the Property
Trustee, to dissolve the Trust (which direction is optional, and except as
otherwise expressly provided below, within the discretion of the Sponsor);
(iv) upon the entry of a decree of judicial dissolution of
the Trust by a court of competent jurisdiction;
(v) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have been paid
to the Holders in accordance with the terms of the Securities;
(vi) upon the repayment of the Debentures or at such time
as no Debentures are outstanding; or
(vii) the expiration of the term of the Trust provided in
Section 3.14.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 8.1(a), and after the completion of the winding up of the
Trust's affairs, the Administrators shall file a certificate of cancellation
with the Secretary of State of the State of Delaware.
(c) The provisions of Section 3.9, Article X and Section 11.2
shall survive the termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in part,
in accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. Any transfer or purported transfer of any Security
not made in accordance with this Declaration shall be null and void.
(b) Subject to this Article IX, QUIPS may only be transferred,
in whole or in part, in accordance with the terms and conditions set forth in
this Declaration. To the fullest extent permitted by law, any transfer or
purported transfer of any security not made in accordance with this Declaration
shall be null and void.
(c) The Sponsor may not transfer the Common Trust Securities;
provided, however, that any permitted successor of the Sponsor under the
Indenture may succeed to the Sponsor's ownership of the Common Trust Securities.
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(d) The Registrar shall provide for the registration of
Securities and of the transfer of Securities, which will be effected without
charge but only upon payment (with such indemnity as the Registrar may require)
in respect of any tax or other governmental charges that may be imposed in
relation to it. Upon surrender for registration of transfer of any Securities,
the Registrar shall cause one or more new Securities to be issued in the name of
the designated transferee or transferees. Every Security surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by the Holder or
such Holder's attorney duly authorized in writing. Each Security surrendered for
registration of transfer shall be canceled by the Property Trustee. A transferee
of a Security shall be entitled to the rights and subject to the obligations of
a Holder hereunder upon the receipt by such transferee of a Security. By
acceptance of a Security, each transferee shall be deemed to have agreed to be
bound by this Declaration.
SECTION 9.2 Transfer Procedures and Restrictions.
(a) Transfer and Exchange of Definitive QUIPS. When Definitive
QUIPS are presented to the Registrar or co-Registrar:
(x) to register the transfer of such Definitive QUIPS; or
(y) to exchange such Definitive QUIPS which became
mutilated, destroyed, defaced, stolen or lost, for an equal number of Definitive
QUIPS,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive QUIPS surrendered for transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Trust and the Registrar or
co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
(b) Transfer of a Definitive QUIPS for a Beneficial Interest
in a Global Security. A Definitive QUIPS may not be exchanged for a beneficial
interest in a Global Security except upon satisfaction of the requirements set
forth below. Upon receipt by the Property Trustee of a Definitive QUIPS, duly
endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Property Trustee, together with written instructions
directing the Property Trustee to make, or to direct the Clearing Agency to
make, an adjustment on its books and records with respect to the appropriate
Global Security to reflect an increase in the number of the QUIPS represented by
such Global Security, then the Property Trustee shall cancel such Definitive
QUIPS and cause, or direct the Clearing Agency to cause, the aggregate number of
QUIPS represented by the appropriate Global Security to be increased
accordingly. If no Global Securities are then outstanding, the Trust shall issue
and the Property Trustee shall authenticate, upon written order of any
Administrator, an appropriate number of QUIPS in global form.
(c) Transfer and Exchange of Global Securities. Subject to
Section 9.2(d), the transfer and exchange of Global Securities or beneficial
interests therein shall be effected
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through the Clearing Agency, in accordance with this Declaration (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Clearing Agency therefor.
(d) Transfer of a Beneficial Interest in a Global Security for
a Definitive QUIPS.
(i) If the QUIPS cease to constitute Pledged Securities,
any Person having a beneficial interest in a Global Security may upon request,
but only upon 20 days prior notice to the Property Trustee, and if accompanied
by the information specified below, exchange such beneficial interest for a
Definitive QUIPS representing the same number of QUIPS. Upon receipt by the
Property Trustee from the Clearing Agency or its nominee on behalf of any Person
having a beneficial interest in a Global Security of written instructions or
such other form of instructions as is customary for the Clearing Agency or the
Person designated by the Clearing Agency as having such a beneficial interest in
a QUIPS and a certification from the transferor (in a form substantially similar
to that attached hereto as the "Form of Assignment" in Exhibit A-1), which may
be submitted by facsimile, then the Property Trustee will cause the aggregate
number of QUIPS represented by Global Securities to be reduced on its books and
records and, following such reduction, the Trust will execute and the Property
Trustee will authenticate and make available for delivery to the transferee a
Definitive QUIPS.
(ii) Definitive QUIPS issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 9.2(d) shall be
registered in such names and in such authorized denominations as the Clearing
Agency, pursuant to instructions from its Participants or indirect participants
or otherwise, shall instruct the Property Trustee in writing. The Property
Trustee shall deliver such QUIPS to the Persons in whose names such QUIPS are so
registered in accordance with such instructions of the Clearing Agency.
(e) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provisions of this Declaration (other than
the provisions set forth in subsection (f) of this Section 9.2), a Global
Security may not be transferred as a whole except by the Clearing Agency to a
nominee of the Clearing Agency or another nominee of the Clearing Agency or by
the Clearing Agency or any such nominee to a successor Clearing Agency or a
nominee of such successor Clearing Agency.
(f) Authentication of Definitive QUIPS. If at any time:
(i) there occurs a Default or an Event of Default which is
continuing, or
(ii) the Trust, at the direction of the Sponsor, as Holder
of all of the issued and outstanding QUIPS, notifies the Property
Trustee in writing that it elects to cause the issuance of Definitive
QUIPS under this Declaration,
then the Trust will execute, and the Property Trustee, upon receipt of a written
order of the Trust signed by one Administrator requesting the authentication and
delivery of Definitive
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QUIPS to the Persons designated by the Trust, will authenticate and make
available for delivery Definitive QUIPS, equal in number to the number of QUIPS
represented by the Global Securities, in exchange for such Global Securities.
(g) Cancellation or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for Definitive QUIPS to the extent permitted by this Declaration or redeemed,
repurchased or canceled in accordance with the terms of this Declaration, such
Global Security shall be returned to the Clearing Agency for cancellation or
retained and canceled by the Property Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Security is exchanged for
Definitive QUIPS, QUIPS represented by such Global Security shall be reduced and
an adjustment shall be made on the books and records of the Property Trustee (if
it is then the custodian for such Global Security) with respect to such Global
Security, by the Property Trustee or the Securities custodian, to reflect such
reduction.
(h) Obligations with Respect to Transfers and Exchanges of
QUIPS.
(i) To permit registrations of transfers and exchanges, an
Administrator on behalf of the Trust shall execute and the Property Trustee
shall authenticate Definitive QUIPS and Global Securities at the Registrar's or
co-Registrar's request in accordance with the terms of this Declaration.
(ii) Registrations of transfers or exchanges will be
effected without charge, but only upon payment (with such indemnity as the Trust
or the Sponsor may require) in respect of any tax or other governmental charge
that may be imposed in relation to it.
(iii) The Registrar or co-registrar shall not be required
to register the transfer of or exchange of QUIPS during a period beginning at
the opening of business 15 days before the day of mailing of a notice of
redemption of QUIPS and ending at the close of business on the day of such
mailing.
(iv) Prior to the due presentation for registrations of
transfer of any QUIPS, the Trust, the Property Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose name a
QUIPS is registered as the absolute owner of such QUIPS for the purpose of
receiving Distributions on such QUIPS and for all other purposes whatsoever, and
none of the Trust, the Property Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
(v) All QUIPS issued upon any transfer or exchange
pursuant to the terms of this Declaration shall evidence the same security and
shall be entitled to the same benefits under this Declaration as the QUIPS
surrendered upon such transfer or exchange.
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(i) No Obligation of the Property Trustee.
(i) The Property Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Security, a Participant in the
Clearing Agency or other Person with respect to the accuracy of the records of
the Clearing Agency or its nominee or of any Participant thereof, with respect
to any ownership interest in the QUIPS or with respect to the delivery to any
Participant, beneficial owner or other Person (other than the Clearing Agency)
of any notice (including any notice of redemption) or the payment of any amount,
under or with respect to such QUIPS. All notices and communications to be given
to the Holders and all payments to be made to Holders under the QUIPS shall be
given or made only to or upon the order of the registered Holders (which shall
be the Clearing Agency or its nominee in the case of a Global Security). The
rights of beneficial owners in any Global Security shall be exercised only
through the Clearing Agency subject to the applicable rules and procedures of
the Clearing Agency. The Property Trustee may conclusively rely and shall be
fully protected in relying upon information furnished by the Clearing Agency or
any agent thereof with respect to its Participants and any beneficial owners.
(ii) The Property Trustee and Registrar shall have no
obligation or duty to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Declaration or under applicable law
with respect to any transfer of any interest in any QUIPS (including any
transfers between or among Clearing Agency Participants or beneficial owners in
any Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so if
and when expressly required by, the terms of this Declaration, and to examine
the same to determine substantial compliance as to form with the express
requirements hereof.
(j) Minimum Transfers. QUIPS may only be transferred in
minimum blocks of $100,000 aggregate liquidation amount. Any transfer of QUIPS
in a block having an aggregate liquidation amount of less than $100,000 shall be
deemed to be voided and of no legal effect whatsoever. Any such transferee shall
be deemed not to be a holder of such QUIPS for any purpose, including, but not
limited to, the receipt of payments on such QUIPS, and such transferee shall be
deemed to have no interest whatsoever in such QUIPS.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any Security
shall be registered on the books and records of the Trust as the sole owner of
such Security for purposes of receiving Distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Security on the part of any Person, whether
or not the Trust shall have actual or other notice thereof.
SECTION 9.4 Book Entry Interests.
Global Securities shall initially be registered on the books
and records of the Trust in the name of Cede & Co., the nominee of the Clearing
Agency, and no QUIPS
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Beneficial Owner will receive a definitive certificate representing such QUIPS
Beneficial Owner's interests in such Global Securities, except as provided in
Section 9.2. Unless and until definitive, fully registered certificates
representing QUIPS have been issued to the QUIPS Beneficial Owners pursuant to
Section 9.2 and Section 7.9:
(a) the provisions of this Section 9.4 shall be in full force
and effect;
(b) the Trust and the Trustees shall be entitled to deal with
the Clearing Agency for all purposes of this Declaration (including the payment
of Distributions on the Global Securities and receiving approvals, votes or
consents hereunder) as the Holder of the QUIPS and the sole holder of the Global
Securities and shall have no obligation to the QUIPS Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4
conflict with any other provisions of this Declaration, the provisions of this
Section 9.4 shall control; and
(d) the rights of the QUIPS Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such QUIPS Beneficial Owners and the
Clearing Agency and/or the Clearing Agency Participants and receive and transmit
payments of Distributions on the Global Securities to such Clearing Agency
Participants. DTC will make book entry transfers among the Clearing Agency
Participants.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the Holders of
QUIPS is required under this Declaration, the Trustees shall give all such
notices and communications specified herein to be given to the Holders of Global
Securities to the Clearing Agency, and shall have no notice obligations to the
QUIPS Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the QUIPS, the Administrators may, in
their sole discretion, appoint a successor Clearing Agency with respect to such
QUIPS.
ARTICLE X
LIMITATION OF LIABILITY OF HOLDERS OF
SECURITIES, TRUSTEES, ADMINISTRATORS OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration, the
Securities Guarantees and the terms of the Securities, the Sponsor shall not be:
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(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the Securities
which shall be made solely from assets of the Trust; and
(ii) required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Sponsor shall be liable for all of the debts and
obligations of the Trust (other than with respect to the Securities) to the
extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the
Holders of the QUIPS shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Declaration or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Securities might properly be paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified
Person has duties (including fiduciary duties) and liabilities relating thereto
to the Trust or to any other Covered Person, an Indemnified Person acting under
this Declaration shall not be liable to the Trust or to any other Covered Person
for its good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or in equity
(other than the duties imposed on the
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Property Trustee under the Trust Indenture Act), are agreed by the parties
hereto to replace such other duties and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises
between any Covered Persons and any Indemnified Person; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person shall act in
a manner that is, or provide terms that are, fair and reasonable to the Trust or
any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is
permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider such interests
and factors as it desires, including its own interests, and shall have no duty
or obligation to give any consideration to any interest of or factors affecting
the Trust or any other Person; or
(ii) in its "good faith" or under another express
standard, the Indemnified Person shall act under such express standard and shall
not be subject to any other or different standard imposed by this Declaration or
by applicable law.
SECTION 10.4 Indemnification.
(a)(i) The Sponsor shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust) by reason of the fact
that he is or was a Company Indemnified Person against expenses (including
attorneys' fees and expenses), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
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judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Company
Indemnified Person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Trust, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
(ii) The Sponsor shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Trust to procure a judgment in its favor by
reason of the fact that he is or was a Company Indemnified Person against
expenses (including attorneys' fees and expenses) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Trust and except that no such
indemnification shall be made in respect of any claim, issue or matter as to
which such Company Indemnified Person shall have been adjudged to be liable to
the Trust unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such Court of Chancery or such other court
shall deem proper.
(iii) To the extent that a Company Indemnified Person
shall be successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of liability)
in defense of any action, suit or proceeding referred to in paragraphs (i) and
(ii) of this Section 10.4(a), or in defense of any claim, issue or matter
therein, he shall be indemnified, to the full extent permitted by law, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of
this Section 10.4(a) (unless ordered by a court) shall be made by the Sponsor
only as authorized in the specific case upon a determination that
indemnification of the Company Indemnified Person is proper in the circumstances
because he has met the applicable standard of conduct set forth in paragraphs
(i) and (ii). Such determination shall be made by Holder of the Common Trust
Securities.
(v) To the fullest extent permitted by law, expenses
(including attorneys' fees and expenses) incurred by a Company Indemnified
Person in defending a civil, criminal, administrative or investigative action,
suit or proceeding referred to in paragraphs (i) and (ii) of this Section
10.4(a) shall be paid by the Sponsor in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such Company Indemnified Person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Sponsor as
authorized in this Section 10.4(a). Notwithstanding the foregoing, no advance
shall be made by the Sponsor if a determination is reasonably and promptly made
by the Holder of the Common Trust Securities, that, based upon the facts known
to the Holder of the Common Trust Securities at the time such
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determination is made, such Company Indemnified Person acted in bad faith or in
a manner that such person did not believe to be in or not opposed to the best
interests of the Trust, or, with respect to any criminal proceeding, that such
Company Indemnified Person believed or had reasonable cause to believe his
conduct was unlawful. In no event shall any advance be made in instances where
the Holder of the Common Trust Securities reasonably determine that such person
deliberately breached his duty to the Trust or its Common Trust Securities or
QUIPS Holders.
(vi) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other paragraphs of this Section
10.4(a) shall not be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any agreement,
vote of stockholders or disinterested directors of the Sponsor or Holders of the
QUIPS or otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office. All rights to indemnification
under this Section 10.4(a) shall be deemed to be provided by a contract between
the Sponsor and each Company Indemnified Person who serves in such capacity at
any time while this Section 10.4(a) is in effect. Any repeal or modification of
this Section 10.4(a) shall not affect any rights or obligations then existing.
(vii) The Sponsor or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified Person
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Sponsor would
have the power to indemnify him against such liability under the provisions of
this Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to
"the Trust" shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in a
consolidation or merger, so that any person who is or was a director, trustee,
officer or employee of such constituent entity, or is or was serving at the
request of such constituent entity as a director, trustee, officer, employee or
agent of another entity, shall stand in the same position under the provisions
of this Section 10.4(a) with respect to the resulting or surviving entity as he
would have with respect to such constituent entity if its separate existence had
continued.
(ix) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 10.4(a) shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a Company Indemnified Person and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(b) The Sponsor agrees to indemnify the (i) Property
Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee
and the Delaware Trustee, and (iv) any officers, directors, shareholders,
members, partners, employees, representatives, custodians, nominees or agents of
the Property Trustee and the Delaware Trustee (each of the Persons in (i)
through (iv) being referred to as a "Fiduciary Indemnified Person") for, and to
hold each Fiduciary Indemnified Person harmless against, any and all loss,
liability, damage,
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claim or expense including taxes (other than taxes based on the income of such
Fiduciary Indemnified Person) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or investigating
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder. The obligation to indemnify as set forth in this
Section 10.4(b) shall survive the satisfaction and discharge of this Declaration
and the Trust or the earlier resignation or removal of such Fiduciary
Indemnified Person.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Property Trustee (subject to Section 5.3(c)) may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, similar or dissimilar to the business of the Trust, and the
Trust and the Holders shall have no rights by virtue of this Declaration in and
to such independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the Trust,
shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the
Delaware Trustee, or the Property Trustee shall be obligated to present any
particular investment or other opportunity to the Trust even if such opportunity
is of a character that, if presented to the Trust, could be taken by the Trust,
and any Covered Person, the Sponsor, the Delaware Trustee and the Property
Trustee shall have the right to take for its own account (individually or as a
partner or fiduciary) or to recommend to others any such particular investment
or other opportunity. Any Covered Person, the Delaware Trustee and the Property
Trustee may engage or be interested in any financial or other transaction with
the Sponsor or any Affiliate of the Sponsor, or may act as depositary, trustee
or agent for, or act on any committee or body of holders of, securities or other
obligations of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the
calendar year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the
Administrators shall keep, or cause to be kept, full books of account, records
and supporting documents, which shall reflect in reasonable detail, each
transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The Trust shall use the accrual method of
accounting for United States Federal income tax purposes. The books of account
and the
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records of the Trust shall be examined by and reported upon as of the end of
each Fiscal Year of the Trust by a firm of independent certified public
accountants selected by the Administrators.
(b) The Administrators shall cause to be duly prepared and
delivered to each of the Holders, any annual United States Federal income tax
information statement, required by the Code, containing such information with
regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Administrators shall endeavor to deliver all
such information statements within 90 days after the end of each Fiscal Year of
the Trust.
(c) The Administrators shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States Federal
income tax return, on a Form 1041 or such other form required by United States
Federal income tax law, and any other annual income tax returns required to be
filed by the Administrators on behalf of the Trust with any state or local
taxing authority.
SECTION 11.3 Banking.
The Trust shall maintain one or more bank accounts in the name
and for the sole benefit of the Trust; provided, however, that all payments of
funds in respect of the Debentures held by the Property Trustee shall be made
directly to the Property Trustee Account and no other funds of the Trust shall
be deposited in the Property Trustee Account. The sole signatories for such
accounts shall be designated by the Administrators; provided, however, that the
Property Trustee shall designate the signatories for the Property Trustee
Account.
SECTION 11.4 Withholding.
The Property Trustee and the Administrators shall comply with
all withholding requirements under United States Federal, state and local law.
The Property Trustee shall request, and the Holders shall provide to the Trust,
such forms or certificates as are necessary to establish an exemption from
withholding with respect to each Holder, and any representations and forms as
shall reasonably be requested by the Trust to assist it in determining the
extent of, and in fulfilling, its withholding obligations. The Administrators
shall file required forms with applicable jurisdictions and, unless an exemption
from withholding is properly established by a Holder, shall remit amounts
withheld with respect to the Holder to applicable jurisdictions. To the extent
that the Property Trustee is required to withhold and pay over any amounts to
any authority with respect to Distributions or allocations to any Holder, the
amount withheld shall be deemed to be a Distribution in the amount of the
withholding to the Holder. In the event of any claimed over withholding, Holders
shall be limited to an action against the applicable jurisdiction. If the amount
required to be withheld was not withheld from actual Distributions made, the
Trust may reduce subsequent Distributions by the amount of such withholding.
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ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed by:
(i) if the amendment affects the rights, powers, duties,
obligations or immunities of the Administrators, the Administrators (or
if there are more than two Administrators, a majority of the
Administrators);
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the Property
Trustee; and
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware
Trustee.
(b) No amendment shall be made, and any such purported
amendment shall be void and ineffective:
(i) unless, in the case of any proposed amendment,
the Property Trustee shall have first received an Officers' Certificate
from the Sponsor that such amendment is permitted by, and conforms to,
the terms of this Declaration (including the terms of the Securities);
(ii) unless, in the case of any proposed amendment
which affects the rights, powers, duties, obligations or immunities of
the Property Trustee, the Property Trustee shall have first received:
(A) an Officers' Certificate from the Sponsor that
such amendment is permitted by, and conforms to, the terms of
this Declaration (including the terms of the Securities); and
(B) an Opinion of Counsel that such amendment is
permitted by, and conforms to, the terms of this Declaration
(including the terms of the Securities);
provided, however, that the Property Trustee shall not be required to
sign any such amendment; and
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(iii) unless the Property Trustee shall have first
received an Opinion of Counsel that such amendment or the exercise of
any power granted to the Property Trustee or Delaware Trustee in
accordance with such amendment will not:
(A) cause the Trust to be classified for purposes
of United States Federal income taxation as an association
taxable as a corporation or as other than a grantor trust; or
(B) cause the Trust to be deemed to be an
Investment Company required to be registered under the
Investment Company Act;
(c) Except as provided in Section 12.1(d), (e) or (h), no
amendment shall be made, and any such purported amendment shall be void and
ineffective unless the Holders of a Majority in liquidation amount of the QUIPS
(or Units) shall have consented to such amendment.
(d) In addition to and notwithstanding any other provision in
this Declaration, without the consent of each affected Holder, this Declaration
may not be amended to (i) change the amount or timing of any Distribution or
other payment on the Securities (including payment of the Applicable Put Price
(as defined in the Indenture)) or otherwise adversely affect the amount of any
distribution required to be made in respect of the Securities as of a specified
date or (ii) restrict the right of a Holder of Securities to institute suit for
the enforcement of any such payment on or after such date.
(e) Section 9.1(b) and this Section 12.1 shall not be amended
without the consent of all of the Holders of the Securities.
(f) Article Four shall not be amended without the consent of
the Holders of a Majority in liquidation amount of the Common Trust Securities.
(g) The rights of the holders of the Common Trust Securities
under Article Five to increase or decrease the number of, and appoint and remove
Trustees or Administrators shall not be amended without the consent of the
Holders of a Majority in liquidation amount of the Common Trust Securities.
(h) Notwithstanding Section 12.1(c), this Declaration may be
amended from time to time by the Sponsor and the Property Trustee without the
consent of the Holders of the Securities to:
(i) cure any ambiguity, correct or supplement any
provision in this Declaration that may be inconsistent with any other provision
of this Declaration or to make any other provisions with respect to matters or
questions arising under this Declaration which shall not be inconsistent with
the other provisions of the Declaration; or
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(ii) to modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that the Trust will
be classified for United States Federal income tax purposes as a grantor trust
or as other than an association taxable as a corporation at all times that any
Securities are outstanding or to ensure that the Trust will not be required to
register as an Investment Company under the Investment Company Act;
provided, however, that in the case of clauses (i) and (ii), such action shall
not adversely affect in any material respect the interests of the Holders, and
any amendments of this Declaration pursuant to Section 12.1(h) shall become
effective when notice thereof is given to the Holders of the Securities.
SECTION 12.2 Meetings of the Holders; Action by Written Consent.
(a) Meetings of the Holders of any class of Securities may be
called at any time by the Administrators (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities or Units are entitled to act under the terms of this Declaration, the
terms of the Securities or the rules of any stock exchange on which the QUIPS or
Units are listed or admitted for trading. The Administrators shall call a
meeting of the Holders of such class if directed to do so by the Holders of at
least 10% in liquidation amount of such class of Securities. Such direction
shall be given by delivering to the Administrators one or more notices in a
writing stating that the signing Holders of Securities wish to call a meeting
and indicating the general or specific purpose for which the meeting is to be
called. Any Holders calling a meeting shall specify in writing the Securities
held by the Holders exercising the right to call a meeting and only those
Securities specified shall be counted for purposes of determining whether the
required percentage set forth in the second sentence of this paragraph has been
met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given by the Property
Trustee to all the Holders of Securities (or Units) having a right to vote
thereat at least seven days and not more than 60 days before the date of such
meeting. Whenever a vote, consent or approval of the Holders is permitted or
required under this Declaration or the rules of any stock exchange on which the
QUIPS or Units are listed or admitted for trading, such vote, consent or
approval may be given at a meeting of the Holders. Any action that may be taken
at a meeting of the Holders of Securities may be taken without a meeting if a
consent in writing setting forth the action so taken is signed by the Holders of
Securities owning not less than the minimum amount of Securities in liquidation
amount that would be necessary to authorize or take such action at a meeting at
which all Holders having a right to vote thereon were present and voting. Prompt
notice of the taking of action without a meeting shall be given to the Holders
entitled to vote who have not consented in writing. The Administrators may
specify that any written ballot submitted to the Security Holder for the purpose
of taking any action without a meeting shall be returned to the Trust within the
time specified by the Administrators;
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(ii) each Holder may authorize any Person to act for it by
proxy on all matters in which a Holder is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. No proxy
shall be valid after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the
discretion of the Holder of Securities executing it. Except as otherwise
provided herein, all matters relating to the giving, voting or validity of
proxies shall be governed by the General Corporation Law of the State of
Delaware relating to proxies, and judicial interpretations thereunder, as if the
Trust were a Delaware corporation and the Holders were stockholders of a
Delaware corporation;
(iii) each meeting of the Holders shall be conducted by the
Administrators or by such other Person that the Administrators may designate;
and
(iv) unless the Business Trust Act, this Declaration, the
terms of the Securities, the Trust Indenture Act or the listing rules of any
stock exchange on which the QUIPS or Units are then listed or trading, otherwise
provides, the Administrators, in their sole discretion, shall establish all
other provisions relating to meetings of Holders, including notice of the time,
place or purpose of any meeting at which any matter is to be voted on by any
Holders of Securities, waiver of any such notice, action by consent without a
meeting, the establishment of a record date, quorum requirements, voting in
person or by proxy or any other matter with respect to the exercise of any such
right to vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
The Trustee that acts as initial Property Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration,
and each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) The Property Trustee is a New York banking corporation
with trust powers and authority to execute and deliver, and to carry out and
perform its obligations under the terms of, this Declaration;
(b) The execution, delivery and performance by the Property
Trustee of the Declaration has been duly authorized by all necessary corporate
action on the part of the Property Trustee. The Declaration has been duly
executed and delivered by the Property Trustee and constitutes a legal, valid
and binding obligation of the Property Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
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generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law);
(c) The execution, delivery and performance of this
Declaration by the Property Trustee does not conflict with or constitute a
breach of the charter or by-laws of the Property Trustee; and
(d) No consent, approval or authorization of, or registration
with or notice to, any New York State or Federal banking authority is required
for the execution, delivery or performance by the Property Trustee of this
Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration,
and each Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) The Delaware Trustee is duly organized, validly existing
and in good standing under the laws of the State of Delaware, with trust power
and authority to execute and deliver, and to carry out and perform its
obligations under the terms of, this Declaration;
(b) The execution, delivery and performance by the Delaware
Trustee of this Declaration has been duly authorized by all necessary corporate
action on the part of the Delaware Trustee. This Declaration has been duly
executed and delivered by the Delaware Trustee and constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law);
(c) No consent, approval or authorization of, or registration
with or notice to, any federal banking authority is required for the execution,
delivery or performance by the Delaware Trustee of this Declaration; and
(d) The Delaware Trustee is a natural person who is a resident
of the State of Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware.
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ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
All notices provided for in this Declaration shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Administrators at
the Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Holders):
Life Re Capital Trust II
c/o Life Re Corporation
969 High Ridge Road
Stamford, CT 06905
Attention: W. Weldon Wilson, Administrator
(b) if given to the Delaware Trustee, at the mailing address
set forth below (or such other address as Delaware Trustee may give notice of to
the Holders):
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, DE 19711
Attention: Corporate Trust Department
(c) if given to the Property Trustee, at the Property
Trustee's mailing address set forth below (or such other address as the Property
Trustee may give notice of to the Holders):
The Bank of New York
101 Barclay Street
21st Floor West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
(d) if given to the Holder of the Common Trust Securities, at
the mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Trust Securities may give notice to the Trust):
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Life Re Corporation
969 High Ridge Road
Stamford, CT 06905
Attention: Chief Financial Officer
(e) if given to any other Holder, at the address set forth on
the books and records of the Trust.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 14.2 Governing Law.
This Declaration and the rights of the parties hereunder shall
be governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
SECTION 14.3 Intention of the Parties.
It is the intention of the parties hereto that for United
States Federal income tax purposes the Trust be classified as a grantor trust
and the Debentures as indebtedness. The provisions of this Declaration shall be
interpreted to further this intention of the parties. The parties hereto agree
and any Holder by the acquisition of a Security shall be deemed to have agreed
to treat the Trust as a grantor trust and the Debentures as indebtedness in all
tax and accounting filings and reports.
SECTION 14.4 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
SECTION 14.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is
named or referred to, the successors and assigns of such party shall be deemed
to be included, and all covenants and agreements in this Declaration by the
Sponsor and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
SECTION 14.6 Partial Enforceability.
If any provision of this Declaration, or the application of
such provision to any Person or circumstance, shall be held invalid, the
remainder of this Declaration, or the
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application of such provision to persons or circumstances other than those to
which it is held invalid, shall not be affected thereby.
SECTION 14.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
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IN WITNESS WHEREOF, the undersigned has caused these presents
to be executed as of the day and year first above written.
----------------------------------
Rodney A. Hawes, Jr.,
as Administrator
----------------------------------
Jacques E. Dubois,
as Administrator
----------------------------------
W. Weldon Wilson,
as Administrator
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By:
------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Property Trustee
By:
------------------------------
Name:
Title:
LIFE RE CORPORATION
as Sponsor
By:
------------------------------
Name:
Title:
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ANNEX I
TERMS OF
___% QUARTERLY INCOME PREFERRED SECURITIES
___% COMMON TRUST SECURITIES
Pursuant to Section 7.1 of the Amended and Restated
Declaration of Trust, dated as of March __, 1998 (as amended from time to time,
the "Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Securities are set out below
(each capitalized term used but not defined herein has the meaning set forth in
the Declaration or, if not defined in such Declaration, as defined in the
Prospectus referred to below in Section 2(c) of this Annex I):
1. Designation and Number.
(a) Quarterly Income Preferred Securities. 100,000 Quarterly
Income Preferred Securities of the Trust with an aggregate liquidation amount
with respect to the assets of the Trust of One Hundred Million Dollars
($100,000,000), and each with a liquidation amount with respect to the assets of
the Trust of $1,000 per security, are hereby designated for the purposes of
identification only as "____% Quarterly Income Preferred Securities" (the
"QUIPS"). The certificates evidencing the QUIPS shall be substantially in the
form of Exhibit A-1 to the Declaration, with such changes and additions thereto
or deletions therefrom as may be required by ordinary usage, custom or practice
or to conform to the rules of any exchange or quotation system on which the
QUIPS are listed, traded or quoted, if any.
(b) Common Trust Securities. 3,093 Common Trust Securities of
the Trust with an aggregate liquidation amount with respect to the assets of the
Trust of Three Million and Ninety-Three Thousand Dollars ($3,093,000) and a
liquidation amount with respect to the assets of the Trust of $1,000 per
security, are hereby designated for the purposes of identification only as
"____% Common Trust Securities" (the "Common Trust Securities"). The
certificates evidencing the Common Trust Securities shall be substantially in
the form of Exhibit A-2 to the Declaration, with such changes and additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice.
2. Distributions.
(a) Distributions payable on each Security will be fixed at a
rate per annum of ____% (the "Coupon Rate") of the stated liquidation amount of
$1,000 per Security (the "Liquidation Amount"), such rate being the rate of
interest payable on the Debentures to be held by the Property Trustee. Except as
set forth below in respect of an Extension Period, Distributions in arrears for
more than one quarterly period will bear additional distributions
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thereon compounded quarterly at the Coupon Rate (to the extent permitted by
applicable law). The term "Distributions", as used herein, includes
distributions of any such interest unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Property Trustee and to the extent the Property Trustee has funds on
hand legally available therefor.
(b) Distributions on the Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from March __, 1998, and will be payable
quarterly in arrears on ____, ____, ____ and ____ of each year, commencing on
______ ___, 1998 (each, a "Distribution Date"), except as otherwise described
below. Distributions will be computed on the basis of a 360-day year consisting
of twelve 30-day months and for any period less than a full calendar month on
the basis of the actual number of days elapsed in such month. As long as no
Event of Default has occurred and is continuing under the Indenture, the
Debenture Issuer has the right under the Indenture to elect to defer payments of
interest by extending the interest payment period at any time and from time to
time on the Debentures (each an "Extension Period"), during which Extension
Period no interest shall be due and payable on the Debentures, provided that no
Extension Period shall end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. During any such
Extension Period, the Debenture Issuer may not (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Debenture Issuer's capital stock (which includes
common and preferred stock), (ii) make any payment of principal of or premium,
if any, or interest on or repay, repurchase or redeem any debt securities of the
Debenture Issuer that rank pari passu with or junior in right of payment to the
Debentures or (iii) make any guarantee payments with respect to any guarantee by
the Debenture Issuer of any securities of any subsidiary of the Debenture Issuer
if such guarantee ranks pari passu with or junior in right of payment to the
Debentures (other than, in the case of clauses (i), (ii) and (iii), (a)
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Debenture Issuer, (b)
any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) as a result of a reclassification of the
Debenture Issuer's capital stock solely into shares of one or more classes of
series of the Debenture Issuer's capital stock or the exchange or conversion of
one class or series of the Debenture Issuer's capital stock for another class or
series of the Debenture Issuer's capital stock, (e) the purchase of fractional
interests in shares of the Debenture Issuer's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, and (f) purchases of common stock of the Debenture
Issuer in connection with the satisfaction by the Debenture Issuer of its
obligations (including purchases related to the issuance of such common stock or
rights) under any of the Debenture Issuer's benefit plans for its and its
subsidiaries' directors, officers or employees or any of the Debenture Issuer's
dividend reinvestment plans). As a consequence of such deferral, Distributions
will also be deferred. Despite such deferral, Distributions will continue to
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accumulate with additional Distributions thereon (to the extent permitted by
applicable law but not at a rate greater than the rate at which interest is then
accruing on the Debentures) at the Coupon Rate compounded quarterly during any
such Extension Period. Prior to the termination of any such Extension Period,
the Debenture Issuer may further defer payments of interest by further extending
such Extension Period; provided that such Extension Period may not extend beyond
the Maturity Date of the Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, the Debenture Issuer may
commence a new Extension Period, subject to the above requirements.
(c) Distributions on the Securities will be payable to the
Holders thereof as they appear on the books and records of the Trust on the
relevant record dates which shall be one Business Day prior to the relevant
Distribution Date, unless the Securities are issued in certificated form, in
which case the regular record date for such Distributions shall be the first day
of the month in which the relevant Distribution Date falls, which Distribution
Dates correspond to the interest payment dates on the Debentures. The relevant
record dates for the Common Trust Securities shall be the same as the record
dates for the QUIPS. Distributions payable on any Securities that are not
punctually paid on any Distribution Date, as a result of the Debenture Issuer
having failed to make a payment under the Debentures, will cease to be payable
to the Holder on the relevant record date, and such defaulted Distribution will
instead be payable to the Person in whose name such Securities are registered on
the special record date or other specified date determined in accordance with
the Indenture. If any date on which Distributions are payable on the Securities
is not a Business Day, then payment of the Distribution payable on such date
will be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except if such Business
Day is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date such payment was originally payable.
(d) In the event that there is any money or other property
held by or for the Trust that is not accounted for hereunder, such property
shall be distributed Pro Rata (as defined herein) among the Holders of the
Securities.
3. Liquidation Distribution Upon Dissolution.
In the event of any dissolution of the Trust or the Sponsor
otherwise gives notice of its election to dissolve the Trust pursuant to Section
8.1(a)(iii) of the Declaration, the Trust shall be liquidated by the
Administrators as expeditiously as the Administrators determine to be possible
by distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to the Holders of the Securities a Like Amount (as
defined below) of the Debentures, unless such distribution is determined by the
Property Trustee not to be practicable, in which event such Holders will be
entitled to receive out of the assets of the Trust legally available for
distribution to Holders, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, an amount equal to the aggregate of the
liquidation
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amount of $1,000 per Security plus accumulated and unpaid Distributions thereon
to the date of payment (such amount being the "Liquidation Distribution").
"Like Amount" means (i) with respect to a redemption of the
Securities, Securities having an aggregate Liquidation Amount equal to the
principal amount of Debentures to be paid in accordance with their terms and
(ii) with respect to a distribution of Debentures upon the liquidation of the
Trust, Debentures having a principal amount equal to the aggregate Liquidation
Amount of the Securities of the Holder to whom such Debentures are distributed.
If, upon any such liquidation, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets on hand
legally available to pay in full the aggregate Liquidation Distribution, then
the amounts payable directly by the Trust on the Securities shall be paid on a
Pro Rata basis, except that if a Event of Default has occurred and is
continuing, the QUIPS shall have priority over the Common Trust Securities.
4. Redemption and Distribution.
(a) The QUIPS will be subject to mandatory redemption on the
Maturity Date of the Debentures out of the proceeds of the repayment of the
Debentures at Maturity. Upon the repayment of the Debentures in whole at
maturity, the proceeds from such repayment shall be simultaneously applied by
the Property Trustee (subject to the Property Trustee having received notice no
later than 45 days prior to such repayment) to redeem a Like Amount of the
Securities at a redemption price equal to the principal of and accrued and
unpaid interest on the Debentures as of the Maturity Date thereof (the "Final
Redemption Price").
(b) On and from the date fixed by the Administrators for any
distribution of Debentures and liquidation of the Trust: (i) the Securities will
no longer be deemed to be outstanding, (ii) the Clearing Agency or its nominee
(or any successor Clearing Agency or its nominee), as the Holder of the
Securities, will receive a registered global certificate or certificates
representing the Debentures to be delivered upon such distribution and (iii) any
certificates representing Securities not held by the Clearing Agency or its
nominee (or any successor Clearing Agency or its nominee) will be deemed to
represent beneficial interests in a Like Amount of Debentures and bearing
accrued and unpaid interest in an amount equal to the accumulated and unpaid
Distributions on such Securities until such certificates are presented to the
Debenture Issuer or its agent for transfer or reissue, whereupon the Debenture
Issuer will issue to such Holder, and the Debenture Trustee will authenticate, a
certificate representing such Debentures.
(c) The procedure with respect to redemptions or distributions
of Debentures shall be as follows:
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(i) Notice of any redemption of, or notice of distribution
of Debentures in exchange for, the Securities (a "Redemption/Distribution
Notice") will be given by the Trust by mail to each Holder to be redeemed or
exchanged not fewer than 30 nor more than 60 days before the date fixed for
redemption or exchange thereof which, in the case of a redemption, will be the
Maturity Date fixed for redemption of the Debentures. For purposes of the
calculation of the date of redemption or exchange and the dates on which notices
are given pursuant to this Section 4(f)(i), a Redemption/Distribution Notice
shall be deemed to be given on the day such notice is first mailed by
first-class mail, postage prepaid, to Holders. Each Redemption/Distribution
Notice shall be addressed to the Holders of Securities at the address of each
such Holder appearing in the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing of either thereof with respect
to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(ii) If Securities are to be redeemed and the Trust gives
a Redemption/Distribution Notice, then (A) with respect to QUIPS issued in
book-entry form, by 12:00 noon, New York City time, on the Maturity Date,
provided that the Debenture Issuer has paid the Property Trustee a sufficient
amount of cash in connection with the maturity of the Debentures by 10:00 a.m.,
New York City time, on the Maturity Date, the Property Trustee will deposit
irrevocably with the Clearing Agency or its nominee (or successor Clearing
Agency or its nominee) funds sufficient to pay the Final Redemption Price and
will give the Clearing Agency irrevocable instructions and authority to pay the
Final Redemption Price to the Clearing Agency Participants, and (B) with respect
to QUIPS issued in certificated form and Common Trust Securities, provided that
the Debenture Issuer has paid the Property Trustee a sufficient amount of cash
in connection with the maturity of the Debentures, the Property Trustee will pay
the Final Redemption Price to the Holders by check mailed to the address of the
relevant Holder appearing on the books and records of the Trust on the Maturity
Date. If a Redemption/Distribution Notice shall have been given and funds
deposited as required, if applicable, then immediately prior to the close of
business on the date of such deposit distributions will cease to accumulate on
the Securities and all rights of Holders will cease, except the right of the
Holders of such Securities to receive the Final Redemption Price, but without
interest on such Final Redemption Price, and such Securities shall cease to be
outstanding.
(iii) Payment of accumulated and unpaid Distributions on
the Maturity Date of the Debentures will be subject to the rights of Holders of
Securities on the close of business on a regular record date in respect of a
Distribution Date occurring on or prior to such Maturity Date.
If the Maturity Date of the Debentures is not a Business Day,
then payment of the Final Redemption Price payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), with the same force and effect as
if made on such date fixed for redemption. If payment of the
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Final Redemption Price is improperly withheld or refused and not paid either by
the Trust or by the Sponsor as guarantor pursuant to the relevant Securities
Guarantee, Distributions on such Securities will continue to accumulate from the
Maturity Date to the actual date of payment, in which case the actual payment
date will be considered the date fixed for redemption for purposes of
calculating the Final Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the
Property Trustee on behalf of the Trust to (A) in respect of the QUIPS, the
Clearing Agency or its nominee (or any successor Clearing Agency or its nominee)
if the Global Certificates have been issued or, if Definitive QUIPS have been
issued, to the Holder thereof, and (B) in respect of the Common Trust Securities
to the Holder thereof.
(v) Subject to the foregoing and applicable law
(including, without limitation, United States Federal securities laws and
banking laws), provided the acquiror is not the Holder of the Common Trust
Securities or the obligor under the Indenture, the Sponsor or any of its
subsidiaries may at any time and from time to time purchase outstanding QUIPS by
tender, in the open market or by private agreement.
5. Voting Rights - QUIPS.
(a) Except as provided under Sections 5(b) and 7 and as
otherwise required by law and the Declaration, the Holders of the QUIPS will
have no voting rights. The Administrators are required to call a meeting of the
Holders of the QUIPS if directed to do so by the Holders of at least 10% in
liquidation amount of the QUIPS.
(b) So long as any Debentures are held by the Property
Trustee, the Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
exercising any trust or power conferred on such Debenture Trustee with respect
to the Debentures, (ii) waive any past default that is waivable under Section
5.07 of the Indenture, (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the Debentures
or (iv) consent to any amendment, modification or termination of the Indenture
or the Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in liquidation amount
of all outstanding QUIPS (or Units); provided, however, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the QUIPS (or Units). The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the QUIPS (or Units) except by subsequent vote of such Holders. The Property
Trustee shall notify each Holder of Securities of any notice of default with
respect to the Debentures. In addition to obtaining the foregoing approvals of
such Holders prior to taking any of the foregoing actions, the Trustees shall
obtain an Opinion of Counsel experienced in such matters to the effect that the
Trust will not
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be classified as an association taxable as a corporation for United States
Federal income tax purposes on account of such action.
If an Event of Default under the Declaration has occurred and
is continuing and such event is attributable to the failure of the Debenture
Issuer to pay principal of or premium, if any, or interest on the Debentures on
the due date (after giving effect to any Extension Period), then a Holder of
QUIPS (or Units) may directly institute a proceeding for enforcement of payment
to such Holder of the principal of or premium, if any, or interest on a Like
Amount of Debentures (a "Direct Action") on or after the respective due date
specified in the Debentures. In connection with such Direct Action, the rights
of the Common Trust Securities Holder will be subrogated to the rights of such
Holder of QUIPS (or Units) to the extent of any payment made by the Debenture
Issuer to such Holder of QUIPS (or Units) in such Direct Action, provided,
however, that no such subrogation right may be exercised so long as an Event of
Default has occurred and is continuing. Except as provided in the second
preceding sentence, the Holders of QUIPS (or Units) will not be able to exercise
directly any other remedy available to the holders of the Debentures.
Any approval or direction of Holders of QUIPS (or Units) may
be given at a separate meeting of such Holders of QUIPS (or Units) convened for
such purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Property Trustees will cause a notice of any
meeting at which Holders of QUIPS (or Units) are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of QUIPS (or Units). Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the Holders of the QUIPS (or Units) will
be required for the Trust to redeem and cancel QUIPS or to distribute the
Debentures in accordance with the Declaration and the terms of the Securities.
Notwithstanding that Holders of QUIPS (or Units) are entitled
to vote or consent under any of the circumstances described above, any of the
QUIPS (or Units) that are owned by the Sponsor or any Affiliate of the Sponsor
shall not be entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
6. Voting Rights - Common Trust Securities.
(a) Except as provided under Sections 6(b), 6(c) and 7 as
otherwise required by law and the Declaration, the Holders of the Common Trust
Securities will have no voting rights.
I-7
<PAGE> 74
(b) Unless an Event of Default under the Declaration shall
have occurred and be continuing, any Trustee may be removed at any time by the
holder of the Common Trust Securities. If an Event of Default under the
Declaration has occurred and is continuing, the Property Trustee and the
Delaware Trustee may be removed at such time by the Holders of a Majority in
liquidation amount of the outstanding QUIPS. In no event will the Holders of the
QUIPS have the right to vote to appoint, remove or replace the Administrators,
which voting rights are vested exclusively in the Sponsor as the holder of the
Common Trust Securities. No resignation or removal of a Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Declaration.
(c) Subject to Section 2.6 of the Declaration and only after
each Event of Default (if any) with respect to the QUIPS has been cured, waived,
or otherwise eliminated and subject to the requirements of the last sentence of
this paragraph, the Holders of a Majority of the Common Trust Securities, voting
separately as a class, may direct the time, method, and place of conducting any
proceeding for any remedy available to the Property Trustee, or exercising any
trust or power conferred upon the Property Trustee under the Declaration,
including (i) directing the time, method, place of conducting any proceeding for
any remedy available to the Debenture Trustee, or exercising any trust or power
conferred on the Debenture Trustee with respect to the Debentures, (ii) waive
any past default and its consequences that is waivable under the Indenture, or
(iii) exercise any right to rescind or annul a declaration of acceleration of
the maturity of the principal of the Debentures; provided, however, that, where
a consent or action under the Indenture would require a Super Majority, the
Property Trustee may only give such consent or take such action at the written
direction of the Holders of at least the proportion in liquidation amount of the
Common Trust Securities which the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding. Notwithstanding this
Section 6(c), the Property Trustee shall not revoke any action previously
authorized or approved by a vote or consent of the Holders of the QUIPS. Other
than with respect to directing the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee or the Debenture
Trustee as set forth above, the Property Trustee shall not take any action
described in (i), (ii) or (iii) above, unless the Property Trustee has obtained
an Opinion of Counsel to the effect that for the purposes of United States
Federal income tax the Trust will not be classified as an association taxable as
a corporation or as other than a grantor trust on account of such action.
If an Event of Default under the Declaration has occurred and
is continuing and such event is attributable to the failure of the Debenture
Issuer to pay principal of or premium, if any, or interest on the Debentures on
the due date (after giving effect to any Extension Period), then a Holder of
Common Trust Securities may institute a Direct Action for enforcement of payment
to such Holder of the principal of or premium, if any, or interest on a Like
Amount of Debentures on or after the respective due date specified in the
Debentures. In connection with Direct Action, the rights of the Common Trust
Securities Holder will be subordinated to the rights of such Holder of QUIPS to
the extent of any payment made by the
I-8
<PAGE> 75
Debenture Issuer to such Holder of Common Trust Securities in such Direct
Action. Except as provided in the second preceding sentence, the Holders of
Common Trust Securities will not be able to exercise directly any other remedy
available to the holders of the Debentures.
Any approval or direction of Holders of Common Trust
Securities may be given at a separate meeting of Holders of Common Trust
Securities convened for such purpose, at a meeting of all of the Holders of
Securities in the Trust or pursuant to written consent. The Administrators will
cause a notice of any meeting at which Holders of Common Trust Securities are
entitled to vote, or of any matter upon which action by written consent of such
Holders is to be taken, to be mailed to each Holder of record of Common Trust
Securities. Each such notice will include a statement setting forth (i) the date
of such meeting or the date by which such action is to be taken, (ii) a
description of any resolution proposed for adoption at such meeting on which
such Holders are entitled to vote or of such matter upon which written consent
is sought and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Trust
Securities will be required for the Trust to redeem and cancel Common Trust
Securities or to distribute the Debentures in accordance with the Declaration
and the terms of the Securities.
7. Amendments to Declaration.
(a) The provisions set forth under Section 12.1 of the
Declaration and this Section 7 shall govern any amendments to the Declaration.
(b) Notwithstanding any provisions of the Declaration and the
provisions of Section 3.16(b) of the Trust Indenture Act, the right of any
Holder of QUIPS to receive payment of distributions and other payments upon
redemption, repurchase or otherwise, on or after their respective due dates, or
to institute a suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder. For the protection and enforcement of the foregoing provision, each and
every Holder of QUIPS shall be entitled to such relief as can be given either at
law or equity.
8. Right to Exercise Debenture Put Options.
Each holder of QUIPS (or, for so long as QUIPS underlie Units,
each holder of Units) will have the right to require the Trust to distribute
Debentures having an aggregate principal amount equal to the aggregate
Liquidation Amount of such QUIPS to the Put Agent (as defined in the Master Unit
Agreement), on the Stock Purchase Date (as defined in the Master Unit Agreement)
or on the date which is three months after the Stock Purchase Date (the "Final
Put Date" and, together with the Stock Purchase Date, the "Put Dates"), in
exchange for such QUIPS, in connection with the concurrent exercise by the Put
Agent on behalf of each such holder of the Debenture Put Option related thereto.
I-9
<PAGE> 76
A holder of QUIPS (or, for so long as QUIPS underlie Units,
each holder of Units) may exercise the right referred to above by presenting and
surrendering the certificate evidencing such QUIPS (or Units), at the offices of
the Property Trustee, with the form of "Notice to Require Exercise of Junior
Subordinated Debenture Put Option" on the reverse side of the certificate
completed and executed as indicated, by 10:00 a.m., New York City time, on the
applicable Put Date. If such right is properly exercised, the applicable
Debentures will be distributed to an agent for the holder appointed by Debenture
Issuer for such purpose (the "Put Agent", who shall, if the right is exercised
on the Stock Purchase Date, be the Collateral Agent), and the Put agent will
then exercise the Debenture Put Option related thereto on behalf of the holder.
9. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
according to the aggregate liquidation amount of the Securities held by the
relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the QUIPS
pro rata according to the aggregate liquidation amount of QUIPS held by the
relevant Holder relative to the aggregate liquidation amount of all QUIPS
outstanding, and only after satisfaction of all amounts owed to the Holders of
the QUIPS, to each Holder of Common Trust Securities pro rata according to the
aggregate liquidation amount of Common Trust Securities held by the relevant
Holder relative to the aggregate liquidation amount of all Common Trust
Securities outstanding.
10. Ranking; Subordination of Common Trust Securities.
(a) The QUIPS rank pari passu with the Common Trust Securities
and payment of Distributions on, and the Final Redemption Price of, the QUIPS
and the Common Trust Securities, as applicable, shall be made pro rata based on
the liquidation amount of the QUIPS and Common Trust Securities; provided,
however, that if on any Distribution Date or Maturity Date an Event of Default
under the Declaration (solely as the result of an event described in clauses
(a), (b) or (c) thereto) shall have occurred and be continuing, no payment of
any Distribution, or Final Redemption Price of, any of the Common Trust
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of the Common Trust Securities, shall be made unless payment
in full in cash of all accumulated and unpaid Distributions on all of the
outstanding QUIPS for all distribution periods terminating on or prior thereto
or, in the case of the Maturity Date, the full amount of the Final Redemption
Price therefor, shall have been made or provided for, and all funds available to
the Property Trustee shall first be applied to the payment in full in cash of
all Distributions on, or Final Redemption Price of, the QUIPS then due and
payable.
I-10
<PAGE> 77
In the case of any Event of Default, the holder of the Common
Trust Securities will be deemed to have waived any right to act with respect to
such Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the Holders of the QUIPS, and only the Holders of the QUIPS will
have the right to direct the Property Trustee to act on their behalf.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of QUIPS and Common Trust Securities, by the
acceptance thereof, agrees to the provisions of the QUIPS Guarantee and the
Common Trust Securities Guarantee, respectively, including the subordination
provisions therein and to the provisions of the Indenture and the Declaration.
12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive or
similar rights to subscribe for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the
Indenture, the QUIPS Guarantee or the Common Trust Securities Guarantee (as may
be appropriate) and the Indenture (including any supplemental indenture) to a
Holder without charge on written request to the Sponsor at its principal place
of business.
I-11
<PAGE> 78
EXHIBIT A-1
FORM OF QUARTERLY INCOME PREFERRED SECURITIES
FORM OF FACE OF SECURITY
IF THIS QUARTERLY INCOME PREFERRED SECURITY ("QUIPS") IS A GLOBAL SECURITY,
INSERT: THIS QUARTERLY INCOME PREFERRED SECURITY IS A GLOBAL SECURITY WITHIN THE
MEANING OF THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF THE DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE
CLEARING AGENCY. THIS QUIPS IS EXCHANGEABLE FOR QUIPS REGISTERED IN THE NAME OF
A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS QUIPS (OTHER
THAN A TRANSFER OF THIS QUIPS AS A WHOLE BY THE CLEARING AGENCY TO A NOMINEE OF
THE CLEARING AGENCY OR BY A NOMINEE OF THE CLEARING AGENCY TO THE CLEARING
AGENCY OR ANOTHER NOMINEE OF THE CLEARING AGENCY) MAY BE REGISTERED EXCEPT IN
LIMITED CIRCUMSTANCES.
UNLESS THIS QUIPS IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK), A NEW
YORK CORPORATION, TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY QUIPS ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
A1-1
<PAGE> 79
Certificate Number Number of Quarterly Income Preferred Securities
CUSIP NO. _______________
Certificate Evidencing Quarterly Income Preferred Securities
of
Life Re Capital Trust II
____% Quarterly Income Preferred Securities
(liquidation amount $1,000 per Quarterly Income Preferred Security)
Life Re Capital Trust II, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that ______________ (the
"Holder") is the registered owner of __________ securities of the Trust
representing preferred undivided beneficial interests in the assets of the Trust
designated the ____% Quarterly Income Preferred Securities (liquidation amount
$1,000 per Quarterly Income Preferred Security) (the "QUIPS"). Subject to the
terms of the Declaration (as defined below), the QUIPS are transferable on the
books and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer. The
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the QUIPS represented hereby are issued and shall in all respects
be subject to the provisions of the Amended and Restated Declaration of Trust of
the Trust dated as of March ___, 1998, as the same may be amended from time to
time (the "Declaration"), including the designation of the terms of the QUIPS as
set forth in Annex I to the Declaration. Capitalized terms used but not defined
herein shall have the meaning given them in the Declaration. The Sponsor will
provide a copy of the Declaration, the QUIPS Guarantee and the Indenture to a
Holder without charge upon written request to the Trust at its principal place
of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the QUIPS Guarantee to the extent provided therein.
By acceptance, the Holder agrees to treat, for United States
Federal income tax purposes, the Trust as a grantor trust, the Debentures as
indebtedness and the QUIPS as evidence of indirect beneficial ownership in the
Debentures.
A1-2
<PAGE> 80
IN WITNESS WHEREOF, the Trust has executed this certificate
this ____ day of _______, 1998.
LIFE RE CAPITAL TRUST II
By:
------------------------
Name:
Title: Administrator
A1-3
<PAGE> 81
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Quarterly Income Preferred Securities
referred to in the within-mentioned Declaration.
Dated: _______________
THE BANK OF NEW YORK,
as Property Trustee
By:
----------------------------
Authorized Signatory
A1-4
<PAGE> 82
FORM OF REVERSE OF SECURITY
Distributions payable on each QUIPS will be fixed at a rate per annum
of ____% (the "Coupon Rate") of the liquidation amount of $1,000 per QUIPS, such
rate being the rate of interest payable on the Debentures to be held by the
Property Trustee. Distributions in arrears for more than one quarterly period
will bear interest thereon compounded quarterly at the Coupon Rate (to the
extent permitted by applicable law). The term "Distributions", as used herein,
includes such cash distributions and any such interest unless otherwise stated.
A Distribution is payable only to the extent that payments are made in respect
of the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds on hand legally available therefor.
Distributions on the QUIPS will be cumulative, will accumulate
from the most recent date to which Distributions have been paid or, if no
Distributions have been paid, from March __, 1998 and will be payable quarterly
in arrears, on __________, ___, ______, and ___ of each year, commencing on
_____, 1998, except as otherwise described below. Distributions will be computed
on the basis of a 360-day year consisting of twelve 30-day months and, for any
period less than a full calendar month, the number of days elapsed in such
month. As long as no Event of Default has occurred and is continuing under the
Indenture, the Debenture Issuer has the right under the Indenture to elect to
defer payments of interest by extending the interest payment period at any time
and from time to time on the Debentures (each an "Extension Period"), provided
that no Extension Period shall end on a date other than an Interest Payment Date
for the Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred. Despite such
deferral, quarterly Distributions will continue to accumulate with interest
thereon (to the extent permitted by applicable law, but not at a rate exceeding
the rate of interest then accruing on the Debentures) at the Coupon Rate
compounded quarterly during any such Extension Period. Prior to the termination
of any such Extension Period, the Debenture Issuer may further defer payments of
interest by further extending such Extension Period; provided that such
Extension Period may not extend beyond the Maturity Date of the Debentures.
Payments of accumulated Distributions will be payable to Holders as they appear
on the books and records of the Trust on the first record date after the end of
the Extension Period. Upon the termination of any Extension Period and the
payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
Subject to the conditions set forth in the Declaration and the
Indenture, the Property Trustee may, at the direction of the Sponsor, at any
time dissolve the Trust and, after satisfaction of liabilities to creditors of
the Trust as required by applicable law, cause the Debentures to be distributed
to the holders of the Securities in liquidation of the Trust.
The QUIPS will be subject to mandatory redemption on the
Maturity Date of the Debentures as provided in the Declaration.
A1-5
<PAGE> 83
The QUIPS and the rights of the Holders shall be governed by
and interpreted in accordance with the laws of the State of Delaware and all
rights and remedies shall be governed by such laws without regard to principles
of conflict of laws.
---------------------
A1-6
<PAGE> 84
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Security to:
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
------------------------------------------------------
- -----------------------------------------------------------------------------
agent to transfer this Security on the books of the Trust. The agent may
substitute another to act for him or her.
Date:
----------------------
Signature:
----------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee (1):
---------------------------
- -------------------------
(1) Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities and Exchange Act of 1934, as amended.
A1-7
<PAGE> 85
NOTICE TO REQUIRE EXERCISE OF JUNIOR SUBORDINATED
DEBENTURE PUT OPTION
The undersigned holder of this Security hereby irrevocably exercises
the right to require the Trust to distribute to the Put Agent Debentures having
an aggregate principal amount equal to the Liquidation Amount of this Security,
or the portion below designated, in exchange for this Security, or the portion
below designated, on the date hereof in accordance with the terms of the Amended
and Restated Declaration of Trust, dated as of March __, 1998 in connection with
the concurrent exercise by the Put Agent on behalf of the holder of this
Security of the Debenture Put Option related hereto. Pursuant to the
aforementioned exercise of the right to require the Trust to distribute to the
Put Agent Debentures in exchange for this Security, the undersigned hereby
directs the Property Trustee to take any actions necessary to effect the
exchange of this Security, or the portion below designated, for a Like Amount of
Debentures.
Date:
---------------------
Principal Amount of this Security to be exchanged ($1000 or integral multiples
thereof):
- ----------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
Please Print or Type Name and Address,
Including Zip Code, and Social Security
or Other Identifying Number
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
Signature Guarantee:*
---------------------------------------------------------
- --------
* Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities and Exchange Act of 1934, as amended.
A1-8
<PAGE> 86
EXHIBIT A-2
FORM OF COMMON TRUST SECURITY CERTIFICATE
THIS COMMON TRUST SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION OR AN
EFFECTIVE REGISTRATION STATEMENT.
THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED.
A2-1
<PAGE> 87
Certificate Number: Number of Common Trust Securities:
Certificate Evidencing Common Trust Securities
of
Life Re Capital Trust II
____% Common Trust Securities
(liquidation amount $1,000 per Common Trust Security)
Life Re Capital Trust II, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that Life Re Corporation
(the "Holder") is the registered owner of ____________ common trust securities
of the Trust representing undivided beneficial interests in the assets of the
Trust designated the ____% Common Trust Securities (liquidation amount $1,000
per Common Trust Security) (the "Common Trust Securities"). Subject to the
limitation in Section 9.1(b) of the Declaration, the Common Trust Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Trust Securities
represented hereby are issued and shall in all respects be subject to the
provisions of the Amended and Restated Declaration of Trust of the Trust dated
as of March ___, 1998 as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Common Trust
Securities as set forth in Annex I to the Declaration. Capitalized terms used
but not defined herein shall have the meaning given them in the Declaration. The
Sponsor will provide a copy of the Declaration, the Common Trust Securities
Guarantee and the Indenture (including any supplemental indenture) to a Holder
without charge upon written request to the Sponsor at its principal place of
business.
Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Common Trust Securities Guarantee to the extent provided therein.
By acceptance, the Holder agrees to treat, for United States
Federal income tax purposes, the Debentures as indebtedness and the Common Trust
Securities as evidence of indirect beneficial ownership in the Debentures.
A2-2
<PAGE> 88
IN WITNESS WHEREOF, the Trust has executed this certificate
this ___ day of ______, 1998.
LIFE RE CAPITAL TRUST II
---------------------------
Name:
Title: Administrator
A2-3
<PAGE> 89
FORM OF REVERSE OF SECURITY
Distributions payable on each Common Trust Security will be fixed at a
rate per annum of ____% (the "Coupon Rate") of the liquidation amount of $1,000
per Common Trust Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one quarterly period will bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distributions", as used herein, includes such cash distributions and any such
interest unless otherwise stated. A Distribution is payable only to the extent
that payments are made in respect of the Debentures held by the Property Trustee
and to the extent the Property Trustee has funds available therefor.
Distributions on the Common Trust Securities will be cumulative, will
accrue from the most recent date to which Distributions have been paid or, if no
Distributions have been paid, from March ___, 1998 and will be payable quarterly
in arrears, on _____, _____, _____ and _____ of each year, commencing on
________, 1998, except as otherwise described below. Distributions will be
computed on the basis of a 360-day year consisting of twelve 30-day months and,
for any period less than a full calendar month, the number of days elapsed in
such month. As long as no Event of Default has occurred and is continuing under
the Indenture, the Debenture Issuer has the right under the Indenture to elect
to defer payments of interest by extending the interest payment period at any
time and from time to time on the Debentures (each an "Extension Period"),
provided that no Extension Period shall end on a date other than an Interest
Payment Date for Debentures or extend beyond the Maturity Date of the
Debentures. As a consequence of such deferral, Distributions will also be
deferred. Despite such deferral, Distributions will continue to accumulate with
interest thereon (to the extent permitted by applicable law, but not at a rate
exceeding the rate of interest then accruing on the Debentures) at the Coupon
Rate compounded quarterly during any such Extension Period. Prior to the
termination of any such Extension Period, the Debenture Issuer may further defer
payments of interest by further extending such Extension Period; provided that
such Extension Period may not extend beyond the Maturity Date of the Debentures.
Payments of accrued Distributions will be payable to Holders as they appear on
the books and records of the Trust on the first record date after the end of the
Extension Period. Upon the termination of any Extension Period and the payment
of all amounts then due, the Debenture Issuer may commence a new Extension
Period, subject to the above requirements.
Subject to the conditions set forth in the Declaration and the
Indenture, the Property Trustee may, at the direction of the Sponsor, at any
time liquidate the Trust and, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, cause the Debentures to be distributed
to the holders of the Securities in liquidation of the Trust
The Common Trust Securities will be subject to mandatory
redemption on the Maturity Date of the Debentures, as provided in the
Declaration.
A2-4
<PAGE> 90
The Common Trust Securities and the rights of the holders
thereof hereunder shall be governed by and interpreted in accordance with the
laws of the State of Delaware and all rights and remedies shall be governed by
such laws without regard to principles of conflict of laws.
---------------------
A2-5
<PAGE> 1
Exhibit 4.7
================================================================================
LIFE RE CORPORATION
------------------------------
------------------------------
INDENTURE
DATED AS OF MARCH __, 1998
------------------------------
THE BANK OF NEW YORK
AS TRUSTEE
------------------------------
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE(1)
of provisions of the Trust Indenture Act of 1939 with Indenture dated as of
March __, 1998 between Life Re Corporation and The Bank of New York, as Trustee:
TRUST INDENTURE ACT SECTION INDENTURE SECTION
310(a)(1)..................................................................6.09
310(a)(2) .................................................................6.09
310(a)(3)...................................................................N/A
310(a)(4)...................................................................N/A
310(a)(5)............................................................6.10, 6.11
310(b).....................................................................6.08
310(c)......................................................................N/A
311(a) and (b).............................................................6.13
311(c)......................................................................N/A
312(a)............................................................4.01, 4.02(a)
312(b) and (c).............................................................4.02
313(a).....................................................................4.04
313(b)(1)..................................................................4.04
313(b)(2)..................................................................4.04
313(c).....................................................................4.04
313(d).....................................................................4.04
314(a)...............................................................3.05, 4.03
314(b)......................................................................N/A
314(c)(1) and (2)...................................................6.07, 13.06
314(c)(3)...................................................................N/A
314(d) .....................................................................N/A
314(e).....................................................................6.07
314(f) .....................................................................N/A
315(a),(c) and (d).........................................................6.01
315(b) ....................................................................5.08
315(e) ....................................................................5.09
316(a)(1) .................................................................5.07
316(a)(2) ..................................................................N/A
316(a) (last sentence).....................................................2.09
316(b) ....................................................................9.02
317(a) ..............................................................5.02, 5.05
317(b) ....................................................................6.05
318(a) ...................................................................13.08
- --------------------
(1) THIS CROSS-REFERENCE TABLE SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE
PART OF THE INDENTURE.
<PAGE> 3
TABLE OF CONTENTS*
Page
ARTICLE I
DEFINITIONS........................... 1
SECTION 1.01. Definitions............................................. 1
Additional Sums.......................................................... 1
Affiliate................................................................ 1
Applicable Put Price..................................................... 2
Authenticating Agent..................................................... 2
Bankruptcy Law........................................................... 2
Board of Directors....................................................... 2
Board Resolution......................................................... 2
Business Day............................................................. 2
Commission............................................................... 2
Common Trust Securities.................................................. 2
Common Trust Securities Guarantee........................................ 2
Common Stock............................................................. 2
Company.................................................................. 3
Company Request.......................................................... 3
Comparable Treasury Issue................................................ 3
Comparable Treasury Price................................................ 3
Compounded Interest...................................................... 3
Coupon Rate.............................................................. 3
Custodian................................................................ 3
Declaration.............................................................. 3
Default.................................................................. 3
Defeasance Agent......................................................... 3
Deferred Interest........................................................ 3
Definitive Securities.................................................... 3
Depositary............................................................... 3
Discharged............................................................... 4
Dissolution Event........................................................ 4
Effective Call Option Price.............................................. 4
Event of Default......................................................... 4
Exchange Act............................................................. 4
Extended Interest Payment Period......................................... 4
Final Put Date........................................................... 4
Global Security.......................................................... 4
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* THIS TABLE OF CONTENTS SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE A
PART OF THE INDENTURE.
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Page
Indenture................................................................. 4
Interest Payment Date..................................................... 5
Issue Date................................................................ 5
LIBOR Rate................................................................ 5
Life Re Capital Trust..................................................... 5
Master Unit Agreement..................................................... 5
Maturity Date............................................................. 5
Mortgage.................................................................. 5
Non-Book-Entry QUIPS...................................................... 5
Officers.................................................................. 5
Officers' Certificate..................................................... 5
Opinion of Counsel........................................................ 5
Other Debentures.......................................................... 5
Other Guarantees.......................................................... 5
outstanding............................................................... 6
Person.................................................................... 6
Predecessor Security...................................................... 6
Principal Office of the Trustee........................................... 6
Property Trustee.......................................................... 6
Put Date.................................................................. 6
Put Option................................................................ 6
Quarterly Payment Dates................................................... 6
QUIPS..................................................................... 6
QUIPS Guarantee........................................................... 7
Quotation Agent........................................................... 7
Reference Treasury Dealer................................................. 7
Reference Treasury Dealer Quotations...................................... 7
Responsible Officer....................................................... 7
Securities................................................................ 7
Securities Act............................................................ 7
Securityholder............................................................ 7
holder of Securities...................................................... 7
Security Register......................................................... 7
Security Registrar........................................................ 8
Senior Indebtedness....................................................... 8
Subsidiary................................................................ 8
Tax Event................................................................. 9
Three-Month Treasury Rate................................................. 9
Trustee................................................................... 9
Trust Indenture Act of 1939............................................... 9
Trust Securities.......................................................... 9
Underwriting Agreement.................................................... 9
Units..................................................................... 9
U.S. Government Obligations............................................... 10
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Page
ARTICLE II
SECURITIES............................. 10
SECTION 2.01. Forms Generally............................................ 10
SECTION 2.02. Execution and Authentication............................... 10
SECTION 2.03. Form and Payment........................................... 11
SECTION 2.04. Legends.................................................... 11
SECTION 2.05. Global Security............................................ 11
SECTION 2.06 Interest................................................... 13
SECTION 2.07. Transfer and Exchange...................................... 14
SECTION 2.08. Replacement Securities..................................... 15
SECTION 2.09. [Intentionally Omitted..................................... 15
SECTION 2.10. Temporary Securities....................................... 15
SECTION 2.11. Cancellation............................................... 16
SECTION 2.12. Defaulted Interest......................................... 16
SECTION 2.13. CUSIP Numbers.............................................. 17
SECTION 2.14. Intent of Parties.......................................... 17
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY...................... 17
SECTION 3.01. Payment of Principal, Premium, Interest and Applicable
Put Price.................................................. 17
SECTION 3.02. Offices for Notices and Payments, etc...................... 18
SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office......... 18
SECTION 3.04. Provision as to Paying Agent............................... 18
SECTION 3.05. Certificate to Trustee..................................... 19
SECTION 3.06. Compliance with Consolidation Provisions................... 20
SECTION 3.07. Limitation on Dividends.................................... 20
SECTION 3.08. Covenants as to Life Re Capital Trust...................... 21
SECTION 3.09. Payment of Expenses........................................ 21
SECTION 3.10. Payment Upon Resignation or Removal........................ 22
ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE........................ 22
SECTION 4.01. Securityholders' Lists..................................... 22
SECTION 4.02. Preservation and Disclosure of Lists....................... 23
SECTION 4.03. Reports by the Company..................................... 24
SECTION 4.04. Reports by the Trustee..................................... 25
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Page
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT........................ 26
SECTION 5.01. Events of Default.......................................... 26
SECTION 5.02. Payment of Securities on Default; Suit Therefor............ 28
SECTION 5.03. Application of Moneys Collected by Trustee................. 30
SECTION 5.04. Proceedings by Securityholders............................. 30
SECTION 5.05. Proceedings by Trustee..................................... 31
SECTION 5.06. Remedies Cumulative and Continuing......................... 31
SECTION 5.07. Direction of Proceedings and Waiver of Defaults by
Majority of Securityholders................................ 32
SECTION 5.08. Notice of Defaults......................................... 33
SECTION 5.09. Undertaking to Pay Costs................................... 33
ARTICLE VI
CONCERNING THE TRUSTEE........................ 33
SECTION 6.01. Duties and Responsibilities of Trustee..................... 33
SECTION 6.02. Reliance on Documents, Opinions, etc....................... 35
SECTION 6.03. No Responsibility for Recitals, etc........................ 36
SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer
Agents or Registrar May Own Securities..................... 36
SECTION 6.05. Moneys to Be Held in Trust................................. 36
SECTION 6.06. Compensation and Expenses of Trustee....................... 37
SECTION 6.07. Officers' Certificate as Evidence.......................... 37
SECTION 6.08. Conflicting Interest of Trustee............................ 38
SECTION 6.09. Eligibility of Trustee..................................... 38
SECTION 6.10. Resignation or Removal of Trustee.......................... 38
SECTION 6.11. Acceptance by Successor Trustee............................ 40
SECTION 6.12. Succession by Merger, etc.................................. 40
SECTION 6.13. Limitation on Rights of Trustee as a Creditor.............. 41
SECTION 6.14. Authenticating Agents...................................... 41
ARTICLE VII
CONCERNING THE SECURITYHOLDERS..................... 42
SECTION 7.01. Action by Securityholders.................................. 42
SECTION 7.02. Proof of Execution by Securityholders...................... 43
SECTION 7.03. Who Are Deemed Absolute Owners............................. 43
SECTION 7.04. Securities Owned by Company Deemed Not Outstanding......... 44
SECTION 7.05. Revocation of Consents; Future Holders Bound............... 44
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Page
ARTICLE VIII
SECURITYHOLDERS' MEETINGS......................... 44
SECTION 8.01. Purposes of Meetings....................................... 44
SECTION 8.02. Call of Meetings by Trustee................................ 45
SECTION 8.03. Call of Meetings by Company or Securityholders............. 45
SECTION 8.04. Qualifications for Voting.................................. 45
SECTION 8.05. Regulations................................................ 46
SECTION 8.06. Voting..................................................... 47
ARTICLE IX
AMENDMENTS AND SUPPLEMENTS........................... 48
SECTION 9.01. Without Consent of Securityholders......................... 48
SECTION 9.02. With Consent of Securityholders............................ 49
SECTION 9.03. Compliance with Trust Indenture Act of 1939; Effect of
Supplemental Indentures.............................. 50
SECTION 9.04. Notation on Securities..................................... 51
SECTION 9.05. Evidence of Compliance of Supplemental Indenture to
be Furnished Trustee................................. 51
ARTICLE X
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE.......... 51
SECTION 10.01. Company May Consolidate, etc., on Certain Terms............ 51
SECTION 10.02. Successor Corporation to Be Substituted for Company........ 52
SECTION 10.03. Opinion of Counsel to Be Given Trustee..................... 52
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE................. 53
SECTION 11.01. Discharge of Indenture..................................... 53
SECTION 11.02. Deposited Moneys and U.S. Government Obligations to
Be Held in Trust by Trustee.......................... 53
SECTION 11.03. Paying Agent to Repay Moneys Held.......................... 54
SECTION 11.04. Return of Unclaimed Moneys................................. 54
SECTION 11.05. Defeasance Upon Deposit of Moneys or U.S. Government
Obligations.......................................... 54
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS....................... 56
SECTION 12.01. Indenture and Securities Solely Corporate Obligations...... 56
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Page
ARTICLE XIII
MISCELLANEOUS PROVISIONS...................... 56
SECTION 13.01. Successors................................................ 56
SECTION 13.02. Official Acts by Successor Corporation.................... 56
SECTION 13.03. Surrender of Company Powers............................... 56
SECTION 13.04. Addresses for Notices, etc................................ 57
SECTION 13.05. Governing Law............................................. 57
SECTION 13.06. Evidence of Compliance with Conditions Precedent.......... 57
SECTION 13.07. Business Days............................................. 58
SECTION 13.08. Trust Indenture Act of 1939 to Control.................... 58
SECTION 13.09. Table of Contents, Headings, etc.......................... 58
SECTION 13.10. Execution in Counterparts................................. 58
SECTION 13.11. Separability.............................................. 58
SECTION 13.12. Assignment................................................ 58
SECTION 13.13. Acknowledgement of Rights................................. 59
ARTICLE XIV
PUT OPTION; NO EARLY REDEMPTION OF SECURITIES............. 59
SECTION 14.01. Put Option................................................ 59
SECTION 14.02. No Early Redemption by Company............................ 60
ARTICLE XV
SUBORDINATION OF SECURITIES.................... 60
SECTION 15.01. Agreement to Subordinate.................................. 60
SECTION 15.02. Default on Senior Indebtedness............................ 60
SECTION 15.03. Liquidation; Dissolution; Bankruptcy...................... 61
SECTION 15.04. Subrogation............................................... 62
SECTION 15.05. Trustee to Effectuate Subordination....................... 63
SECTION 15.06. Notice by the Company..................................... 63
SECTION 15.07. Rights of the Trustee; Holders of Senior Indebtedness..... 64
SECTION 15.08. Subordination May Not Be Impaired......................... 65
ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD................... 65
SECTION 16.01. Extension of Interest Payment Period...................... 65
SECTION 16.02. Notice of Extension....................................... 66
EXHIBIT A................................................................ A-1
Testimonium
Signatures
Acknowledgements
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THIS INDENTURE, dated as of March __, 1998, between Life Re
Corporation, a Delaware corporation (hereinafter sometimes called the
"Company"), and The Bank of New York, a New York banking corporation, as trustee
(hereinafter sometimes called the "Trustee"),
WITNESSETH:
In consideration of the premises, and the purchase of the
Securities by the holders thereof, the Company covenants and agrees with the
Trustee for the equal and proportionate benefit of the respective holders from
time to time of the Securities, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.
The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture shall have the respective meanings specified in this Section
1.01. All other terms used in this Indenture which are defined in the Trust
Indenture Act of 1939, or which are by reference therein defined in the
Securities Act, shall (except as herein otherwise expressly provided or unless
the context otherwise requires) have the meanings assigned to such terms in said
Trust Indenture Act of 1939 and in said Securities Act as in force at the date
of this Indenture as originally executed. The following terms have the meanings
given to them in the Declaration: (i) Clearing Agency; (ii) Delaware Trustee;
(iii) Property Trustee; (iv) Administrators; (v) Direct Action; (vi) Put Agent;
(vii) Distributions; and (viii) QUIPS; and the following terms have the meanings
given to them in the Master Unit Agreement: (i) Pledged Securities; (ii) Stock
Purchase Date; (iii) Call Option Expiration Date; and (iv) Purchase Contracts.
All accounting terms used herein and not expressly defined shall have the
meanings assigned to such terms in accordance with generally accepted accounting
principles and the term "generally accepted accounting principles" means such
accounting principles as are generally accepted at the time of any computation.
The words "herein", "hereof" and "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision. Headings are used for convenience of reference only and do
not affect interpretation. The singular includes the plural and vice versa.
"Additional Sums" shall have the meaning set forth in Section
2.06(c).
"Affiliate" means, with respect to a specified Person, (a) any
Person directly or indirectly owning, controlling or holding the power to vote
10% or more of the outstanding voting securities or other ownership interests of
the specified Person, (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or
<PAGE> 10
indirectly owned, controlled or held with power to vote by the specified Person,
(c) any Person directly or indirectly controlling, controlled by, or under
common control with the specified Person, (d) a partnership in which the
specified Person is a general partner, (e) any executive officer or director of
the specified Person, and (f) if the specified Person is an individual, any
entity of which the specified Person is an executive officer, director or
general partner.
"Applicable Put Price" shall have the meaning set forth in Section
14.01.
"Authenticating Agent" shall mean any agent or agents of the
Trustee which at the time shall be appointed and acting pursuant to Section
6.14.
"Bankruptcy Law" shall mean Title 11, U.S. Code, or any similar
federal or state law for the relief of debtors.
"Board of Directors" shall mean either the Board of Directors of
the Company or any duly authorized committee of that board.
"Board Resolution" shall mean a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" shall mean, any day other than a Saturday or a
Sunday or a day on which banking institutions in The City of New York or
Wilmington, Delaware, are authorized or required by law or executive order to
close.
"Commission" shall mean the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act of 1939,
then the body performing such duties at such time.
"Common Trust Securities" shall mean undivided beneficial
interests in the assets of Life Re Capital Trust which rank pari passu with
QUIPS issued by Life Re Capital Trust; provided, however, that if an Event of
Default (solely as the result of an event described in clauses (a), (b) or (c)
thereto) has occurred and is continuing, no payments in respect of Distributions
on, or payments upon liquidation, redemption or otherwise with respect to, the
Common Trust Securities shall be made until the holders of the QUIPS shall be
paid in full the Distributions and the liquidation, redemption and other
payments to which they are entitled.
"Common Trust Securities Guarantee" shall mean any guarantee that
the Company may enter into with any Person or Persons that operates directly or
indirectly for the benefit of holders of Common Trust Securities of Life Re
Capital Trust.
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"Common Stock" shall mean (i) the Common Stock, par value $.001
per share, of the Company or (ii) any other class of stock resulting from
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value.
"Company" shall mean Life Re Corporation, a Delaware corporation,
and, subject to the provisions of Article X, shall include its successors and
assigns.
"Company Request" or "Company Order" shall mean a written request
or order signed in the name of the Company by an Officer of the Company, and
delivered to the Trustee.
"Comparable Treasury Issue" means the United States Treasury
security selected by the Quotation Agent as having a three-month maturity that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities with a
three-month maturity.
"Comparable Treasury Price" shall mean, with respect to any date
of determination, (i) the average of five Reference Treasury Dealer Quotations
for such date of determination, after excluding the highest and lowest such
Reference Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than
three such Reference Treasury Dealer Quotations, the average of all such
Quotations.
"Compounded Interest" shall have the meaning set forth in Section
16.01.
"Coupon Rate" shall have the meaning set forth in Section 2.06.
"Custodian" shall mean any receiver, trustee, assignee,
liquidator, or similar official under any Bankruptcy Law.
"Declaration" shall mean the Amended and Restated Declaration of
Trust of Life Re Capital Trust, dated as of the Issue Date.
"Default" shall mean any event, act or condition that with notice
or lapse of time, or both, would constitute an Event of Default.
"Defeasance Agent" shall have the meaning set forth in Section
11.05.
"Deferred Interest" shall have the meaning set forth in Section
16.01.
"Definitive Securities" shall mean those securities issued in
fully registered certificated form not otherwise in global form.
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"Depositary" shall mean, for which the Company shall determine
that such Securities will be issued as a Global Security, The Depository Trust
Company, New York, New York, another clearing agency, or any successor
registered as a clearing agency under the Exchange Act or other applicable
statute or regulation, which, in each case, shall be designated by the Company
pursuant to Section 2.05(d).
"Discharged" shall have the meaning set forth in Section 11.05.
"Dissolution Event" shall mean the liquidation of the Trust
pursuant to the Declaration, and the distribution of the Securities held by the
Property Trustee to the holders of the Trust Securities issued by Life Re
Capital Trust pro rata in accordance with the Declaration.
"Effective Call Option Price" for any Securities means (a) the
aggregate principal amount of such Securities plus 90 days of simple interest
thereon at the Coupon Rate, all discounted to present value at the Call Option
Expiration Date at a discount rate equal to the Three-Month Treasury Rate
prevailing on the Call Option Expiration Date (i.e., divided by one plus such
Three-Month Treasury Rate (expressed as a decimal between 0 and 1)) plus (b) the
aggregate amount of deferred interest payments on such Securities accrued to but
not including the Call Option Expiration Date.
"Event of Default" shall mean any event specified in Section 5.01,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Extended Interest Payment Period" shall have the meaning set
forth in Section 16.01.
"Final Put Date" shall mean the date which is three months after
the Stock Purchase Date.
"Global Security" shall mean, with respect to the Securities, a
Security executed by the Company and delivered by the Trustee to the Depositary
or pursuant to the Depositary's instruction, all in accordance with the
Indenture, which shall be registered in the name of the Depositary or its
nominee.
"Indenture" shall mean this instrument as originally executed or,
if amended or supplemented as herein provided, as so amended or supplemented.
"Interest Payment Date" shall have the meaning set forth in
Section 2.06.
"Issue Date" means March __ 1998.
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"LIBOR Rate" means, with respect to the period from and including
the Call Option Expiration Date to but excluding the Final Put Date, the London
interbank offered rate for deposits in U.S. dollars having a maturity of one
month commencing on the Call Option Expiration Date which appears on Telerate
Page 3750 (or any successor thereto) as of 11:00 a.m., London time, on the Call
Option Expiration Date.
"Life Re Capital Trust" shall mean Life Re Capital Trust II, a
Delaware business trust created for the purpose of issuing undivided beneficial
interests in its assets in connection with the issuance of Securities under this
Indenture.
"Master Unit Agreement" shall mean the Master Unit Agreement
between the Company and The Bank of New York, as Unit Agent, dated as of the
Issue Date.
"Maturity Date" shall mean March __, 2003.
"Mortgage" shall mean and include any mortgage, pledge, lien,
security interest, conditional sale or other title retention agreement or other
similar encumbrance.
"Non-Book-Entry QUIPS" shall have the meaning set forth in Section
2.05.
"Officers" shall mean any of the Chairman, a Vice Chairman, the
Chief Executive Officer, the President, the Chief Financial Officer, a Vice
President (whether or not designated by a number or words added before or after
such title), the Comptroller, the Secretary or an Assistant Secretary of the
Company.
"Officers' Certificate" shall mean a certificate signed by two
Officers and delivered to the Trustee.
"Opinion of Counsel" shall mean a written opinion of counsel, who
may be an employee of the Company, and who shall be acceptable to the Trustee.
"Other Debentures" shall mean all junior subordinated debentures
issued by the Company from time to time and sold to trusts established or to be
established by the Company, in each case similar to Life Re Capital Trust.
"Other Guarantees" shall mean all guarantees issued by the Company
with respect to securities and issued to other trusts established or to be
established by the Company, in each case similar to Life Re Capital Trust.
The term "outstanding" when used with reference to Securities,
shall, subject to the provisions of Section 7.04, mean, as of any particular
time, all Securities authenticated and delivered by the Trustee or the
Authenticating Agent under this Indenture, except
5
<PAGE> 14
(a) Securities theretofore cancelled by the Trustee or the
Authenticating Agent or delivered to the Trustee for
cancellation;
(b) Securities, or portions thereof, for the payment of which
moneys in the necessary amount shall have been deposited in
trust with the Trustee or with any paying agent (other than
the Company) or shall have been set aside and segregated in
trust by the Company (if the Company shall act as its own
paying agent); and
(c) Securities in lieu of or in substitution for which other
Securities shall have been authenticated and delivered
pursuant to the terms of Section 2.08 unless proof
satisfactory to the Company and the Trustee is presented
that any such Securities are held by bona fide holders in
due course.
"Person" shall mean any individual, corporation, estate,
partnership, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt and as that
evidenced by such particular Security; and, for the purposes of this definition,
any Security authenticated and delivered under Section 2.08 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
lost, destroyed or stolen Security.
"Principal Office of the Trustee", or other similar term, shall
mean the principal office of the Trustee, at which at any particular time its
corporate trust business shall be administered.
"Property Trustee" shall have the same meaning as set forth in the
Declaration.
"Put Date" shall mean each of the Stock Purchase Date and the
Final Put Date.
"Put Option" shall have the meaning set forth in Section 14.01
"Quarterly Payment Dates" means ___________, ___________,
__________ and __________ of each year, subject to the deferral provisions
described herein.
"QUIPS" shall mean undivided beneficial interests in the assets of
Life Re Capital Trust which rank pari passu with the Common Trust Securities
issued by Life Re Capital Trust; provided, however, that if an Event of Default
(solely as the result of an event described in clauses (a), (b) or (c) thereto)
has occurred and is continuing, no payments in respect of Distributions (as
defined in the Declaration) on, or payments upon liquidation, redemption or
otherwise with respect to, the Common Trust Securities shall be made until the -
6
<PAGE> 15
holders of the QUIPS shall be paid in full the Distributions and the
liquidation, redemption and other payments to which they are entitled.
"QUIPS Guarantee" shall mean any guarantee that the Company may
enter into with The Bank of New York or other Persons that operates directly or
indirectly for the benefit of holders of QUIPS of Life Re Capital Trust.
"Quotation Agent" shall mean the Reference Treasury Dealer
appointed by the Company or, if the Company fails to do so, by an Administrator.
"Reference Treasury Dealer" shall mean a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer") selected by the
Company.
"Reference Treasury Dealer Quotations" shall mean, with respect to
each Reference Treasury Dealer and any date pursuant to Section 14.01, the
average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m., New York City time, on the third Business Day preceding
such date.
"Responsible Officer", when used with respect to the Trustee,
shall mean any vice president, any assistant vice president, any assistant
secretary, any assistant treasurer, any trust officer or assistant trust
officer, or any other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Securities" shall mean the Company's ____% Junior Subordinated
Deferrable Interest Debentures due March __, 2003, as authenticated and issued
under this Indenture.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Securityholder", "holder of Securities", or other similar terms,
shall mean any person in whose name at the time a particular Security is
registered on the register kept by the Company or the Trustee for that purpose
in accordance with the terms hereof.
"Security Register" shall mean (i) prior to a Dissolution Event,
the list of holders provided to the Trustee pursuant to Section 4.01, and (ii)
following a Dissolution Event, any security register maintained by a Security
Registrar for the Securities appointed by the Company following the execution of
a supplemental indenture providing for transfer procedures as provided for in
Section 2.07(a).
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<PAGE> 16
"Security Registrar" shall mean the Person who is appointed by the
Company to maintain the Security Register.
"Senior Indebtedness" shall mean, with respect to the Company, (i)
the principal, premium, if any, and interest in respect of (A) indebtedness of
the Company for money borrowed, and (B) indebtedness evidenced by securities,
debentures, notes, bonds or other similar instruments issued by the Company,
including, without limitation, any current or future indebtedness under any
indenture (other than the Indenture) to which the Company is party; (ii) all
capital lease obligations of the Company, (iii) all obligations of the Company
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of the Company and all obligations of the Company under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of the Company for the
reimbursement on any letter of credit, any banker's acceptance, any security
purchase facility, any repurchase agreement or similar arrangement, any interest
rate swap, any other hedging arrangement, any obligation under options or any
similar credit or other transaction, (v) all obligations of the type referred to
in clauses (i) through (iv) above of other persons for the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise and (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of the Company (whether or
not such obligation is assumed by the Company), except for (1) any indebtedness
between or among the Company or any Affiliate of the Company, (2) any other debt
securities issued pursuant to the Indenture and guarantees in respect of those
debt securities and (3) any indebtedness that is by its terms subordinated to or
pari passu with the Securities, including any junior subordinated debentures
issued in the future with subordination terms substantially similar to the
Securities. Senior Indebtedness shall continue to be Senior Indebtedness and be
entitled to the benefits of the subordination provisions irrespective or any
amendment, modification or waiver of any term of such Senior Indebtedness.
"Subsidiary" shall mean with respect to any Person, (i) any
corporation at least a majority of whose outstanding voting stock is owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries, or
by such Person and one or more of its Subsidiaries, (ii) any general
partnership, joint venture or similar entity, at least a majority of whose
outstanding partnership or similar interests shall at the time be owned by such
Person, or by one or more of its Subsidiaries, or by such Person and one or more
of its Subsidiaries and (iii) any limited partnership of which such Person or
any of its Subsidiaries is a general partner. For the purposes of this
definition, "voting stock" means shares, interests, participations or other
equivalents in the equity interest (however designated) in such Person having
ordinary voting power for the election of a majority of the directors (or the
equivalent) of such Person, other than shares, interests, participations or
other equivalents having such power only by reason of the occurrence of a
contingency.
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"Tax Event" shall mean the receipt by Life Re Capital Trust and
the Company of an opinion of a nationally recognized tax counsel experienced in
such matters to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws or any regulations
thereunder of the United States or any political subdivision or taxing authority
thereof or therein, or as a result of any official administrative pronouncement
or judicial decision interpreting or applying such laws or regulations, which
(a) amendment or change is effective or (b) pronouncement or decision is
announced, on or after the Issue Date, there is more than an insubstantial risk
that (i) Life Re Capital Trust is, or will be within 90 days of the date of such
opinion, subject to United States Federal income tax with respect to income
received or accrued on the Securities, or (ii) Life Re Capital Trust is, or will
be within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
"Three-Month Treasury Rate" means, with respect to any date of
determination, the rate per annum equal to (i) the yield, under the heading
which represents the average for the immediately prior week, appearing in the
most recently published statistical release designated "H.15 (519)" or any
successor publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for
United States Treasury Securities having a three-month maturity or (ii) if such
release (or any successor release) is not published during the week preceding
the calculation date or does not contain such yields, the rate per annum equal
to the quarterly equivalent yield to maturity of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for such date plus
0.50%.
"Trustee" shall mean the Person identified as "Trustee" in the
first paragraph hereof, and, subject to the provisions of Article VI hereof,
shall also include its successors and assigns as Trustee hereunder.
"Trust Indenture Act of 1939" shall mean the Trust Indenture Act
of 1939 as in force at the date of execution of this Indenture, except as
provided in Section 9.03.
"Trust Securities" shall mean the QUIPS and the Common Trust
Securities, collectively.
"Underwriting Agreement" shall mean the Underwriting Agreement
dated March __, 1998, among the Company, Life Re Capital Trust and the
underwriters named therein.
"Units" means ____% Adjustable Conversion-rate Equity Security
Units initially consisting of (i) a purchase contract under which the holder
will purchase from the Company a number of shares of Common Stock equal to the
Settlement Rate (as defined in the Master Unit Agreement) and (ii) QUIPS.
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"U.S. Government Obligations" shall mean securities that are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such U.S. Government Obligation or a
specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depository
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depository receipt.
ARTICLE II
SECURITIES
SECTION 2.01. Forms Generally.
The Securities and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A, the terms of which are
incorporated in and made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject or usage. Each Security shall be
dated the date of its authentication. The Securities shall be issued in minimum
denominations of $100,000 and integral multiples of $1,000 above $100,000.
SECTION 2.02. Execution and Authentication.
The Securities shall be signed on behalf of the Company by the
Chairman, a Vice Chairman, the Chief Executive Officer, the President, the Chief
Financial Officer, a Vice President or the Controller and attested by its
Secretary or an Assistant Secretary. Any signature may be in the form of a
manual or facsimile signature in the manner set forth in Exhibit A. If an
Officer whose signature is on a Security no longer holds that office at the time
the Security is authenticated, the Security shall nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of an authorized signatory of the Trustee. The signature of the
Trustee shall be conclusive evidence that the Security has been authenticated
under this Indenture. The form of Trustee's certificate of authentication to be
borne by the Securities shall be substantially as set forth in Exhibit A hereto.
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The Trustee shall, upon a Company Order, authenticate for original
issue up to, and the aggregate principal amount of Securities outstanding at any
time may not exceed the sum of $___________ aggregate principal amount of the
Securities, except as provided in Sections 2.07, 2.08, 2.10 and 14.05.
SECTION 2.03. Form and Payment.
Except as provided in Section 2.05, the Securities shall be issued
in fully registered certificated form without interest coupons. Principal of,
premium, if any, and interest on and the Applicable Put Price with respect to
the Securities issued in certificated form will be payable, the transfer of such
Securities will be registrable and such Securities will be exchangeable for
Securities bearing identical terms and provisions at the office or agency of the
Company maintained for such purpose under Section 3.02; provided, however, that
payment of interest with respect to the Securities (other than Securities issued
in global form, the payment of interest on which shall be made in immediately
available funds) may be made at the option of the Company (i) by check mailed to
the holder at such address as shall appear in the Security Register or (ii) by
wire transfer to an account maintained by the Person entitled thereto, provided
that proper wire transfer instructions have been received in writing by the
relevant record date. Notwithstanding the foregoing, so long as the holder of
any Securities is the Property Trustee, the payment of the principal of,
premium, if any, and interest (including Compounded Interest and Additional
Sums, if any) on and the Applicable Put Price with respect to such Securities
held by the Property Trustee will be made in immediately available funds at such
place and to such account as may be designated by the Property Trustee.
SECTION 2.04. Legends.
Each Security represented by a Global Security pursuant to Section
2.06 shall bear the applicable legend in substantially the form set forth on
Exhibit A hereto.
SECTION 2.05. Global Security.
(a) In connection with a Dissolution Event,
(i) if any QUIPS are held in book-entry form, the related
Definitive Securities shall be presented to the Trustee (if an
arrangement with the Depositary has been maintained) by the Property
Trustee in exchange for one or more Global Securities (as may be
required pursuant to Section 2.07) in an aggregate principal amount
equal to the aggregate principal amount of all outstanding Securities,
to be registered in the name of the Depositary, or its nominee, and
delivered by the Trustee to the Depositary for crediting to the
accounts of its participants pursuant to the instructions of the
Administrators; the Company upon any such presentation shall execute
one or more Global Securities in such aggregate principal amount and
deliver the same to the Trustee for authentication and delivery in
accordance with this Indenture; and payments on the Securities issued
as a Global Security will be made to the Depositary; and
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(ii) if any QUIPS are held in certificated form, the related
Definitive Securities may be presented to the Trustee by the Property
Trustee and any certificate which represents QUIPS other than QUIPS in
book-entry form ("Non Book-Entry QUIPS") will be deemed to represent
beneficial interests in Securities presented to the Trustee by the
Property Trustee having an aggregate principal amount equal to the
aggregate liquidation amount of the Non Book-Entry QUIPS until such
certificates are presented to the Security Registrar for transfer or
reissuance, at which time such certificates will be cancelled and a
Security, registered in the name of the holder of the certificate or
the transferee of the holder of such Capital Security certificate, as
the case may be, with an aggregate principal amount equal to the
aggregate liquidation amount of the certificate cancelled, will be
executed by the Company and delivered to the Trustee for authentication
and delivery in accordance with this Indenture. Upon the issuance of
such Securities, Securities with an equivalent aggregate principal
amount that were presented by the Property Trustee to the Trustee will
be deemed to have been cancelled.
(b) The Global Securities shall represent the aggregate amount of
outstanding Securities from time to time endorsed thereon; provided, that the
aggregate amount of outstanding Securities represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
repurchases. Any endorsement of a Global Security to reflect the amount of any
increase or decrease in the amount of outstanding Securities represented thereby
shall be made by the Trustee, in accordance with instructions given by the
Company as required by this Section 2.05.
(c) The Global Securities may be transferred, in whole but not in
part, only to the Depositary, another nominee of the Depositary, or to a
successor Depositary selected or approved by the Company or to a nominee of such
successor Depositary.
(d) If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or the Depositary has ceased to be
a clearing agency registered under the Exchange Act, and a successor Depositary
is not appointed by the Company within 90 days after the Company receives such
notice or becomes aware of such condition, as the case may be, the Company will
execute, and the Trustee, upon Company Order, will authenticate and make
available for delivery the Definitive Securities, in authorized denominations,
and in an aggregate principal amount equal to the principal amount of the Global
Security in exchange for such Global Security. If there is an Event of Default,
the Depositary shall have the right to exchange the Global Securities for
Definitive Securities. In addition, the Company may at any time determine that
the Securities shall no longer be represented by a Global Security. In the event
of such an Event of Default or such a determination, the Company shall execute,
and subject to Section 2.07, the Trustee, and in the event of such a
determination, upon receipt of an Officers' Certificate evidencing such
determination by the Company, will authenticate and make available for delivery
the Definitive Securities, in authorized denominations, and in an aggregate
principal amount equal to the principal amount of the Global Security in
exchange for such Global Security. Upon the exchange of
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the Global Security for such Definitive Securities, in authorized denominations,
the Global Security shall be cancelled by the Trustee. Such Definitive
Securities issued in exchange for the Global Security shall be registered in
such names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Definitive Securities to
the Depositary for delivery to the Persons in whose names such Definitive
Securities are so registered.
SECTION 2.06 Interest.
(a) Each Security will bear interest at the rate of ____% per
annum (the "Coupon Rate") from the most recent date to which interest has been
paid or duly provided for or, if no interest has been paid or duly provided for,
from the Issue Date, until the principal thereof becomes due and payable, and at
the Coupon Rate on any overdue principal (and premium, if any) and (to the
extent that payment of such interest is enforceable under applicable law) on any
overdue installment of interest, compounded quarterly, payable (subject to the
provisions of Article XVI) quarterly in arrears on each Quarterly Payment Date
of each year (each, an "Interest Payment Date") commencing on _________ __,
1998, to the Person in whose name such Security or any predecessor Security is
registered, at the close of business on the regular record date for such
interest installment, which shall be one Business Day prior to the relevant
Interest Payment Date, unless the Securities are distributed upon a Dissolution
Event and are issued in certificated form, in which case the regular record date
for such interest installment shall be the first day of the month in which the
relevant Interest Payment Date falls.
(b) Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months and for any period of less than a full
calendar month, the number of days elapsed in such month. In the event that any
Interest Payment Date falls on a day that is not a Business Day, then payment of
interest payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except if such Business Day is in the next succeeding calendar year,
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on the date such payment was
originally payable.
(c) During such time as the Property Trustee is the holder of any
Securities, the Company shall pay any additional amounts on the Securities as
may be necessary in order that the amount of Distributions then due and payable
by Life Re Capital Trust on the outstanding Trust Securities shall not be
reduced as a result of any additional taxes, duties and other governmental
charges to which Life Re Capital Trust has become subject as a result of a Tax
Event ("Additional Sums") and the term "interest", as used herein, shall include
any Additional Sums payable on the Securities.
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SECTION 2.07. Transfer and Exchange.
(a) Transfer Restrictions. The Securities may be transferred only
in blocks having an aggregate principal amount of not less than $100,000. Any
such transfer of the Securities in a block having an aggregate principal amount
of less than $100,000 shall be deemed to be void and of no legal effect
whatsoever. Any such transferee shall be deemed not to be holder of such
Securities for any purpose, including but not limited to the receipt of payment
on such Securities, and such transferee shall be deemed to have no interest
whatsoever in such Securities. Upon any distribution of the Securities following
a Dissolution Event, the Company and the Trustee shall enter into a supplemental
indenture pursuant to Section 9.01 to provide for the transfer restrictions and
procedures with respect to the Securities substantially similar to those
contained in the Declaration to the extent applicable in the circumstances
existing at such time.
(b) General Provisions Relating to Transfers and Exchanges. Upon
surrender for registration of transfer of any Security at the office or agency
of the Company maintained for the purpose pursuant to Section 3.02, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of the same
series, of any authorized denominations and of a like aggregate principal
amount.
At the option of the holder, Securities of any series may be
exchanged for other Securities of the same series, of any authorized
denominations and of a like aggregate principal amount, upon surrender of the
Securities to be exchanged at such office or agency. Whenever any Securities are
so surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the holder making the exchange is
entitled to receive.
Every Security presented or surrendered for registration of
transfer or exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
holder thereof or his attorney duly authorized in writing.
All Definitive Securities and Global Securities issued upon any
registration of transfer or exchange of Definitive Securities or Global
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Definitive
Securities or Global Securities surrendered upon such registration of transfer
or exchange.
No service charge shall be made to a holder for any registration
of transfer or exchange, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith.
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Each Securityholder agrees to indemnify the Company and the
Trustee against any liability that may result from the transfer, exchange or
assignment of such Securityholder's Security in violation of any provision of
this Indenture and/or applicable United States Federal or state securities law.
The Trustee shall have no obligation or duty to monitor, determine
or inquire as to compliance with any restriction on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Depositary
participants or beneficial owners of interests in any Global Security) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
SECTION 2.08. Replacement Securities.
If any mutilated Security is surrendered to the Trustee, or the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee shall authenticate a replacement Security if the Trustee's requirements
for replacements of Securities are met. An indemnity bond must be supplied by
the holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee and any authenticating agent from any loss that
any of them may suffer if a Security is replaced. The Company or the Trustee may
charge for its expenses in replacing a Security.
Every replacement Security is an obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement of mutilated, destroyed, lost or stolen Securities.
SECTION 2.09. [Intentionally Omitted]
SECTION 2.10. Temporary Securities.
Pending the preparation of Definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities that are printed, lithographed,
typewritten, mimeographed or otherwise reproduced, in any authorized
denomination, substantially of the tenor of the Definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
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If temporary Securities are issued, the Company shall cause
Definitive Securities to be prepared without unreasonable delay. The Definitive
Securities shall be printed, lithographed, typewritten or engraved, or provided
by any combination thereof, or in any other manner permitted by the rules and
regulations of any applicable securities exchange, all as determined by the
officers executing such definitive Securities. After the preparation of
Definitive Securities, the temporary Securities shall be exchangeable for
Definitive Securities upon surrender of the temporary Securities at the office
or agency maintained by the Company for such purpose pursuant to Section 3.02
hereof, without charge to the Securityholder, except for any such exchange
involving a registration of transfer pursuant to Section 2.07. Upon surrender
for cancellation of any one or more temporary Securities, the Company shall
execute, and the Trustee shall authenticate and make available for delivery, in
exchange therefor the same aggregate principal amount of Definitive Securities
of authorized denominations. Until so exchanged, the temporary Securities shall
in all respects be entitled to the same benefits under this Indenture as
Definitive Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Trustee and no one else shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall retain or dispose of cancelled Securities in accordance
with its normal practices (subject to the record retention requirement of the
Exchange Act) unless the Company directs them to be returned to it. The Company
may not issue new Securities to replace Securities that have been repurchased or
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. Defaulted Interest.
Any interest on any Security that is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the holder
on the relevant regular record date by virtue of having been such holder; and
such Defaulted Interest shall be paid by the Company, at its election, as
provided in clause (a) or clause (b) below:
(a) The Company may make payment of any Defaulted Interest on
Securities to the Persons in whose names such Securities (or their
respective Predecessor Securities) are registered at the close of
business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner: the Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each such Security and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the
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Trustee shall fix a special record date for the payment of such
Defaulted Interest which shall not be more than 15 nor less than 10
days prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such special
record date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest and the
special record date therefor to be mailed, first class postage prepaid,
to each Securityholder at his or her address as it appears in the
Security Register, not less than 10 days prior to such special record
date. Notice of the proposed payment of such Defaulted Interest and the
special record date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names such
Securities (or their respective Predecessor Securities) are registered
on such special record date and shall be no longer payable pursuant to
the following clause (b).
(b) The Company may make payment of any Defaulted Interest on any
Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
SECTION 2.13. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of exercise of put right as a convenience to Securityholders; provided
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of exercise of put right and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such put
shall not be affected by any defect in or omission of such numbers. The Company
will promptly notify the Trustee of any change in the CUSIP numbers.
SECTION 2.14. Intent of Parties.
The Company agrees, and each holder of a beneficial interest in
any Securities shall by the acquisition of such interest be deemed to have
agreed, that for United States Federal income tax purposes the Securities are
intended to constitute indebtedness.
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ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal, Premium, Interest and
Applicable Put Price.
The Company covenants and agrees for the benefit of the holders of
the Securities that it will duly and punctually pay or cause to be paid the
principal of and premium, if any, and interest on and Applicable Put Price with
respect to the Securities at the place, at the respective times and in the
manner provided herein. Except as provided in Section 2.03, each installment of
interest on the Securities may be paid by mailing checks for such interest
payable to the order of the holder of the Security entitled thereto as they
appear in the Security Register.
SECTION 3.02. Offices for Notices and Payments, etc.
So long as any of the Securities remain outstanding, the Company
will maintain in the Borough of Manhattan, The City of New York, an office or
agency where the Securities may be presented for payment, an office or agency
where the Securities may be presented for registration of transfer and for
exchange as in this Indenture provided and an office or agency where notices and
demands to or upon the Company in respect of the Securities or of this Indenture
may be served. The Company will give to the Trustee written notice of the
location of any such office or agency and of any change of location thereof.
Until otherwise designated from time to time by the Company in a notice to the
Trustee, any such office or agency for all of the above purposes shall be the
Principal Office of the Trustee. In case the Company shall fail to maintain any
such office or agency in the Borough of Manhattan, The City of New York, or
shall fail to give such notice of the location or of any change in the location
thereof, presentations and demands may be made and notices may be served at the
Principal Office of the Trustee.
In addition to any such office or agency, the Company may from
time to time designate one or more offices or agencies outside the Borough of
Manhattan, The City of New York, where the Securities may be presented for
payment, registration of transfer and for exchange in the manner provided in
this Indenture, and the Company may from time to time rescind such designation,
as the Company may deem desirable or expedient; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain any such office or agency in the Borough of Manhattan,
The City of New York, for the purposes above mentioned. The Company will give to
the Trustee prompt written notice of any such designation or rescission thereof.
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SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office.
The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 6.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.04. Provision as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee with respect to the Securities, it will cause such
paying agent to execute and deliver to the Trustee an
instrument in which such agent shall agree with the
Trustee, subject to the provision of this Section 3.04,
(1) that it will hold all sums held by it as such agent
for the payment of the principal of and premium, if
any, or interest on the Securities (or the Applicable
Put Price therefor) (whether such sums have been paid
to it by the Company or by any other obligor on the
Securities of such series) in trust for the benefit of
the holders of the Securities;
(2) that it will give the Trustee notice of any failure by
the Company (or by any other obligor on the
Securities) to make any payment of the principal of
and premium or interest on the Securities (or the
Applicable Put Price therefor) when the same shall be
due and payable; and
(3) that it will at any time during the continuance of any
such failure, upon the written request of the Trustee,
forthwith pay to the Trustee all sums so held in trust
by it as such paying agent.
(b) If the Company shall act as its own paying agent, it will,
on or before each due date of the principal of and premium,
if any, or interest on the Securities (or the Applicable
Put Price therefor), set aside, segregate and hold in trust
for the benefit of the holders of the Securities a sum
sufficient to pay such principal, premium or interest (or
the Applicable Put Price therefor) so becoming due and will
notify the Trustee of any failure to take such action and
of any failure by the Company (or by any other obligor
under the Securities) to make any payment of the principal
of and premium, if any, or interest on the Securities (or
the Applicable Put Price therefor) when the same shall
become due and payable.
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(c) Anything in this Section 3.04 to the contrary
notwithstanding, the Company may, at any time, for the
purpose of obtaining a satisfaction and discharge with
respect to the Securities hereunder, or for any other
reason, pay or cause to be paid to the Trustee all sums
held in trust for any such Securities by the Trustee or any
paying agent hereunder, as required by this Section 3.04,
such sums to be held by the Trustee upon the trusts herein
contained.
(d) Anything in this Section 3.04 to the contrary
notwithstanding, the agreement to hold sums in trust as
provided in this Section 3.04 is subject to Sections 11.03
and 11.04.
SECTION 3.05. Certificate to Trustee.
The Company will deliver to the Trustee on or before 120 days
after the end of each fiscal year in each year, commencing with the first fiscal
year ending after the date hereof, so long as Securities are outstanding
hereunder, an Officers' Certificate, one of the signers of which shall be the
principal executive, principal financial or principal accounting officer of the
Company stating that in the course of the performance by the signers of their
duties as officers of the Company they would normally have knowledge of any
default (without regard to notice requirements or grace periods) by the Company
in the performance of any covenants contained herein, stating whether or not
they have knowledge of any such default and, if so, specifying each such default
of which the signers have knowledge and the nature thereof.
The Company will deliver to the Trustee, as soon as possible and
in any event within five Business Days after the Company becomes aware of the
occurrence of any Event of Default, an Officers' Certificate setting forth the
details of such Event of Default and the action which the Company proposes to
take with respect thereto.
SECTION 3.06. Compliance with Consolidation Provisions.
The Company will not, while any of the Securities remain
outstanding, consolidate with, or merge into, or merge into itself, or sell or
convey all or substantially all of its property to any other Person unless the
provisions of Article X hereof are complied with.
SECTION 3.07. Limitation on Dividends.
The Company will not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock), (ii) make any payment of principal, interest or premium, if
any, on or repay or repurchase or redeem any debt securities of the Company
(including any Other Debentures) that rank pari passu with or junior in right of
payment to the Securities or (iii) make any guarantee payments with respect to
any
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guarantee by the Company of any securities of any Subsidiary of the Company
(including Other Guarantees) if such guarantee ranks pari passu or junior in
right of payment to the Securities (other than, in the case of clauses (i), (ii)
and (iii), (a) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, Common Stock of the Company; (b)
any declaration of a dividend in connection with the implementation of a
stockholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto; (c)
payments under the QUIPS Guarantee; (d) as a result of a reclassification of the
Company's capital stock solely into shares of one or more classes or series of
the Company's capital stock or the exchange or the conversion of one class or
series of the Company's capital stock for another class or series of the
Company's capital stock; (e) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged; and (f)
purchases of Common Stock in connection with the satisfaction by the Company of
its obligations (including purchases related to the issuance of Common Stock or
rights) under any of the Company's benefit plans for its and its Subsidiaries'
directors, officers or employees or any of the Company's dividend reinvestment
plans), if at such time (i) an Event of Default shall have occurred and be
continuing, (ii) if the Securities are held by the Property Trustee, the Company
shall be in default with respect to its payment obligations under the QUIPS
Guarantee or (iii) the Company shall have given notice of its election of the
exercise of its right to extend the interest payment period pursuant to Section
16.01 and any such extension shall be continuing.
SECTION 3.08. Covenants as to Life Re Capital Trust.
In the event Securities are issued to Life Re Capital Trust or a
trustee of such trust in connection with the issuance of Trust Securities by
Life Re Capital Trust, for so long as such Trust Securities remain outstanding,
the Company will (i) maintain 100% direct ownership of the Common Trust
Securities of Life Re Capital Trust; provided, however, that any successor of
the Company, permitted pursuant to Article X, may succeed to the Company's
ownership of such Common Trust Securities, (ii) use its reasonable efforts to
cause Life Re Capital Trust (a) to remain a statutory business trust, except in
connection with a distribution of Securities, the redemption of all of the Trust
Securities of Life Re Capital Trust or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of Life Re Capital Trust,
and (b) to otherwise continue to be treated as a grantor trust and not an
association taxable as a corporation or partnership for United States Federal
income tax purposes and (iii) to use its reasonable efforts to cause each holder
of Trust Securities (or, for so long as Trust Securities constitute Pledged
Securities, Units) to be treated as owning an undivided beneficial interest in
the Securities.
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SECTION 3.09. Payment of Expenses.
In connection with the offering, sale and issuance of the
Securities to Life Re Capital Trust and in connection with the sale of the Trust
Securities by Life Re Capital Trust, the Company, in its capacity as borrower
with respect to the Securities, shall:
(a) pay all costs and expenses relating to the offering, sale and
issuance of the Securities, including compensation of the Trustee in accordance
with the provisions of Section 6.06;
(b) pay all costs and expenses of Life Re Capital Trust,
including, but not limited to, costs and expenses relating to the organization
of Life Re Capital Trust, the offering, sale and issuance of the Trust
Securities (including commissions to the initial purchaser in connection
therewith), the fees and expenses of the Property Trustee and the Delaware
Trustee, the costs and expenses relating to the operation of Life Re Capital
Trust, including without limitation, costs and expenses of accountants,
attorneys, statistical or bookkeeping services, expenses for printing and
engraving and computing or accounting equipment, paying agent(s), registrar(s),
transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of assets of Life Re Capital Trust;
(c) be primarily and fully liable for any indemnification
obligations arising with respect to the Declaration;
(d) pay any and all taxes (other than United States withholding
taxes attributable to Life Re Capital Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of Life Re Capital Trust; and
(e) pay all other fees, expenses, debts and obligations (other
than payments of principal of, premium, if any, or interest on the Trust
Securities) related to Life Re Capital Trust.
SECTION 3.10. Payment Upon Resignation or Removal.
Upon termination of this Indenture or the removal or resignation
of the Trustee, unless otherwise stated, the Company shall pay to the Trustee
all amounts accrued and owing to the date of such termination, removal or
resignation. Upon termination of the Declaration or the removal or resignation
of the Delaware Trustee or the Property Trustee, as the case may be, pursuant to
Section 5.7 of the Declaration, the Company shall pay to the Delaware Trustee or
the Property Trustee, as the case may be, all amounts accrued and owing to the
date of such termination, removal or resignation.
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ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 4.01. Securityholders' Lists.
The Company covenants and agrees that it will furnish or cause to
be furnished to the Trustee:
(a) on a quarterly basis on each regular record date for the
Securities, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the
Securityholders as of such record date; and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company, of any
such request, a list of similar form and content as of a
date not more than 15 days prior to the time such list is
furnished,
except that, no such lists need be furnished so long as the
Trustee is in possession thereof by reason of its acting as
Security Registrar.
SECTION 4.02. Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and
addresses of the holders of the Securities (1) contained in
the most recent list furnished to it as provided in Section
4.01 or (2) received by it in the capacity of Security
Registrar (if so acting) hereunder. The Trustee may destroy
any list furnished to it as provided in Section 4.01 upon
receipt of a new list so furnished.
(b) In case three or more holders of Securities (hereinafter
referred to as "applicants") apply in writing to the
Trustee and furnish to the Trustee reasonable proof that
each such applicant has owned a Security for a period of at
least six months preceding the date of such application,
and such application states that the applicants desire to
communicate with other holders of Securities or with
holders of all Securities with respect to their rights
under this Indenture and is accompanied by a copy of the
form of proxy or other communication which such applicants
propose to transmit, then the Trustee shall within 5
Business Days after the receipt of such application, at its
election, either:
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(1) afford such applicants access to the information preserved
at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.02; or
(2) inform such applicants as to the approximate number of
holders of all Securities, whose names and addresses appear
in the information preserved at the time by the Trustee in
accordance with the provisions of subsection (a) of this
Section 4.02, and as to the approximate cost of mailing to
such Securityholders the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford such
applicants access to such information, the Trustee shall,
upon the written request of such applicants, mail to each
Securityholder whose name and address appear in the
information preserved at the time by the Trustee in
accordance with the provisions of subsection (a) of this
Section 4.02 a copy of the form of proxy or other
communication which is specified in such request with
reasonable promptness after a tender to the Trustee of the
material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of such mailing, unless
within five days after such tender, the Trustee shall mail
to such applicants and file with the Commission, together
with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best
interests of the holders of Securities of such series or
all Securities, as the case may be, or would be in
violation of applicable law. Such written statement shall
specify the basis of such opinion. If the Commission, after
opportunity for a hearing upon the objections specified in
the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the
entry of an order sustaining one or more of such
objections, the Commission shall find, after notice and
opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so
declaring, the Trustee shall mail copies of such material
to all such Securityholders with reasonable promptness
after the entry of such order and the renewal of such
tender; otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their
application.
(c) Each and every holder of Securities, by receiving and
holding the same, agrees with the Company and the Trustee
that neither the Company nor the Trustee nor any paying
agent shall be held accountable by reason of the disclosure
of any such information as to the names and addresses of
the holders of Securities in accordance with the provisions
of subsection (b) of this Section 4.02, regardless of the
source from which such information was derived, and that
the Trustee shall not be held account-
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able by reason of mailing any material pursuant to a
request made under said subsection (b).
SECTION 4.03. Reports by the Company.
(a) The Company covenants and agrees to file with the Trustee,
within 15 days after the date on which the Company is
required to file the same with the Commission, copies of
the annual reports and of the information, documents and
other reports (or copies of such portions of any of the
foregoing as the Commission may from time to time by rules
and regulations prescribe) which the Company may be
required to file with the Commission pursuant to Section 13
or Section 15(d) of the Exchange Act; or, if the Company is
not required to file information, documents or reports
pursuant to either of such sections, then to file with the
Trustee such of the supplementary and periodic information,
documents and reports which may be required pursuant to
Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and regu-
lations.
(b) The Company covenants and agrees to file with the Trustee
and the Commission, in accordance with the rules and
regulations prescribed from time to time by the Commission,
such additional information, documents and reports with
respect to compliance by the Company with the conditions
and covenants provided for in this Indenture as may be
required from time to time by such rules and regulations.
(c) The Company covenants and agrees to transmit by mail to all
holders of Securities, as the names and addresses of such
holders appear upon the Security Register, within 30 days
after the filing thereof with the Trustee, such
information, documents and reports or summaries of any
information, documents and reports required to be filed by
the Company pursuant to subsections (a) and (b) of this
Section 4.03 as may be required by rules and regulations
prescribed from time to time by the Commission.
(d) Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the
Trustee's receipt of such shall not constitute constructive
notice of any information contained therein or determinable
from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which
the Trustee is entitled to rely exclusively on Officers'
Certificates).
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SECTION 4.04. Reports by the Trustee.
(a) The Trustee shall transmit to Securityholders such reports
concerning the Trustee and its actions under this Indenture
as may be required pursuant to the Trust Indenture Act of
1939 at the times and in the manner provided pursuant
thereto. If required by Section 313(a) of the Trust
Indenture Act of 1939, the Trustee shall, within sixty days
after each __________, following the date of this
Indenture, commencing _______________ _, 1999, deliver to
Securityholders a brief report, dated as of such
____________, which complies with the provisions of such
Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Securityholders, be filed by the Trustee
with each stock exchange, if any, upon which the Securities
are listed, with the Commission and with the Company. The
Company will promptly notify the Trustee when the
Securities are listed on any stock exchange and any
delisting thereof.
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 5.01. Events of Default.
One or more of the following events of default shall constitute an
Event of Default hereunder (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of any interest upon any Security or
any Other Debentures when it becomes due and payable, and
continuance of such default for a period of 30 days;
provided, however, that a valid extension of an interest
payment period by the Company in accordance with the terms
hereof or, in the case of any Other Debentures, the
indenture related thereto, shall not constitute a default
in the payment of interest for this purpose; or
(b) default in the payment of all or any part of the principal
of (or premium, if any, on) any Security or any Other
Debentures as and when the same shall become due and
payable either at maturity, upon redemption or repurchase,
by declaration of acceleration of maturity or otherwise; or
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(c) default in the payment of all or any part of the Applicable
Put Price of any Security when due upon exercise of the
related Put Option; or
(d) default in any material respect in the performance, or
breach, of any covenant or warranty of the Company in this
Indenture (other than a covenant or warranty a default in
whose performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of such
default or breach for a period of 90 days after there has
been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the
holders of at least 25% in aggregate principal amount of
the outstanding Securities a written notice specifying such
default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default"
hereunder; or
(e) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an
involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect,
or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company
or for any substantial part of its property, or ordering
the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a
period of 90 consecutive days; or
(f) the Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, shall consent to the entry of an
order for relief in an involuntary case under any such law,
or shall consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or
of any substantial part of its property, or shall make any
general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due.
If an Event of Default with respect to Securities at the time
outstanding occurs and is continuing, then in every such case the Trustee or the
holders of not less than 25% in aggregate principal amount of the Securities
then outstanding may declare the principal amount of all Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the holders of the outstanding Securities), and upon any
such declaration the same shall become immediately due and payable.
The foregoing provisions, however, are subject to the condition
that if, at any time after the principal of the Securities shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, (i)
the Company shall pay or shall deposit with the Trustee a
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sum sufficient to pay (A) all matured installments of interest upon all the
Securities and the principal of and premium, if any, on any and all Securities
(or the Applicable Put Price therefor) which shall have become due otherwise
than by acceleration (with interest upon such principal and premium, if any, and
Applicable Put Price and, to the extent that payment of such interest is
enforceable under applicable law, on overdue installments of interest, at the
same rate as the rate of interest specified in the Securities to the date of
such payment or deposit) and (B) such amount as shall be sufficient to cover
reasonable compensation to the Trustee and each predecessor Trustee, their
respective agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor Trustee
except as a result of negligence or bad faith, and (ii) any and all Events of
Default under the Indenture, other than the non-payment of the principal of the
Securities which shall have become due solely by such declaration of
acceleration, shall have been cured, waived or otherwise remedied as provided
herein, then, in every such case, the holders of a majority in aggregate
principal amount of the Securities then outstanding, by written notice to the
Company and to the Trustee, may rescind and annul such declaration and its
consequences, but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or shall impair any right consequent
thereon.
In case the Trustee shall have proceeded to enforce any right
under this Indenture and such proceedings shall have been discontinued or
abandoned because of such rescission or annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the Trustee and the holders of the Securities shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the holders of the
Securities shall continue as though no such proceeding had been taken.
SECTION 5.02. Payment of Securities on Default; Suit Therefor.
The Company covenants that (a) in case default shall be made in
the payment of any installment of interest upon any of the Securities as and
when the same shall become due and payable, and such default shall have
continued for a period of 30 days, or (b) in case default shall be made in the
payment of the principal of or premium, if any, on any of the Securities (or the
Applicable Put Price therefor) as and when the same shall have become due and
payable, whether at maturity of the Securities or by declaration or exercise of
the Put Option or otherwise, then, upon demand of the Trustee, the Company will
pay to the Trustee, for the benefit of the holders of the Securities, the whole
amount that then shall have become due and payable on all such Securities for
principal and premium, if any, Applicable Put Price or interest, as the case may
be, with interest upon the overdue principal and premium, if any, Applicable Put
Price and (to the extent that payment of such interest is enforceable under
applicable law and, if the Securities are held by Life Re Capital Trust or a
trustee of such trust, without duplication of any other amounts paid by Life Re
Capital Trust or a trustee in respect thereof) upon the overdue installments of
interest at the rate borne by the Securities; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including a reasonable compensation to the Trustee, its agents,
attor-
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neys and counsel, and any expenses or liabilities incurred by the Trustee
hereunder other than through its negligence or bad faith.
In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid, and may prosecute
any such action or proceeding to judgment or final decree, and may enforce any
such judgment or final decree against the Company or any other obligor on the
Securities and collect in the manner provided by law out of the property of the
Company or any other obligor on the Securities wherever situated the moneys
adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or
for the reorganization of the Company or any other obligor on the Securities
under Title 11, United States Code, or any other applicable law, or in case a
receiver or trustee shall have been appointed for the property of the Company or
such other obligor, or in the case of any other similar judicial proceedings
relative to the Company or other obligor upon the Securities, or to the
creditors or property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of the Securities shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 5.02, shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount of principal and interest or Applicable Put Price owing and unpaid in
respect of the Securities and, in case of any judicial proceedings, to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for reasonable
compensation to the Trustee and each predecessor Trustee, and their respective
agents, attorneys and counsel, and for reimbursement of all expenses and
liabilities incurred, and all advances made, by the Trustee and each predecessor
Trustee, except as a result of negligence or bad faith) and of the
Securityholders allowed in such judicial proceedings relative to the Company or
any other obligor on the Securities, or to the creditors or property of the
Company or such other obligor, unless prohibited by applicable law and
regulations, to vote on behalf of the holders of the Securities in any election
of a trustee or a standby trustee in arrangement, reorganization, liquidation or
other bankruptcy or insolvency proceedings or person performing similar
functions in comparable proceedings, and to collect and receive any moneys or
other property payable or deliverable on any such claims, and to distribute the
same after the deduction of its charges and expenses; and any receiver, assignee
or trustee in bankruptcy or reorganization is hereby authorized by each of the
Securityholders to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee such amounts as shall be sufficient to
cover reasonable compensation to the Trustee, each predecessor Trustee and their
respective agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor Trustee
except as a result of negligence or bad faith.
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Nothing herein contained shall be construed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any holder thereof or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
All rights of action and of asserting claims under this Indenture,
or under any of the Securities, may be enforced by the Trustee without the
possession of any of the Securities, or the production thereof in any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall be for the ratable benefit of the holders of the
Securities.
In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party) the Trustee shall be held to represent all
the holders of the Securities, and it shall not be necessary to make any holders
of the Securities parties to any such proceedings.
SECTION 5.03. Application of Moneys Collected by Trustee.
Any moneys collected by the Trustee shall be applied in the order
following, at the date or dates fixed by the Trustee for the distribution of
such moneys, upon presentation of the Securities in respect of which moneys have
been collected, and stamping thereon the payment, if only partially paid, and
upon surrender thereof if fully paid:
First: To the payment of costs and expenses of collection
applicable to the Securities and reasonable compensation to the Trustee, its
agents, attorneys and counsel, and of all other expenses and liabilities
incurred, and all advances made, by the Trustee except as a result of its
negligence or bad faith;
Second: To the payment of all Senior Indebtedness of the Company
if and to the extent required by Article XV;
Third: To the payment of the amounts then due and unpaid upon
Securities for principal of (and premium, if any) and interest on the Securities
(or the Applicable Put Price therefor), in respect of which or for the benefit
of which money has been collected, ratably, without preference of priority of
any kind, according to the amounts due on such Securities for principal (and
premium, if any), the Applicable Put Price and interest, respectively; and
Fourth: To the Company.
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SECTION 5.04. Proceedings by Securityholders.
Except as contemplated by this Section 5.04, no holder of any
Security shall have any right by virtue of or by availing of any provision of
this Indenture to institute any suit, action or proceeding in equity or at law
upon or under or with respect to this Indenture or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless such holder
previously shall have given to the Trustee written notice of an Event of Default
and of the continuance thereof with respect to the Securities specifying such
Event of Default, as hereinbefore provided, and unless also the holders of not
less than 25% in aggregate principal amount of the Securities then outstanding
shall have made written request upon the Trustee to institute such action, suit
or proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee for 60 days
after its receipt of such notice, request and offer of indemnity shall have
failed to institute any such action, suit or proceeding, it being understood and
intended, and being expressly covenanted by the taker and holder of every
Security with every other taker and holder and the Trustee, that no one or more
holders of Securities shall have any right in any manner whatsoever by virtue of
or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of any other holder of Securities, or to obtain or seek to
obtain priority over or preference to any other such holder, or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal, ratable and common benefit of all holders of Securities.
Notwithstanding any other provisions in this Indenture, however,
the right of any holder of any Security to receive payment of the principal of
(premium, if any) and interest on such Security (or the Applicable Put Price
therefor), on or after the same shall have become due and payable, or to
institute suit for the enforcement of any such payment, shall not be impaired or
affected without the consent of such holder and by accepting a Security
hereunder it is expressly understood, intended and covenanted by the taker and
holder of every Security with every other such taker and holder and the Trustee,
that no one or more holders of Securities shall have any right in any manner
whatsoever by virtue or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of the holders of any other Securities,
or to obtain or seek to obtain priority over or preference to any other such
holder, or to enforce any right under this Indenture, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Securities. For the protection and enforcement of the provisions of this
Section, each and every Securityholder and the Trustee shall be entitled to such
relief as can be given either at law or in equity.
The Company and the Trustee acknowledge that pursuant to the
Declaration, the holders of QUIPS (or, for so long as QUIPS underlie Units,
holders of Units) are entitled, in the circumstances and subject to the
limitations set forth therein, to commence a Direct Action with respect to any
Event of Default under this Indenture and the Securities attributable to the
failure of the Company to pay interest or premium, if any, on or principal of
the Securities (or the applicable Put Price therefor) on the due date (after
giving effect to any valid extension of an interest payment period by the
Company). The Company may not amend this Indenture to
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remove the foregoing right without the prior written consent of the holders of
all of the QUIPS (or, for so long as QUIPS underlie Units, the holders of all
the Units). The holders of the QUIPS will not be able to exercise directly any
remedies available to the holders of the Securities other than as provided in
this paragraph.
SECTION 5.05. Proceedings by Trustee.
In case an Event of Default occurs with respect to Securities and
is continuing, the Trustee may in its discretion proceed to protect and enforce
the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
of such rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 5.06. Remedies Cumulative and Continuing.
Except as provided in the last paragraph of Section 2.08, all
powers and remedies given by this Article V to the Trustee or to the
Securityholders shall, to the extent permitted by law, be deemed cumulative and
not exclusive of any other powers and remedies available to the Trustee or the
holders of the Securities, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture or otherwise established with respect to the Securities, and no delay
or omission of the Trustee or of any holder of any of the Securities to exercise
any right or power accruing upon any Event of Default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 5.04, every power and remedy given by this Article V or by
law to the Trustee or to the Securityholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the
Securityholders.
SECTION 5.07. Direction of Proceedings and Waiver of Defaults by
Majority of Securityholders.
Prior to any declaration accelerating the maturity of the
Securities, the holders of a majority in aggregate principal amount of the
Securities at the time outstanding shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; provided,
however, that (subject to the provisions of Section 6.01) the Trustee shall have
the right to decline to follow any such direction if the Trustee shall determine
that the action so directed would be unjustly prejudicial to the holders not
taking part in such direction or if the Trustee being advised by counsel
determines that the action or proceeding so directed may not lawfully be taken
or if the Trustee in good faith by its board of directors or trustees, executive
committee, or a trust committee of directors or trustees and/or Responsible
Officers shall
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determine that the action or proceedings so directed would involve the Trustee
in personal liability. Prior to any declaration accelerating the maturity of the
Securities, the holders of a majority in aggregate principal amount of the
Securities at the time outstanding may on behalf of the holders of all of the
Securities waive any past default or Event of Default and its consequences
except a default (a) in the payment of principal of or premium, if any, or
interest on or the Applicable Put Price in respect of any of the Securities
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and premium, if any, and principal due otherwise than
by acceleration and the Applicable Put Price with respect to the Securities has
been deposited with the Trustee) or (b) in respect of covenants or provisions
hereof which cannot be modified or amended without the consent of the holder of
each Security affected; provided, however, that if the Securities are held by
the Property Trustee, such waiver or modification to such waiver shall not be
effective until the holders of a majority in aggregate liquidation amount of
Trust Securities shall have consented to such waiver or modification to such
waiver; provided further, that if the consent of the holder of each outstanding
Security is required, such waiver shall not be effective until each holder of
the Trust Securities shall have consented to such waiver. Upon any such waiver,
the default covered thereby shall be deemed to be cured for all purposes of this
Indenture and the Company, the Trustee and the holders of the Securities shall
be restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon. Whenever any default or Event of Default hereunder shall
have been waived as permitted by this Section 5.07, said default or Event of
Default shall for all purposes of the Securities and this Indenture be deemed to
have been cured and to be not continuing.
SECTION 5.08. Notice of Defaults.
The Trustee shall, within 90 days after the occurrence of a
default with respect to the Securities, mail to all Securityholders, as the
names and addresses of such holders appear upon the Security Register, notice of
all defaults known to the Trustee, unless such defaults shall have been cured
before the giving of such notice (the term "defaults" for the purpose of this
Section 5.08 being hereby defined to be the events specified in clauses (a),
(b), (c), (d), (e) and (f) of Section 5.01, not including periods of grace, if
any, provided for therein, and irrespective of the giving of written notice
specified in clause (d) of Section 5.01); and provided that, except in the case
of default in the payment of the principal of or premium, if any, or interest on
or the Applicable Put Price in respect of any of the Securities, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Securityholders; and
provided further, that in the case of any default of the character specified in
Section 5.01(d) no such notice to Securityholders shall be given until at least
60 days after the occurrence thereof but shall be given within 90 days after
such occurrence.
SECTION 5.09. Undertaking to Pay Costs.
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All parties to this Indenture agree, and each holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section 5.09 shall not apply to any suit instituted by
the Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding in the aggregate more than 10% in aggregate principal
amount of the Securities outstanding, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of (or
premium, if any) or interest on or the Applicable Put Price in respect of any
Security against the Company on or after the same shall have become due and
payable.
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee.
With respect to the holders of the Securities issued hereunder, the
Trustee, prior to the occurrence of an Event of Default and after the curing or
waiving of all Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Indenture. In case an Event of Default has occurred (which has not been cured or
waived), the Trustee shall exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have
occurred
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this
Indenture, and the Trustee shall not be liable except
for the performance of such duties and obligations as
are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into
this Indenture against the Trustee; and
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(2) in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to
the requirements of this Indenture; but, in the case
of any such certificates or opinions which by any
provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or
not they conform to the requirements of this
Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts
stated therein);
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Officers of the
Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith, in
accordance with the direction of the Securityholders pursuant
to Section 5.07, relating to the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or liability is not reasonably assured to it under the
terms of this Indenture or adequate indemnity against such risk is not
reasonably assured to it.
SECTION 6.02. Reliance on Documents, Opinions, etc.
Except as otherwise provided in Section 6.01:
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, note, debenture or other paper
or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein may be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be
herein specifically prescribed); and
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any Board Resolution may be evidenced to the Trustee by a copy
thereof certified by the Secretary or an Assistant Secretary
of the Company;
(c) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or
suffered omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Securityholders,
pursuant to the provisions of this Indenture, unless such
Securityholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers
conferred upon it by this Indenture; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon
the occurrence of an Event of Default (that has not been cured
or waived), to exercise such of the rights and powers vested
in it by this Indenture, and to use the same degree of care
and skill in their exercise, as a prudent man would exercise
or use under the circumstances in the conduct of his own
affairs;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, debenture, coupon or other
paper or document, unless requested in writing to do so by the
holders of a majority in aggregate principal amount of the
outstanding Securities; provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses
or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to
it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expense or liability as a
condition to so proceeding;
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or
through agents (including any Authenticating Agent) or
attorneys, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent or
attorney appointed by it with due care; and
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(h) the Trustee shall not be deemed to have notice of any Default
or Event of Default unless a Responsible Officer of the
Trustee has actual knowledge thereof or unless written notice
of any event which is in fact such a default is received by
the Trustee at the Principal Office of the Trustee, and such
notice references the Securities and this Indenture.
SECTION 6.03. No Responsibility for Recitals, etc.
The recitals contained herein and in the Securities (except in the
certificate of authentication of the Trustee or the Authenticating Agent) shall
be taken as the statements of the Company and the Trustee and the Authenticating
Agent assume no responsibility for the correctness of the same. The Trustee and
the Authenticating Agent make no representations as to the validity or
sufficiency of this Indenture or of the Securities. The Trustee and the
Authenticating Agent shall not be accountable for the use or application by the
Company of any Securities or the proceeds of any Securities authenticated and
delivered by the Trustee or the Authenticating Agent in conformity with the
provisions of this Indenture.
SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer
Agents or Registrar May Own Securities.
The Trustee or any Authenticating Agent or any paying agent or any
transfer agent or any Security Registrar, in its individual or any other
capacity, may become the owner or pledgee of Securities with the same rights it
would have if it were not Trustee, Authenticating Agent, paying agent, transfer
agent or Security Registrar.
SECTION 6.05. Moneys to Be Held in Trust.
Subject to the provisions of Section 11.04, all moneys received by the
Trustee or any paying agent shall, until used or applied as herein provided, be
held in trust for the purpose for which they were received, but need not be
segregated from other funds except to the extent required by law. The Trustee
and any paying agent shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.
So long as no Event of Default shall have occurred and be continuing, all
interest allowed on any such moneys shall be paid from time to time upon the
written order of the Company, signed by the Chairman of the Board of Directors,
the President, the Chief Executive Officer, the Chief Financial Officer or a
Vice President or the Treasurer or an Assistant Treasurer of the Company.
SECTION 6.06. Compensation and Expenses of Trustee.
The Company, as issuer of the Securities, covenants and agrees to pay
to the Trustee from time to time, and the Trustee shall be entitled to, such
compensation as shall be agreed to in writing between the Company and the
Trustee (which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and the
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Company will pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith. The Company also
covenants to indemnify each of the Trustee or any predecessor Trustee (and its
officers, agents, directors and employees) for, and to hold it harmless against,
any and all loss, damage, claim, liability or expense including taxes (other
than taxes based on the income of the Trustee) incurred without negligence or
bad faith on the part of the Trustee and arising out of or in connection with
the acceptance or administration of this trust, including the costs and expenses
of defending itself against any claim of liability in the premises. The
obligations of the Company under this Section 6.06 to compensate and indemnify
the Trustee and to pay or reimburse the Trustee for expenses, disbursements and
advances shall constitute additional indebtedness hereunder. Such additional
indebtedness shall be secured by a lien prior to that of the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the benefit of the holders of particular Securities.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.01(e) or Section
5.01(f), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 6.07. Officers' Certificate as Evidence.
Except as otherwise provided in Sections 6.01 and 6.02, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof is herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee, and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken or omitted by
it under the provisions of this Indenture upon the faith thereof.
SECTION 6.08. Conflicting Interest of Trustee.
If the Trustee has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the Trust Indenture Act of 1939, the Trustee
and the Company shall in all respects comply with the provisions of Section
310(b) of the Trust Indenture Act of 1939, subject to the penultimate paragraph
thereof.
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SECTION 6.09. Eligibility of Trustee.
The Trustee hereunder shall at all times be a corporation organized and
doing business under the laws of the United States of America or any state or
territory thereof or of the District of Columbia or a corporation or other
Person permitted to act as trustee by the Commission authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000) and subject to supervision or
examination by federal, state, territorial, or District of Columbia authority.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 6.09 the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.09, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.10.
SECTION 6.10. Resignation or Removal of Trustee.
(a) The Trustee, or any trustee or trustees hereafter appointed,
may at any time resign by giving written notice of such
resignation to the Company and by mailing notice thereof to
the holders of the Securities at their addresses as they
shall appear on the Security Register. Upon receiving such
notice of resignation, the Company shall promptly appoint a
successor trustee or trustees by written instrument, in
duplicate, one copy of which instrument shall be delivered to
the resigning Trustee and one copy to the successor trustee.
If no successor trustee shall have been so appointed and have
accepted appointment within 60 days after the mailing of such
notice of resignation to the Securityholders, the resigning
Trustee may petition, at the expense of the Company, any court
of competent jurisdiction for the appointment of a successor
trustee, or any Securityholder who has been a bona fide holder
of a Security for at least six months may, subject to the
provisions of Section 5.09, on behalf of himself and all
others similarly situated, petition any such court for the
appointment of a successor trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and pre-
scribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur --
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(1) the Trustee shall fail to comply with the provisions
of Section 6.08 after written request therefor by the
Company or by any Securityholder who has been a bona
fide holder of a Security or Securities for at least
six months, or
(2) the Trustee shall cease to be eligible in accordance
with the provisions of Section 6.09 and shall fail to
resign after written request therefor by the Company
or by any such Securityholder, or
(3) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, the Company may remove the
Trustee and appoint a successor trustee by written
instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or,
subject to the provisions of Section 5.09, any
Securityholder who has been a bona fide holder of a
Security for at least six months may, on behalf of
himself and all others similarly situated, petition
any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor
trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, remove
the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal
amount of the Securities at the time outstanding may
at any time remove the Trustee and nominate a
successor trustee, which shall be deemed appointed as
successor trustee unless within 10 days after such
nomination the Company objects thereto or if no
successor trustee shall have been so appointed and
shall have accepted appointment within 30 days after
such removal, in which case the Trustee so removed or
any Securityholder, upon the terms and conditions and
otherwise as in subsection (a) of this Section 6.10
provided, may petition, at the expense of the
Company, any court of competent jurisdiction for an
appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and
appointment of a successor trustee pursuant to any of
the provisions of this Section 6.10 shall become
effective upon acceptance of appointment by the
successor trustee as provided in Section 6.11.
SECTION 6.11. Acceptance by Successor Trustee.
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Any successor trustee appointed as provided in Section 6.10 shall
execute, acknowledge and deliver to the Company and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring trustee shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as trustee herein; but,
nevertheless, on the written request of the Company or of the successor trustee,
the trustee ceasing to act shall, upon payment of any amounts then due it
pursuant to the provisions of Section 6.06, execute and deliver an instrument
transferring to such successor trustee all the rights and powers of the trustee
so ceasing to act and shall duly assign, transfer and deliver to such successor
trustee all property and money held by such retiring trustee thereunder. Upon
request of any such successor trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers. Any trustee ceasing to act
shall, nevertheless, retain a lien upon all property or funds held or collected
by such trustee to secure any amounts then due it pursuant to the provisions of
Section 6.06.
No successor trustee shall accept appointment as provided in this
Section 6.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 6.08 and eligible under the
provisions of Section 6.09.
Upon acceptance of appointment by a successor trustee as provided in
this Section 6.11, the Company shall mail notice of the succession of such
trustee hereunder to the holders of Securities at their addresses as they shall
appear on the Security Register. If the Company fails to mail such notice within
10 days after the acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.
SECTION 6.12. Succession by Merger, etc.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any Securities shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor trustee; and in all such cases such certificates shall have the full
force which the Securities or
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this Indenture elsewhere provides that the certificate of the Trustee shall
have; provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or authenticate Securities in the name
of any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
SECTION 6.13. Limitation on Rights of Trustee as a Creditor.
The Trustee shall comply with Section 311(a) of the Trust Indenture Act
of 1939, excluding any creditor relationship described in Section 311(b) of the
Trust Indenture Act of 1939. A Trustee who has resigned or been removed shall be
subject to Section 311(a) of the Trust Indenture Act of 1939 to the extent
included therein.
SECTION 6.14. Authenticating Agents.
There may be one or more Authenticating Agents appointed by the Trustee
upon the request of the Company with power to act on its behalf and subject to
its direction in the authentication and delivery of Securities issued upon
exchange or transfer thereof as fully to all intents and purposes as though any
such Authenticating Agent had been expressly authorized to authenticate and
deliver Securities; provided, that the Trustee shall have no liability to the
Company for any acts or omissions of the Authenticating Agent with respect to
the authentication and delivery of Securities. Any such Authenticating Agent
shall at all times be a corporation organized and doing business under the laws
of the United States or of any state or territory thereof or of the District of
Columbia authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of at least $5,000,000 and being subject to
supervision or examination by federal, state, territorial or District of
Columbia authority. If such corporation publishes reports of condition at least
annually pursuant to law or the requirements of such authority, then for the
purposes of this Section 6.14 the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of any Authenticating Agent, shall be the successor
of such Authenticating Agent hereunder, if such successor corporation is
otherwise eligible under this Section 6.14 without the execution or filing of
any paper or any further act on the part of the parties hereto or such
Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenti-
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cating Agent and to the Company. Upon receiving such a notice of resignation or
upon such a termination, or in case at any time any Authenticating Agent shall
cease to be eligible under this Section 6.14, the Trustee may, and upon the
request of the Company shall, promptly appoint a successor Authenticating Agent
eligible under this Section 6.14, shall give written notice of such appointment
to the Company and shall mail notice of such appointment to all Securityholders
as the names and addresses of such holders appear on the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all rights, powers, duties and responsibilities of its
predecessor hereunder, with like effect as if originally named as Authenticating
Agent herein.
The Company, as borrower, agrees to pay to any Authenticating Agent
from time to time reasonable compensation for its services. Any Authenticating
Agent shall have no responsibility or liability for any action taken by it as
such in accordance with the directions of the Trustee.
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders.
Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Securities may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action) the fact that at
the time of taking any such action the holders of such specified percentage have
joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by such Securityholders in person or by
agent or proxy appointed in writing, or (b) by the record of such holders of
Securities voting in favor thereof at any meeting of such Securityholders duly
called and held in accordance with the provisions of Article VIII, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of such Securityholders.
If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Company may, at its option, as evidenced by an Officers' Certificate, fix in
advance a record date for the determination of Securityholders entitled to give
such request, demand, authorization, direction, notice, consent, waiver or other
action or to revoke any such action, but the Company shall have no obligation to
do so. If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other action or revocation may be given
before or after the record date, but only the Securityholders of record at the
close of business on the record date shall be deemed to be Securityholders for
the purposes of determining whether Securityholders of the requisite proportion
of outstanding Securities have authorized or agreed or consented to such
request, demand, authorization, direction, notice,
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consent, waiver or other action, and for that purpose the outstanding Securities
shall be computed as of the record date; provided, however, that no such
authorization, agreement or consent by such Securityholders on the record date
shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after the record date.
SECTION 7.02. Proof of Execution by Securityholders.
Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of the
execution of any instrument by a Securityholder or his agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee. The ownership of Securities shall be proved by the Security
Register or by a certificate of the Security Registrar. The Trustee may require
such additional proof of any matter referred to in this Section as it shall deem
necessary.
The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.06.
SECTION 7.03. Who Are Deemed Absolute Owners.
Prior to due presentment for registration of transfer of any Security,
the Company, the Trustee, any Authenticating Agent, any paying agent, any
transfer agent and any Security Registrar may deem the Person in whose name such
Security shall be registered upon the Security Register to be, and may treat him
as, the absolute owner of such Security (whether or not such Security shall be
overdue) for the purpose of receiving payment of or on account of the principal
of and premium, if any, and the Applicable Put Price with respect to and
(subject to Section 2.06) interest on such Security and for all other purposes;
and neither the Company nor the Trustee nor any Authenticating Agent nor any
paying agent nor any transfer agent nor any Security Registrar shall be affected
by any notice to the contrary. All such payments so made to any holder for the
time being or upon his order shall be valid, and, to the extent of the sum or
sums so paid, effectual to satisfy and discharge the liability for moneys
payable upon any such Security.
SECTION 7.04. Securities Owned by Company Deemed Not Outstanding.
In determining whether the holders of the requisite aggregate principal
amount of Securities have concurred in any direction, consent or waiver under
this Indenture, Securities which are owned by the Company or any other obligor
on the Securities or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company,
except for the Securities owned by or on behalf of Life Re Capital Trust, or any
other obligor on the Securities shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; provided that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, consent or
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waiver, only Securities which the Trustee actually knows are so owned shall be
so disregarded. Securities so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 7.04 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Securities and that the pledgee is not the Company or any such other
obligor or Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee.
SECTION 7.05. Revocation of Consents; Future Holders Bound.
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 7.01, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Securities specified in this
Indenture in connection with such action, any holder of a Security (or any
Security issued in whole or in part in exchange or substitution therefor),
subject to Section 7.01, the serial number of which is shown by the evidence to
be included in the Securities the holders of which have consented to such action
may, by filing written notice with the Trustee at its principal office and upon
proof of holding as provided in Section 7.02, revoke such action so far as
concerns such Security (or so far as concerns the principal amount represented
by any exchanged or substituted Security). Except as aforesaid any such action
taken by the holder of any Security shall be conclusive and binding upon such
holder and upon all future holders and owners of such Security, and of any
Security issued in exchange or substitution therefor, irrespective of whether or
not any notation in regard thereto is made upon such Security or any Security
issued in exchange or substitution therefor.
ARTICLE VIII
SECURITYHOLDERS' MEETINGS
SECTION 8.01. Purposes of Meetings.
A meeting of Securityholders may be called at any time and from time to
time pursuant to the provisions of this Article VIII for any of the following
purposes:
(a) to give any notice to the Company or to the Trustee, or to
give any directions to the Trustee, or to consent to the
waiving of any default hereunder and its consequences, or to
take any other action authorized to be taken by
Securityholders pursuant to any of the provisions of Article
V;
(b) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article VI;
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(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section
9.02; or
(d) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal
amount of such Securities under any other provision of this
Indenture or under applicable law.
SECTION 8.02. Call of Meetings by Trustee.
The Trustee may at any time call a meeting of Securityholders to take
any action specified in Section 8.01, to be held at such time and at such place
in the Borough of Manhattan, The City of New York, as the Trustee shall
determine. Notice of every meeting of the Securityholders, setting forth the
time and the place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be mailed to holders of Securities at their
addresses as they shall appear on the Securities Register. Such notice shall be
mailed not less than 20 nor more than 180 days prior to the date fixed for the
meeting.
SECTION 8.03. Call of Meetings by Company or Securityholders.
In case at any time the Company pursuant to a resolution of the Board
of Directors, or the holders of at least 10% in aggregate principal amount of
the Securities then outstanding, shall have requested the Trustee to call a
meeting of Securityholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or such Securityholders may determine the time and the
place in the Borough of Manhattan, The City of New York for such meeting and may
call such meeting to take any action authorized in Section 8.01, by mailing
notice thereof as provided in Section 8.02.
SECTION 8.04. Qualifications for Voting.
To be entitled to vote at any meeting of Securityholders a Person shall
be (a) a holder of one or more Securities or (b) a Person appointed by an
instrument in writing as proxy by a holder of one or more Securities. The only
Persons who shall be entitled to be present or to speak at any meeting of
Securityholders shall be the Persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
SECTION 8.05. Regulations.
Notwithstanding any other provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Securityholders, in regard to proof of the holding of Securities and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies,
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certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 8.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 8.04, at any meeting each holder
of Securities or proxy therefor shall be entitled to one vote for each $1,000
principal amount of Securities held or represented by him; provided, however,
that no vote shall be cast or counted at any meeting in respect of any Security
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Securities held by him or instruments in writing as aforesaid duly
designating him as the person to vote on behalf of other Securityholders. Any
meeting of Securityholders duly called pursuant to the provisions of Section
8.02 or 8.03 may be adjourned from time to time by a majority of those present,
whether or not constituting a quorum, and the meeting may be held as so
adjourned without further notice.
The Persons entitled to vote a majority in principal amount of the
outstanding Securities shall constitute a quorum for a meeting of holders of
Securities; provided, however, that if any action is to be taken at such meeting
with respect to a consent, waiver, request, demand, notice, authorization,
direction or other action which may be given by the holders of not less than a
specified percentage in principal amount of the outstanding Securities, the
Persons holding or representing such specified percentage in principal amount of
the outstanding Securities will constitute a quorum. In the absence of a quorum
within 30 minutes of the time appointed for any such meeting, the meeting shall,
if convened at the request of holders of Securities, be dissolved. In any other
case the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period of not less than 10 days
as determined by the chairman of the meeting prior to the adjournment of such
adjourned meeting. Notice of the reconvening of any adjourned meeting shall be
given as provided in Section 8.02, except that such notice need be given only
once not less than five days prior to the date on which the meeting is scheduled
to be reconvened. Notice of the reconvening of an adjourned meeting shall state
expressly the percentage, as provided above, of the principal amount of the
outstanding Securities which shall constitute a quorum.
Except as limited by the first proviso to the first paragraph of
Section 9.02, any resolution presented to a meeting or adjourned meeting duly
reconvened at which a quorum is present as aforesaid may be adopted by the
affirmative vote of the holders of a majority in principal amount of the
outstanding Securities; provided, however, that, except as limited by
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the first proviso to the first paragraph of Section 9.02, any resolution with
respect to any consent, waiver, request, demand, notice, authorization,
direction or other action which this Indenture expressly provides may be given
by the holders of not less than a specified percentage in principal amount of
the outstanding Securities may be adopted at a meeting or an adjourned meeting
duly reconvened and at which a quorum is present as aforesaid only by the
affirmative vote of the holders of not less than such specified percentage in
principal amount of the outstanding Securities.
Any resolution passed or decision taken at any meeting of holders of
Securities duly held in accordance with this Section shall be binding on all the
holders of Securities whether or not present or represented at the meeting.
SECTION 8.06. Voting.
The vote upon any resolution submitted to any meeting of holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of such holders or of their representatives by proxy and the serial
number or numbers of the Securities held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
triplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 8.02. The record shall show the serial numbers of the
Securities voting in favor of or against any resolution. The record shall be
signed and verified by the affidavits of the permanent chairman and secretary of
the meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
ARTICLE IX
AMENDMENTS AND SUPPLEMENTS
SECTION 9.01. Without Consent of Securityholders.
The Company and the Trustee may from time to time and at any time amend
or supplement this Indenture, without the consent of the Securityholders, for
one or more of the following purposes:
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(a) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the
successor corporation of the covenants, agreements and
obligations of the Company pursuant to Article X hereof;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the
Securityholders as the Board of Directors and the Trustee
shall consider to be for the protection of the
Securityholders, and to make the occurrence, or the occurrence
and continuance, of a default in any of such additional
covenants, restrictions or conditions a Default or an Event of
Default permitting the enforcement of all or any of the
remedies provided in this Indenture as herein set forth;
provided, however, that in respect of any such additional
covenant, restriction or condition such amendment may provide
for a particular period of grace after default (which period
may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement
upon such default or may limit the remedies available to
the Trustee upon such default;
(c) to provide for the issuance under this Indenture of Securities
in coupon form (including Securities registrable as to
principal only) and to provide for exchangeability of such
Securities with the Securities issued hereunder in fully
registered form and to make all appropriate changes for such
purpose;
(d) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture
which may be defective or inconsistent with any other
provision contained herein or in any supplemental indenture,
or to make such other provisions in regard to matters or
questions arising under this Indenture; provided that any such
action shall not materially adversely affect the interests of
the holders of the Securities;
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to the
Securities;
(f) to make provision for transfer procedures, certification,
book-entry provisions, the form of legends, if any, to be
placed on Securities, minimum denominations and all other
matters required pursuant to Section 2.07 or otherwise
necessary, desirable or appropriate in connection with the
issuance of Securities to holders of QUIPS in the event of a
distribution of Securities by Life Re Capital Trust following
a Dissolution Event;
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(g) to qualify or maintain qualification of this Indenture under
the Trust Indenture Act of 1939; or
(h) to make any change that does not adversely affect the rights
of any Securityholder in any material respect.
The Trustee is hereby authorized to join with the Company in the
execution of any supplemental indenture to effect such amendment, to make any
further appropriate agreements and stipulations which may be therein contained
and to accept the conveyance, transfer and assignment of any property
thereunder, but the Trustee shall not be obligated to, but may in its
discretion, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any amendment to this Indenture authorized by the provisions of this
Section 9.01 may be executed by the Company and the Trustee without the consent
of the holders of any of the Securities at the time outstanding, notwithstanding
any of the provisions of Section 9.02.
SECTION 9.02. With Consent of Securityholders.
With the consent (evidenced as provided in Section 7.01) of the holders
of in excess of 50% of the aggregate principal amount of the Securities at the
time outstanding, the Company, when authorized by a Board Resolution, and the
Trustee may from time to time and at any time amend this Indenture for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the holders of the Securities; provided, however, that no such amendment shall
without the consent of the holders of each Security then outstanding and
affected thereby (i) extend the Maturity Date of any Security, or reduce the
rate or extend the time of payment of interest thereon (except as contemplated
by Article XVI), or reduce the principal amount thereof, or reduce any amount
payable on redemption or repurchase thereof, or make the principal thereof or
any interest or premium thereon payable in any coin or currency other than that
provided in the Securities, or impair or affect the right of any Securityholder
to institute suit for payment thereof, (ii) change any of the terms or
conditions of the Put Options or the Applicable Put Price, or (iii) reduce the
aforesaid percentage of Securities the holders of which are required to consent
to any such amendment to this Indenture, provided, however, that if the
Securities are held by Life Re Capital Trust, such amendment shall not be
effective until the holders of a majority in liquidation amount of Trust
Securities shall have consented to such amendment and further that no such
amendment shall remove the right of a holder of record of QUIPS (or for so long
as QUIPS underlie Units, a holder of record of Units) to institute a Direct
Action with respect to an Event of Default hereunder as provided in the
Declaration without consent of the holders of all of the QUIPS (or, for so long
as QUIPS underlie Units, the holders of all the Units); provided, further, that
if the consent of the holder of each outstanding Security is required, such
amendment shall not be effective until each holder of the Trust Securities shall
have consented to such amendment.
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Upon the request of the Company accompanied by a copy of a resolution
of the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any supplemental indenture affecting such
amendment, and upon the filing with the Trustee of evidence of the consent of
Securityholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, prepared by the
Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders as their names and addresses appear upon the
Security Register. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 9.03. Compliance with Trust Indenture Act of 1939; Effect of
Supplemental Indentures.
Any supplemental indenture executed pursuant to the provisions of this
Article IX shall comply with the Trust Indenture Act of 1939. Upon the execution
of any supplemental indenture pursuant to the provisions of this Article IX,
this Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Securities shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
SECTION 9.04. Notation on Securities.
Securities authenticated and delivered after the execution of any
supplemental indenture affecting such series pursuant to the provisions of this
Article IX may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company or the Trustee shall
so determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may be prepared and executed by the
Company, authenticated by the Trustee or the Authenticating Agent and delivered
in exchange for the Securities then outstanding.
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SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be
Furnished Trustee.
The Trustee, subject to the provisions of Sections 6.01 and 6.02, may
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any supplemental indenture executed pursuant hereto complies with
the requirements of this Article IX.
The Trustee may receive an Opinion of Counsel as conclusive evidence
that any supplemental indenture executed pursuant to this Article is authorized
or permitted by, and conforms to, the terms of this Article and that it is
proper for the Trustee under the provisions of this Article to join in the
execution thereof.
ARTICLE X
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 10.01. Company May Consolidate, etc., on Certain Terms.
Nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of the Company with or into any other Person
(whether or not affiliated with the Company, as the case may be), or successive
consolidations or mergers in which the Company, or its successor or successors,
as the case may be, shall be a party or parties, or shall prevent any sale,
conveyance, transfer or lease of the property of the Company, or its successor
or successors, as the case may be, as an entirety, or substantially as an
entirety, to any other Person (whether or not affiliated with the Company, or
its successor or successors, as the case may be) authorized to acquire and
operate the same; provided, that (a) the Company is the surviving Person, or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, conveyance, transfer or lease of property is
made is a Person organized and existing under the laws of the United States or
any State thereof or the District of Columbia, (b) upon any such consolidation,
merger, sale, conveyance, transfer or lease, the due and punctual payment of the
principal of (and premium, if any) and interest on and the Applicable Put Price
with respect to the Securities according to their tenor and the due and punctual
performance and observance of all the obligations, covenants and conditions of
this Indenture to be kept or performed by the Company shall be expressly
assumed, by supplemental indenture (which shall conform to the provisions of the
Trust Indenture Act of 1939, as then in effect) satisfactory in form to the
Trustee executed and delivered to the Trustee by the Person formed by such
consolidation, or into which the Company, shall have been merged, or by the
Person which shall have acquired such property, as the case may be and (c) after
giving effect to such consolidation, merger, sale, conveyance, transfer or
lease, no Default or Event of Default and no event which, after notice or lapse
of time or both, would become an Event of Default, shall have occurred and be
continuing.
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SECTION 10.02. Successor Corporation to Be Substituted for Company.
In case of any such consolidation, merger, conveyance or transfer and
upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the due and punctual payment of the principal of and premium, if any, and
interest on and the Applicable Put Price with respect to all of the Securities
and the due and punctual performance and observance of all of the obligations,
covenants and conditions of this Indenture to be performed or observed by the
Company, such successor Person shall succeed to and be substituted for the
Company, with the same effect as if it had been named herein as the party of the
first part, and the Company thereupon shall be relieved of any further liability
or obligation hereunder or upon the Securities. Such successor Person thereupon
may cause to be signed, and may issue either in its own name or in the name of
Life Re Corporation, any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee or the Authenticating Agent; and, upon the order of such successor
Person instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee or the Authenticating
Agent shall authenticate and deliver any Securities which previously shall have
been signed and delivered by the officers of the Company to the Trustee or the
Authenticating Agent for authentication, and any Securities which such successor
Person thereafter shall cause to be signed and delivered to the Trustee or the
Authenticating Agent for that purpose. All the Securities so issued shall in all
respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Securities had been issued at the date of the
execution hereof.
SECTION 10.03. Opinion of Counsel to Be Given Trustee.
The Trustee, subject to the provisions of Sections 6.01 and 6.02, may
receive an Opinion of Counsel as conclusive evidence that any consolidation,
merger, sale, conveyance, transfer or lease, and any assumption, permitted or
required by the terms of this Article X complies with the provisions of this
Article X.
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01. Discharge of Indenture.
When (a) the Company shall deliver to the Trustee for cancellation all
Securities theretofore authenticated (other than any Securities which shall have
been destroyed, lost or stolen and which shall have been replaced or paid as
provided in Section 2.08) and not theretofore cancelled, or (b) all the
Securities not theretofore cancelled or delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become
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due and payable within one year, and the Company shall deposit with the Trustee,
in trust, funds sufficient to pay on the Maturity Date all of the indebtedness
on the Securities (other than any Securities which shall have been destroyed,
lost or stolen and which shall have been replaced as provided in Section 2.08)
not theretofore cancelled or delivered to the Trustee for cancellation,
including principal and premium, if any, and interest due or to become due to
the Maturity Date, but excluding, however, the amount of any moneys for the
payment of principal of or premium, if any, or interest on the Securities (1)
theretofore repaid to the Company in accordance with the provisions of Section
11.04, or (2) paid to any State or to the District of Columbia pursuant to its
unclaimed property or similar laws, and if in either case the Company shall also
pay or cause to be paid all other sums payable hereunder by the Company, then
this Indenture shall cease to be of further effect except for the provisions of
Sections 2.02, 2.07, 2.08, 3.01, 3.02, 3.04, 6.06, 6.10 and 11.04 hereof, which
shall survive until such Securities shall mature and be paid. Thereafter,
Sections 6.06, 6.10 and 11.04 shall survive, and the Trustee, on demand of the
Company accompanied by any Officers' Certificate and an Opinion of Counsel to
the effect that all conditions to the satisfaction and discharge of this
Indenture have been satisfied and at the cost and expense of the Company, shall
execute proper instruments acknowledging satisfaction of and discharging this
Indenture, the Company, however, hereby agreeing to reimburse the Trustee for
any costs or expenses thereafter reasonably and properly incurred by the Trustee
in connection with this Indenture or the Securities.
SECTION 11.02. Deposited Moneys and U.S. Government Obligations to Be
Held in Trust by Trustee.
Subject to the provisions of Section 11.04, all moneys and U.S.
Government Obligations deposited with the Trustee pursuant to Sections 11.01 or
11.05 shall be held in trust and applied by it to the payment, either directly
or through any paying agent (including the Company if acting as its own paying
agent), to the holders of the particular Securities for the payment of which
such moneys or U.S. Government Obligations have been deposited with the Trustee,
of all sums due and to become due thereon for principal, premium, if any, and
interest.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 11.05 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the holders of outstanding Securities.
SECTION 11.03. Paying Agent to Repay Moneys Held.
Upon the satisfaction and discharge of this Indenture all moneys then
held by any paying agent of the Securities (other than the Trustee) shall, upon
written demand of the Company, be repaid to it or paid to the Trustee, and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.
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SECTION 11.04. Return of Unclaimed Moneys.
Any moneys deposited with or paid to the Trustee or any paying agent
for payment of the principal of or premium, if any, or interest on or the
Applicable Put Price with respect to Securities and not applied but remaining
unclaimed by the holders of Securities for two years after the date upon which
the principal of or premium, if any, or interest on or the Applicable Put Price
with respect to such Securities, as the case may be, shall have become due and
payable, shall be repaid to the Company by the Trustee or such paying agent on
Company Request; and the holder of any of the Securities shall thereafter look
only to the Company for any payment which such holder may be entitled to collect
and all liability of the Trustee or such paying agent with respect to such
moneys shall thereupon cease.
SECTION 11.05. Defeasance Upon Deposit of Moneys or U.S. Government
Obligations.
The Company shall be deemed to have been Discharged (as defined below)
from its obligations with respect to the Securities on the 91st day after the
conditions set forth below have been satisfied:
(1) the Company shall have deposited or caused to be
deposited irrevocably with the Trustee or the
Defeasance Agent (as defined below) as trust funds in
trust, specifically pledged as security for, and
dedicated solely to, the benefit of the holders of
the Securities (i) money in an amount, or (ii) U.S.
Government Obligations which through the payment of
interest and principal in respect thereof in
accordance with their terms will provide, not later
than one day before the due date of any payment,
money in an amount, or (iii) a combination of (i) and
(ii), sufficient, in the opinion (with respect to
(ii) and (iii)) of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee and
the Defeasance Agent, if any, to pay and discharge
each installment of principal of and interest and
premium, if any, on the outstanding Securities on the
dates such installments of principal, interest or
premium are due;
(2) no Default or Event of Default with respect to the
Securities shall have occurred and be continuing on
the date of such deposit;
(3) the Company shall have delivered to the Trustee and
the Defeasance Agent, if any, an Opinion of Counsel
to the effect that holders of the Securities will not
recognize income, gain or loss for United States
Federal income tax purposes as a result of the
exercise of the option under this Section 11.05 and
will be subject to United States Federal income tax
on the same amount and in the same manner and at the
same times as would have been the case if such option
had not been exercised,
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and such opinion shall be based on a statute so
providing or be accompanied by a private letter
ruling to that effect received from the United States
Internal Revenue Service or a revenue ruling
pertaining to a comparable form of transaction to
that effect published by the United States Internal
Revenue Service; and
(4) the Company shall have delivered to the Trustee and
the Defeasance Agent, if any, an Officers'
Certificate and an Opinion of Counsel each stating
that all conditions precedent herein provided for
relating to the satisfaction and discharge of this
Indenture have been complied with.
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Securities and to have satisfied all the obligations under this Indenture
relating to the Securities (and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging the same), except (A) the rights
of holders of Securities to receive, from the trust fund described in clause (1)
above, payment of the principal of and the interest and premium, if any, on the
Securities when such payments are due; (B) the Company's obligations with
respect to the Securities under Sections 2.02, 2.07, 2.08, 3.02, 3.04, 6.10 and
11.04; and (C) the rights, powers, trusts, duties and immunities of the Trustee
hereunder.
"Defeasance Agent" means another financial institution which is
eligible to act as Trustee hereunder and which assumes all of the obligations of
the Trustee necessary to enable the Trustee to act under this Article. In the
event such a Defeasance Agent is appointed pursuant to this Section, the
following conditions shall apply:
(1) the Trustee shall have approval rights over the
document appointing such Defeasance Agent and the
document setting forth such Defeasance Agent's rights
and responsibilities;
(2) the Defeasance Agent shall provide verification to
the Trustee acknowledging receipt of sufficient
money and/or U. S. Government Obligations to meet the
applicable conditions set forth in this Section
11.05.
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01. Indenture and Securities Solely Corporate Obligations.
No recourse for the payment of the principal of or premium, if any, or
interest on or the Applicable Put Price with respect to any Security, or for any
claim based thereon or
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otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in this Indenture, or in any Security, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, officer or director, as such, past,
present or future, of the Company or of any successor Person to the Company,
either directly or through the Company or any successor Person to the Company,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Securities.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01. Successors.
All the covenants, stipulations, promises and agreements in this
Indenture contained by the Company shall bind its successors and assigns whether
so expressed or not.
SECTION 13.02. Official Acts by Successor Corporation.
Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee or officer of any corporation that shall at the time be
the lawful sole successor of the Company.
SECTION 13.03. Surrender of Company Powers.
The Company by instrument in writing executed by authority of a
majority of its Board of Directors and delivered to the Trustee may surrender
any of the powers reserved to the Company, and thereupon such power so
surrendered shall terminate both as to the Company, as the case may be, and as
to any successor Person.
SECTION 13.04. Addresses for Notices, etc.
Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Securities on the Company may be given or served by being deposited postage
prepaid by registered or certified mail in a post office letter box addressed
(until another address is filed by the Company with the Trustee for the purpose)
to the Company, 969 High Ridge Road, Stamford, Connecticut 06905, Attention: W.
Weldon Wilson, Esq. Any notice, direction, request or demand by any
Securityholder to or upon the Trustee shall be deemed to have been sufficiently
given or made,
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for all purposes, if given or made in writing at the office of the Trustee, The
Bank of New York, 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attention: Corporate Trust Trustee Administration (unless another address is
provided by the Trustee to the Company for the purpose).
Any notice or communication to a holder of Securities shall be mailed
by first class mail to his or her address shown on the register kept by the
Securities Registrar. Failure to mail a notice or communication to a holder or
any defect in it shall not affect its sufficiency with respect to other holders.
SECTION 13.05. Governing Law.
This Indenture and each Security shall be deemed to be a contract made
under the laws of the State of New York, and for all purposes shall be governed
by and construed in accordance with the laws of said State, without regard to
conflicts of laws principles thereof.
SECTION 13.06. Evidence of Compliance with Conditions Precedent.
Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that in the opinion of
the signers all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture (except pursuant to Section 3.05) shall include
(1) a statement that the person making such certificate or opinion has read such
covenant or condition; (2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; (3) a statement that, in the opinion of
such person, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (4) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.
SECTION 13.07. Business Days.
In any case where the date of payment of principal of or premium, if
any, or interest on or the Applicable Put Price with respect to the Securities
will not be a Business Day, the payment of such principal of or premium, if any,
or interest on the Securities need not be made on such date but may be made on
the next succeeding Business Day, except that if such Business Day is in the
next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if
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made on the date of payment and no interest shall accrue for the period from and
after such date.
SECTION 13.08. Trust Indenture Act of 1939 to Control.
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act of 1939, such imposed duties shall
control.
SECTION 13.09. Table of Contents, Headings, etc.
The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.
SECTION 13.10. Execution in Counterparts.
This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
SECTION 13.11. Separability.
In case any one or more of the provisions contained in this Indenture
or in the Securities shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of the Securities,
but this Indenture and the Securities shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
SECTION 13.12. Assignment.
The Company will have the right at all times to assign any of its
respective rights or obligations under this Indenture to a direct or indirect
wholly owned Subsidiary of the Company, provided that, in the event of any such
assignment, the Company will remain primarily liable for all its obligations.
Subject to the foregoing, the Indenture is binding upon and inures to the
benefit of the parties thereto and their respective successors and assigns. This
Indenture may not otherwise be assigned by the parties hereto.
SECTION 13.13. Acknowledgement of Rights.
The Company acknowledges that, with respect to any Securities held by
Life Re Capital Trust or a trustee of such trust, if the Property Trustee of
such Trust fails to enforce its rights under this Indenture as the holder of the
Securities held as the assets of Life Re Capital Trust, any holder of QUIPS may,
to the fullest extent permitted by applicable law, institute
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legal proceedings directly against the Company to enforce such Property
Trustee's rights under this Indenture without first instituting any legal
proceedings against such Property Trustee or any other Person or entity.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
principal of or premium, if any, or interest on or the Applicable Put Price with
respect to the Securities when due, the Company acknowledges that a holder of
QUIPS may directly institute a proceeding for enforcement of payment to such
holder of the principal of or premium, if any, or interest on or the Applicable
Put Price with respect to the Securities having a principal amount equal to the
aggregate liquidation amount of the QUIPS of such holder on or after the
respective due date specified in the Securities.
ARTICLE XIV
PUT OPTION; NO EARLY REDEMPTION OF SECURITIES
SECTION 14.01. Put Option.
Each holder of Securities will have the right (a "Put Option") to
require the Company to repurchase such Securities, in whole or in part, on
either Put Date, for a purchase price equal to the Applicable Put Price for such
Securities.
Each holder of Securities or the Put Agent on behalf of such holder may
exercise the Put Option related to such Securities by presenting and
surrendering the certificate evidencing such Securities, at the Principal Office
of the Trustee, with the form of "Notice of Exercise of Put Right" on the
reverse side of the certificate completed and executed as indicated, by 10:00
a.m., New York City time, on the applicable Put Date.
"Applicable Put Price" for any Securities will be:
(a) if the Put Date is the Stock Purchase Date, the aggregate principal
amount of such Securities plus unpaid interest accrued thereon to but not
including the Put Date; or
(b) if the Put Date is the Final Put Date, (i) the Effective Call
Option Price for such Securities plus simple interest thereon for the
period from and including the Call Option Expiration Date to but
excluding the Put Date at a rate per annum equal to the LIBOR Rate for
such period prevailing on the Call Option Expiration Date plus ____
basis points, minus (ii) the aggregate amount of interest paid on such
Securities after the Call Option Expiration Date and on or before the
Final Put Date plus simple interest on each such interest payment for
the period from and including the date of receipt of such payment to
but excluding the Put Date at a rate per annum equal to the LIBOR Rate
for such period prevailing on such date of receipt.
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SECTION 14.02. No Early Redemption by Company.
The Company shall not have the right to redeem the Securities, in whole
or in part, prior to the Maturity Date.
ARTICLE XV
SUBORDINATION OF SECURITIES
SECTION 15.01. Agreement to Subordinate.
The Company covenants and agrees, and each holder of Securities issued
hereunder likewise covenants and agrees, that the Securities shall be issued
subject to the provisions of this Article XV; and each holder of a Security,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions.
The payment by the Company of the principal of, premium, if any, and
interest on all Securities issued hereunder (including payments of the
applicable Put Price) or exercise of any Put Options shall, to the extent and in
the manner hereinafter set forth, be unsecured and subordinated and junior in
right of payment to the prior payment in full of all amounts with respect to
Senior Indebtedness, whether outstanding at the date of this Indenture or
thereafter incurred.
No provision of this Article XV shall (i) prevent the occurrence of any
Default or Event of Default hereunder or (ii) limit the amount of Senior
Indebtedness that may be incurred by the Company.
SECTION 15.02. Default on Senior Indebtedness.
No payment shall be made by the Company with respect to the principal
of or premium, if any, or interest on the Securities (including payments of the
Applicable Put Price on exercise of any Put Options) if there shall have
occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
resulting in the acceleration of the maturity thereof, or any judicial
proceeding shall be pending with respect to any such default.
In the event of the acceleration of the maturity of the Securities,
then no payment shall be made by the Company or retained by Securityholders with
respect to the Securities until the holders of all Senior Indebtedness
outstanding at the time of such acceleration shall receive payment in full of
all amounts due in respect of such Senior Indebtedness (including any amounts
due upon acceleration).
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In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraphs of this Section 15.02, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing, within 90 days of
such payment of the amounts then due and owing on such Senior Indebtedness and
only the amounts specified in such notice to the Trustee shall be paid to the
holders of such Senior Indebtedness.
Notwithstanding the foregoing, amounts that would be due and payable by
the Company to holders of Securities in the absence of the foregoing
subordination provisions may be applied by such holders or holders of QUIPS (or,
so long as QUIPS underlie the Units, holders of Units) to offset their
obligations to the Company under their respective Purchase Contracts.
SECTION 15.03. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or assignment for the benefit of
creditors or marshaling of assets or in bankruptcy, insolvency, debt
restructuring, receivership or other proceedings in connection with any
insolvency or bankruptcy proceeding of the Company, all amounts due upon all
Senior Indebtedness of the Company shall first be paid in full, or payment
thereof provided for in money in accordance with its terms, before any payment
is made by the Company on account of the principal (and premium, if any) or
interest on the Securities (including payments of the Applicable Put Price on
exercise of any Put Options); and upon any such dissolution or winding-up or
liquidation or reorganization, any payment by the Company, or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to which the Securityholders or the Trustee would be entitled to
receive from the Company, except for the provisions of this Article XV, shall be
paid by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution, or by the
Securityholders or by the Trustee under this Indenture if received by them or
it, directly to the holders of Senior Indebtedness of the Company (pro rata to
such holders on the basis of the respective amounts of Senior Indebtedness held
by such holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay such
Senior Indebtedness in full, in money or money's worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to the Securityholders
or to the Trustee.
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In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness is paid in full, or provision is made for
such payment in money in accordance with its terms, such payment or distribution
shall be held in trust for the benefit of and shall be paid over or delivered to
the holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all amounts in respect of such Senior Indebtedness in
full in money in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the benefit of the holders of such
Senior Indebtedness.
For purposes of this Article XV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XV with respect
to the Securities to the payment of Senior Indebtedness that may at the time be
outstanding, provided that (i) such Senior Indebtedness is assumed by the new
corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of such Senior Indebtedness are not, without the
consent of such holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the sale,
conveyance, transfer or lease of its property as an entirety, or substantially
as an entirety, to another Person upon the terms and conditions provided for in
Article X of this Indenture shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 15.03 if such
other Person shall, as a part of such consolidation, merger, sale, conveyance,
transfer or lease, comply with the conditions stated in Article X of this
Indenture.
SECTION 15.04. Subrogation.
Subject to the payment in full of all amounts due in respect of Senior
Indebtedness, the rights of the Securityholders shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company, as the case may
be, applicable to such Senior Indebtedness until the principal of (and premium,
if any) and interest on and the Applicable Put Price with respect to the
Securities shall be paid in full; and, for the purposes of such subrogation, no
payments or distributions to the holders of such Senior Indebtedness of any
cash, property or securities to which the Securityholders or the Trustee would
be entitled except for the provisions of this Article XV, and no payment over
pursuant to the provisions of this Article XV to or for the benefit of the
holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as
between the Company, its creditors other than holders of Senior Indebtedness of
the Company, and the holders of the Securities, be deemed to be a payment by the
Company to or on account
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of such Senior Indebtedness. It is understood that the provisions of this
Article XV are and are intended solely for the purposes of defining the relative
rights of the holders of the Securities, on the one hand, and the holders of
such Senior Indebtedness on the other hand.
Nothing contained in this Article XV or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness of the Company, and the
holders of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Securities the principal of (and
premium, if any) and interest on and the Applicable Put Price with respect to
the Securities as and when the same shall become due and payable in accordance
with their terms, or is intended to or shall affect the relative rights of the
holders of the Securities and creditors of the Company, as the case may be,
other than the holders of Senior Indebtedness of the Company, as the case may
be, nor shall anything herein or therein prevent the Trustee or the holder of
any Security from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article XV of the holders of such Senior Indebtedness in respect of cash,
property or securities of the Company, as the case may be, received upon the
exercise of any such remedy.
SECTION 15.05. Trustee to Effectuate Subordination.
Each Securityholder by such Securityholder's acceptance thereof
authorizes and directs the Trustee on such Securityholder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article XV and appoints the Trustee such Securityholder's
attorney-in-fact for any and all such purposes.
SECTION 15.06. Notice by the Company.
The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company that would prohibit the making
of any payment of monies to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article XV. Notwithstanding the provisions of
this Article XV or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts that would prohibit the
making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article XV, unless and until a
Responsible Officer of the Trustee assigned to its Principal Office shall have
received written notice thereof from the Company or a holder or holders of
Senior Indebtedness or from any trustee therefor; and before the receipt of any
such written notice, the Trustee, subject to the provisions of Article VI of
this Indenture, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received the notice
provided for in this Section 15.06 at least two Business Days prior to the date
(i) upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (or premium, if
any) or interest on or the Applicable Put Price with respect to any Security),
or (ii) moneys and/or U.S. Government Obligations are deposited in trust
pursuant to Article XI then, anything herein contained to the contrary
notwithstanding, the
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Trustee shall have full power and authority to receive such money and U.S.
Government Obligations and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Article VI of this Indenture,
shall be entitled to conclusively rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Indebtedness of the
Company (or a trustee or representative on behalf of such holder) to establish
that such notice has been given by a holder of such Senior Indebtedness or a
trustee or representative on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of such Senior Indebtedness to
participate in any payment or distribution pursuant to this Article XV, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article XV, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Upon any payment or distribution of assets of the Company referred to
in this Article XV, the Trustee and the Securityholders shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, liquidating trustee, custodian,
receiver, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Trustee or to the
Securityholders, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XV.
SECTION 15.07. Rights of the Trustee; Holders of Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XV in respect of any Senior Indebtedness at any
time held by it, to the same extent as any other holder of Senior Indebtedness,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article XV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
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provisions of Article VI of this Indenture, the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall pay over or deliver to
Securityholders, the Company or any other Person money or assets to which any
holder of Senior Indebtedness shall be entitled by virtue of this Article XV or
otherwise.
Nothing in this Article XV shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.06.
SECTION 15.08. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Securityholders, without
incurring responsibility to the Securityholders and without impairing or
releasing the subordination provided in this Article XV or the obligations
hereunder of the holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 16.01. Extension of Interest Payment Period.
So long as no Event of Default has occurred and is continuing, the
Company shall have the right, at any time and from time to time during the term
of the Securities, to defer payments of interest by extending the interest
payment period of such Securities for a period not to extend beyond the Maturity
Date (an "Extended Interest Payment Period"), during which Extended Interest
Payment Period no interest shall be due and payable; provided that no Extended
Interest Payment Period shall end on a date other than an Interest Payment
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Date. To the extent permitted by applicable law, interest, the payment of which
has been deferred because of the extension of the interest payment period
pursuant to this Section 16.01, will bear interest thereon at the Coupon Rate
compounded quarterly for each quarterly period of the Extended Interest Payment
Period ("Compounded Interest"). At the end of the Extended Interest Payment
Period, the Company shall pay all interest accrued and unpaid on the Securities,
including any Additional Sums and Compounded Interest (together, "Deferred
Interest") that shall be payable to the holders of the Securities in whose names
the Securities are registered in the Security Register on the first record date
preceding the end of the Extended Interest Payment Period. Before the
termination of any Extended Interest Payment Period, the Company may further
defer payments of interest by further extending such period, provided that such
period shall not extend beyond the Maturity Date. Upon the termination of any
Extended Interest Payment Period and the payment of all Deferred Interest then
due, the Company may commence a new Extended Interest Payment Period, subject to
the foregoing requirements. No interest shall be due and payable during an
Extended Interest Payment Period, except at the end thereof, but the Company may
prepay at any time all or any portion of the interest accrued during an Extended
Interest Payment Period.
SECTION 16.02. Notice of Extension.
(a) If the Property Trustee is the only registered holder of the
Securities at the time the Company elects to begin or extend an Extended
Interest Payment Period, the Company shall give written notice to the
Administrators, the Property Trustee and the Trustee of its election to begin or
extend such Extended Interest Payment Period at least five Business Days before
the earlier of (i) the date on which Distributions on the Trust Securities
issued by Life Re Capital Trust would be payable except for the election to
begin or extend such Extended Interest Payment Period, (ii) the date Life Re
Capital Trust is required to give notice of the record date or the date such
Distributions are payable to any national securities exchange or to holders of
the QUIPS issued by Life Re Capital Trust and (iii) such record date. Upon
receipt of such Notice, the Trustee shall give notice of the Company's election
to begin or extend an Extended Interest Payment Period to the holders of the
QUIPS.
(b) If the Property Trustee is not the only holder of the Securities at
the time the Company elects to begin or extend an Extended Interest Payment
Period, the Company shall give the holders of the Securities and the Trustee
written notice of its election to begin or extend such Extended Interest Payment
Period at least 10 Business Days before the earlier of (i) the next succeeding
Interest Payment Date, or (ii) the date the Company is required to give notice
of the record or payment date of such interest payment to any national
securities exchange.
(c) There is no limitation on the number of times that the Company may
elect to begin or extend an Extended Interest Payment Period.
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THE BANK OF NEW YORK hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers thereunto duly authorized, as of the
day and year first above written.
LIFE RE CORPORATION
By _______________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By _______________________________
Name:
Title:
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EXHIBIT A
(FORM OF FACE OF SECURITY)
IF THE SECURITY IS A GLOBAL SECURITY, INSERT: - THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS
SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY
A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
A-1
<PAGE> 78
No.____________________ CUSIP No. _________
LIFE RE CORPORATION
____% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE MARCH __, 2003
Life Re Corporation, a Delaware corporation (the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to The Bank of New York, as Property
Trustee of Life Re Capital Trust II or registered assigns, the principal sum of
$___________ Dollars on March __, 2003 (the "Maturity Date"), unless the Put
Option with respect to this Security was previously exercised, and to pay
interest on the outstanding principal amount hereof from March __, 1998, or from
the most recent interest payment date (each such date, an "Interest Payment
Date") to which interest has been paid or duly provided for, quarterly (subject
to deferral as set forth herein) in arrears on __________, ___________,
____________ and ___________ of each year, commencing ________ __, 1998 at the
rate of ____% per annum until the principal hereof shall have become due and
payable, and at the same rate per annum on any overdue principal and premium, if
any, and the Applicable Put Price with respect hereto and (without duplication
and to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest at the same rate per annum
compounded quarterly. The amount of interest payable on any Interest Payment
Date shall be computed on the basis of a 360-day year of twelve 30-day months
and, for any period less than a full calendar month, the number of days elapsed
in such month. In the event that any date on which the principal of (or premium,
if any) or interest on or the Applicable Put Price with respect to this Security
is payable is not a Business Day, then the payment payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay), except if such Business Day is
in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date such payment was originally payable.
The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities, as defined in said Indenture) is registered at the close of business
on the regular record date for such interest installment, which shall be one
Business Day prior to the relevant Interest Payment Date, unless this Security
is distributed upon a Dissolution Event and is issued in certificated form, in
which case the regular record date for such interest installment shall be the
first day of the month in which the relevant Interest Payment Date falls. Any
such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the holders on such regular record date and may
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a special record date to
be fixed by the Trustee for the payment of such defaulted interest, notice
whereof shall be given to the holders of Securities not less than 10 days prior
to such special record date, or may be paid at
A-2
<PAGE> 79
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture.
The principal of (and premium, if any) and interest on and the
Applicable Put Price with respect to this Security shall be payable at the
office or agency of the Trustee maintained for that purpose or at the office of
a paying agent or paying agents as the Company may designate from time to time
in any coin or currency of the United States of America that at the time of
payment is legal tender for payment of public and private debts; provided,
however, that, payment of interest may be made at the option of the Company by
(i) check mailed to the holder at such address as shall appear in the Security
Register or (ii) by transfer to an account maintained by the Person entitled
thereto, provided that proper wire transfer instructions have been received by
the relevant record date; provided that if this Security is issued in global
form, payment of the interest hereon shall be made in immediately available
funds. Notwithstanding the foregoing, so long as the holder of this Security is
the Property Trustee, the payment of the principal of (and premium, if any) and
interest on and the Applicable Put Price with respect to this Security will be
made in immediately available funds at such place and to such account as may be
designated by the Property Trustee.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, unsecured and subordinate and junior in right of payment to
the prior payment in full of the Senior Indebtedness, and this Security is
issued subject to the provisions of the Indenture with respect thereto. Each
holder of this Security, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the Trustee on his or her behalf
to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination so provided and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
The Company agrees, and each holder of a beneficial interest in any
Securities shall by the acquisition of such interest be deemed to have agreed,
that for United States Federal income tax purposes the Securities are intended
to constitute indebtedness.
This Security shall not be entitled to any benefit under the Indenture
or be valid or become obligatory for any purpose until the Certificate of
Authentication hereon shall have been signed by or on behalf of the Trustee.
The provisions of this Security are continued on the reverse side
hereof and such provisions shall for all purposes have the same effect as though
fully set forth at this place.
A-3
<PAGE> 80
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
LIFE RE CORPORATION
By: ____________________________
Name:
Title
Attest:
By: _______________________
Name:
Title:
A-4
<PAGE> 81
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated ______________
THE BANK OF NEW YORK,
as Trustee
By____________________
Authorized Signatory
A-5
<PAGE> 82
(FORM OF REVERSE OF SECURITY)
This Security is one of the Securities of the Company (herein sometimes
referred to as the "Securities"), specified in the Indenture, all issued or to
be issued under and pursuant to an Indenture, dated as of March __, 1998 (the
"Indenture"), duly executed and delivered between the Company and The Bank of
New York, as Trustee (the "Trustee"), to which Indenture reference is hereby
made for a description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the holders of the
Securities.
The holder of Security will have the right to require the Company to
repurchase this Security, in whole or in part, on either Put Date, for a
purchase price equal to the Applicable Put Price for such Security.
The holder of this Security or the Put Agent on behalf of such holder
may exercise the Put Option related to this Security by presenting and
surrendering this Security, at the Principal Office of the Trustee, with the
form of "Notice of Exercise of Put Right" on the reverse side of the certificate
completed and executed as indicated, by 10:00 a.m., New York City time, on the
applicable Put Date.
In the event of the exercise of the Put Option with respect to this
Security in part only, a new Security or Securities for the portion hereof not
repurchased will be issued in the name of the holder hereof upon the
cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Securities may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of in excess of 50% of the aggregate
principal amount of the Securities at the time outstanding, as defined in the
Indenture, to amend the Indenture for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture or
of modifying in any manner the rights of the holders of the Securities;
provided, however, that no such amendment shall, without the consent of each
holder of Securities then outstanding and affected thereby, (i) extend the
Maturity Date of any Securities, or reduce the principal amount thereof, or
reduce any amount payable on redemption or repurchase thereof, or reduce the
rate or extend the time of payment of interest thereon (subject to Article XVI
of the Indenture), or make the principal of, or interest or premium on, the
Securities payable in any coin or currency other than U.S. dollars, or impair or
affect the right of any holder of Securities to institute suit for the payment
thereof, (ii) change any of the terms or conditions of the Put Options or the
Applicable Put Price, or (iii) reduce the aforesaid percentage of Securities,
the holders of which are required to consent to any such supplemental indenture.
The Indenture also contains provisions permitting the holders of a majority in
A-6
<PAGE> 83
aggregate principal amount of the Securities at the time outstanding, on behalf
of all of the holders of the Securities, to waive any past default in the
performance of any of the covenants contained in the Indenture, or established
pursuant to the Indenture, and its consequences, except a default in the payment
of the principal of or premium, if any, or interest on or the Applicable Put
Price in respect of any of the Securities or a default in respect of any
covenant or provision under which the Indenture cannot be modified or amended
without the consent of each holder of Securities then outstanding. Any such
consent or waiver by the holder of this Security (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such holder and upon all
future holders and owners of this Security and of any Security issued in
exchange herefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any, and
interest on and the Applicable Put Price in respect of this Security at the time
and place and at the rate and in the money herein prescribed.
So long as no Event of Default has occurred and is continuing, the
Company shall have the right, at any time and from time to time during the term
of the Securities, to defer payments of interest by extending the interest
payment period of such Securities for a period not to extend beyond the Maturity
Date (an "Extended Interest Payment Period"), or ending on a date other than an
Interest Payment Date, at the end of which period the Company shall pay all
interest then accrued and unpaid (together with interest thereon at the rate
specified for the Securities to the extent that payment of such interest is
enforceable under applicable law). Before the termination of any such Extended
Interest Payment Period, the Company may further defer payments of interest by
further extending such Extended Interest Payment Period, provided that such
Extended Interest Payment Period, together with all such previous and further
extensions within such Extended Interest Payment Period, (i) shall not end on
any date other than an Interest Payment Date and (ii) shall not extend beyond
the Maturity Date. Upon the termination of any such Extended Interest Payment
Period and the payment of all accrued and unpaid interest and any additional
amounts then due, the Company may commence a new Extended Interest Payment
Period, subject to the foregoing requirements.
The Company has agreed that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Company (including Other Debentures) that rank pari passu with
or junior in right of payment to the Securities or (iii) make any guarantee
payments with respect to any guarantee by the Company of any securities or any
Subsidiary of the Company (including Other Guarantees) if such guarantee ranks
pari passu or junior in right of payment to the Securities (other than, in the
case of clauses (i), (ii) or (iii), (a) dividends or distribu-
A-7
<PAGE> 84
tions in shares of, or options, warrants or rights to subscribe for or purchase
shares of, Common Stock of the Company; (b) any declaration of a dividend in
connection with the implementation of a stockholder's rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto; (c) payments under the QUIPS
Guarantee; (d) as a result of a reclassification of the Company's capital stock
solely into shares of one or more classes or series of the Company's capital
stock or the exchange or the conversion of one class or series of the Company's
capital stock for another class or series of the Company's capital stock; (e)
the purchase of fractional interests in shares of the Company's capital stock
pursuant to the exchange or conversion of such capital stock or the security
being exchanged or converted and (f) purchases of Common Stock in connection
with the satisfaction by the Company of its obligations (including purchases
related to the issuance of Common Stock or rights) under any of the Company's
benefit plans for its and its Subsidiaries' directors, officers or employees or
any of the Company's dividend reinvestment plans) if at such time (i) an Event
of Default shall have occurred and be continuing, (ii) if such Securities are
held by the Property Trustee, the Company shall be in default with respect to
its payment obligations under the QUIPS Guarantee or (iii) the Company shall
have given notice of its election of the exercise of its right to extend the
interest payment period and any such extension shall be continuing.
The Securities are issuable only in registered form without coupons in
minimum denominations of $100,000 and any integral multiple of $1,000 above
$100,000. As provided in the Indenture and subject to the transfer restrictions
limitations as may be contained herein and therein from time to time, this
Security is transferable by the holder hereof on the Security Register of the
Company, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the City and State of New York accompanied by
a written instrument or instruments of transfer in form satisfactory to the
Company and the Security Registrar duly executed by the holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
authorized denominations and for the same aggregate principal amount and series
will be issued to the designated transferee or transferees. No service charge
will be made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this Security,
the Company, the Trustee, any authenticating agent, any paying agent, any
transfer agent and any Registrar may deem and treat the holder hereof as the
absolute owner hereof (whether or not this Security shall be overdue and
notwithstanding any notice of ownership or writing hereon made by anyone other
than the Security Registrar) for the purpose of receiving payment of or on
account of the principal hereof and premium, if any, and (subject to the
Indenture) interest due hereon and for all other purposes, and neither the
Company nor the Trustee nor any authenticating agent nor any paying agent nor
any transfer agent nor any registrar shall be affected by any notice to the
contrary.
No recourse shall be had for the payment of the principal of or
premium, if any, or interest on or the Applicable Put Price in respect of this
Security, or for any claim based
A-8
<PAGE> 85
hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture, against any incorporator, stockholder, officer or director, past,
present or future, as such, of the Company or of any predecessor or successor
Person, whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issuance
hereof, expressly waived and released.
All terms used in this Security that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PROVISIONS THEREOF.
A-9
<PAGE> 86
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfer this Security to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Security on the books of the
- ---------------------------
Company. The agent may substitute another to act for him or her.
Date:
-----------------------
Signature:
------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee(1):
-----------------------------------------------
- ----------
(1) Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities and Exchange Act of 1934, as amended.
A-10
<PAGE> 87
NOTICE OF EXERCISE OF PUT RIGHT
The undersigned holder of this Security hereby irrevocably exercises
the option to require the Company to repurchase this Security, or the portion
below designated, for a purchase price equal to the Applicable Put Price for
this Security on the date hereof in accordance with the terms of the Indenture,
dated as of March __, 1998, between the Company and The Bank of New York, as
Trustee. Pursuant to the aforementioned exercise of the option to require the
Company to repurchase this Security, the undersigned hereby directs the Trustee
to take any actions necessary to effect the repurchase of this Security, or the
portion below designated.
Date:
-----------------------------
Principal Amount of this Security to be repurchased ($1000 or integral multiples
thereof):--------------
(Sign exactly as your name appears on the other side of this Security)
Please Print or Type Name and Address,
Including Zip Code, and Social Security
or Other Identifying Number
- ---------------------------------------------
- ---------------------------------------------
- ---------------------------------------------
- ---------------------------------------------
Signature Guarantee:*
---------------------------------------------
- --------
* Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities and Exchange Act of 1934, as amended.
A-11
<PAGE> 1
EXHIBIT 4.9
====================================
QUIPS GUARANTEE AGREEMENT
Life Re Corporation
Dated as of March , 1998
====================================
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of Trust Indenture Section of Capital
Act of 1939, as amended Securities Guarantee
Agreement
<S> <C>
310(a)..................................................................4.1(a)
310(b)..................................................................4.1(c)
310(c)............................................................Inapplicable
311(a)..................................................................2.2(a)
311(b)..................................................................2.2(b)
311(c)............................................................Inapplicable
312(a)..................................................................2.2(a)
312(b)..................................................................2.2(b)
312(c)..................................................................2.2(c)
313.....................................................................2.3
314(a)..................................................................2.4
314(b)............................................................Inapplicable
314(c)..................................................................2.5
314(d)............................................................Inapplicable
314(e)..................................................................2.5
314(f)............................................................Inapplicable
315(a)..................................................................3.1(b)
315(b)..................................................................2.7
315(c)..................................................................3.1(c)
315(d)..................................................................3.1(d)
316(a)..........................................................5.4(a), 2.6
318(a)..................................................................2.1(c)
</TABLE>
- ---------------
* This Cross-Reference Table does not constitute part of this QUIPS
Guarantee Agreement and shall not affect the interpretation of any of its terms
or provisions.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATION
<S> <C>
SECTION 1.1 Definitions and Interpretation.............................................. 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application............................................ 5
SECTION 2.2 Lists of Holders of Securities.............................................. 5
SECTION 2.3 Reports by the QUIPS Guarantee Trustee...................................... 6
SECTION 2.4 Periodic Reports to QUIPS Guarantee Trustee................................. 6
SECTION 2.5 Evidence of Compliance with Conditions Precedent............................ 6
SECTION 2.6 Events of Default; Waiver................................................... 6
SECTION 2.7 Event of Default; Notice.................................................... 7
SECTION 2.8 Conflicting Interests....................................................... 7
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
QUIPS GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the QUIPS Guarantee Trustee............................ 7
SECTION 3.2 Certain Rights of QUIPS Guarantee Trustee................................... 9
SECTION 3.3. Not Responsible for Recitals or Issuance of QUIPS Guarantee................. 11
ARTICLE IV
QUIPS GUARANTEE TRUSTEE
SECTION 4.1 QUIPS Guarantee Trustee; Eligibility........................................ 11
SECTION 4.2 Appointment, Removal and Resignation of QUIPS Guarantee Trustee............. 12
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee................................................................... 13
SECTION 5.2 Waiver of Notice and Demand................................................. 13
SECTION 5.3 Obligations Not Affected.................................................... 13
SECTION 5.4 Rights of Holders........................................................... 14
SECTION 5.5 Guarantee of Payment........................................................ 15
SECTION 5.6 Subrogation................................................................. 15
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 5.7 Independent Obligations..................................................... 15
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions.................................................. 15
SECTION 6.2 Ranking..................................................................... 16
ARTICLE VII
TERMINATION
SECTION 7.1 Termination................................................................. 17
ARTICLE VIII
COMPENSATION AND EXPENSES OF
QUIPS GUARANTEE TRUSTEE
SECTION 8.1 Compensation and Expenses of QUIPS Guarantee Trustee........................ 17
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Exculpation................................................................. 18
SECTION 9.2 Indemnification............................................................. 18
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Successors and Assigns...................................................... 19
SECTION 10.2 Amendments.................................................................. 19
SECTION 10.3 Notices..................................................................... 19
SECTION 10.4 Benefit..................................................................... 20
SECTION 10.5 Governing Law............................................................... 20
</TABLE>
ii
<PAGE> 5
QUIPS GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "QUIPS Guarantee"), dated as of
March , 1998, is executed and delivered by Life Re Corporation, a Delaware
corporation (the "Guarantor"), and The Bank of New York, a New York banking
corporation, as indenture trustee (the "QUIPS Guarantee Trustee"), for the
benefit of the Holders (as defined herein) from time to time of the QUIPS (as
defined herein) of Life Re Capital Trust II, a Delaware statutory business trust
(the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of March , 1998 among the trustees of the
Issuer, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof ______ Quarterly Income Preferred Securities, having
an aggregate liquidation amount of $100,000,000, such Quarterly Income Preferred
Securities being designated the QUIPS (collectively the "QUIPS").
WHEREAS, as incentive for the Holders to purchase the QUIPS,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this QUIPS Guarantee, to pay to the Holders the Guarantee Payments
(as defined below). The Guarantor agrees to make certain other payments on the
terms and conditions set forth herein.
WHEREAS, the Guarantor is executing and delivering a guarantee
agreement (the "Common Trust Securities Guarantee"), with substantially
identical terms to this QUIPS Guarantee, for the benefit of the holders of the
Common Trust Securities (as defined herein), except that if an Event of Default
(as defined below) has occurred and is continuing, the rights of holders of the
Common Trust Securities to receive Guarantee Payments under the Common Trust
Securities Guarantee are subordinated, to the extent and in the manner set forth
in the Common Trust Securities Guarantee, to the rights of Holders to receive
Guarantee Payments under this QUIPS Guarantee.
NOW, THEREFORE, in consideration of the purchase by each
Holder of QUIPS, which purchase the Guarantor hereby acknowledges shall benefit
the Guarantor, the Guarantor executes and delivers this QUIPS Guarantee for the
benefit of the Holders.
<PAGE> 6
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this QUIPS Guarantee, unless the context otherwise
requires:
(a) capitalized terms used in this QUIPS Guarantee but
not defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) terms defined in the Declaration as at the date of
execution of this QUIPS Guarantee have the same
meaning when used in this QUIPS Guarantee unless
otherwise defined in this QUIPS Guarantee;
(c) a term defined anywhere in this QUIPS Guarantee has
the same meaning throughout;
(d) all references to "the QUIPS Guarantee" or "this
QUIPS Guarantee" are to this QUIPS Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this QUIPS Guarantee to Articles
and Sections are to Articles and Sections of this
QUIPS Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the
same meaning when used in this QUIPS Guarantee,
unless otherwise defined in this QUIPS Guarantee or
unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule
405 under the Securities Act of 1933, as amended, or any successor rule
thereunder.
"Business Day" means any day other than a Saturday or a
Sunday, or a day on which banking institutions in The City of New York or
Wilmington, Delaware, are authorized or required by law or executive order to
close.
"QUIPS Guarantee Trustee" means The Bank of New York, a New
York banking corporation, until a Successor QUIPS Guarantee Trustee has been
appointed and has accepted such appointment pursuant to the terms of this QUIPS
Guarantee and thereafter means each such Successor QUIPS Guarantee Trustee.
2
<PAGE> 7
"Common Trust Securities" means the securities representing
common undivided beneficial interests in the assets of the Issuer.
"Corporate Trust Office" means the office of the QUIPS
Guarantee Trustee at which the corporate trust business of the QUIPS Guarantee
Trustee shall, at any particular time, be principally administered, which office
at the date of execution of this Agreement is located at 101 Barclay Street,
21st Floor West, New York, New York 10286.
"Covered Person" means any Holder or beneficial owner of
QUIPS.
"Debentures" means the series of subordinated debt securities
of the Guarantor designated the ___% Junior Subordinated Deferrable Interest
Debentures due March , 2005 held by the Property Trustee (as defined in the
Declaration) of the Issuer.
"Guarantee Event of Default" has the meaning set forth in
Section 2.6.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the QUIPS, to the extent not
paid or made by the Issuer: (i) any accumulated and unpaid Distributions (as
defined in the Declaration) that are required to be paid on such QUIPS, to the
extent that the Issuer has funds on hand legally available therefor at such
time, (ii) the final redemption price, including all accumulated and unpaid
Distributions to the date of redemption (the "Final Redemption Price") with
respect to the QUIPS outstanding on the Maturity Date of the Debentures, to the
extent the Issuer has funds on hand legally available therefor at such time, and
(iii) upon a voluntary or involuntary dissolution and liquidation of the Issuer
(other than in connection with the distribution of Debentures to the Holders in
exchange for QUIPS as provided in the Declaration), the lesser of (a) the
aggregate of the Liquidation Amount and all accumulated and unpaid Distributions
on the QUIPS to the date of payment, to the extent the Issuer has funds on hand
legally available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer. If an Event
of Default has occurred and is continuing, no Guarantee Payments under the
Common Trust Securities Guarantee with respect to the Common Trust Securities or
any guarantee payment under any Other Common Trust Securities Guarantees shall
be made until the Holders shall be paid in full the Guarantee Payments to which
they are entitled under this QUIPS Guarantee.
"Holder" shall mean any holder, as registered on the books and
records of the Issuer, of any QUIPS; provided, however, that, in determining
whether the holders of the requisite percentage of QUIPS have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or
any Affiliate of the Guarantor.
"Indemnified Person" means the QUIPS Guarantee Trustee, any
Affiliate of the QUIPS Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the QUIPS Guarantee Trustee.
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"Indenture" means the Indenture dated as of March , 1998,
among the Guarantor (the "Debenture Issuer") and The Bank of New York, as
trustee, pursuant to which the Debentures are to be issued to the Property
Trustee of the Issuer.
"Majority in Liquidation Amount of the QUIPS" means, except as
provided by the Trust Indenture Act, a vote by Holder(s) of more than 50% of the
aggregate Liquidation Amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accumulated and unpaid Distributions
to the date upon which the voting percentages are determined) of all QUIPS.
"Officers' Certificate" means, with respect to any person, a
certificate signed by two of the following: the Chairman, a Vice Chairman, the
Chief Executive Officer, the President, the Chief Financial Officer, a Vice
President (whether or not designated by a number or a word or words added before
or after such title), the Comptroller, the Secretary or an Assistant Secretary
of the Guarantor. Any Officers' Certificate delivered with respect to compliance
with a condition or covenant provided for in this QUIPS Guarantee (other than
pursuant to Section 314(a)(4) of the Trust Indenture Act) shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(c) a statement as to whether, in the opinion of each
such officer, such condition or covenant has been complied with.
"Other Common Trust Securities Guarantees" shall have the same
meaning as "Other Guarantees" in the Common Trust Securities Guarantee.
"Other Debentures" means all junior subordinated debentures
issued by the Guarantor from time to time and sold to trusts to be established
by the Guarantor, in each case similar to the Issuer.
"Other Guarantees" means all guarantees issued by the
Guarantor with respect to securities similar to the QUIPS issued by other trusts
to be established by the Guarantor, in each case similar to the Issuer.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
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"Responsible Officer" means, with respect to the QUIPS
Guarantee Trustee, any officer within the Corporate Trust Office of the QUIPS
Guarantee Trustee, including any vice president, any assistant vice president,
any assistant secretary, any assistant treasurer, any trust officer, any senior
trust officer or other officer in the Corporate Trust Office of the QUIPS
Guarantee Trustee customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Successor QUIPS Guarantee Trustee" means a successor QUIPS
Guarantee Trustee possessing the qualifications to act as QUIPS Guarantee
Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Securities" means the Common Trust Securities and the
QUIPS, collectively.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a) This QUIPS Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this QUIPS Guarantee if
this QUIPS Guarantee were qualified under the Trust Indenture Act and shall, to
the extent applicable, be governed by such provisions; and
(b) if and to the extent that any provision of this QUIPS
Guarantee limits, qualifies or conflicts with the duties imposed by Section 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.2 Lists of Holders of Securities
(a) The Guarantor shall provide the QUIPS Guarantee
Trustee (unless the QUIPS Guarantee Trustee is otherwise the registrar of the
QUIPS) (i) on a quarterly basis on each regular record date for the Debentures,
a list, in such form as the QUIPS Guarantee Trustee may reasonably require, of
the names and addresses of the Holders ("List of Holders") as of such record
date, and (ii) at such other times as the QUIPS Guarantee Trustee may request in
writing, within 30 days after the receipt by the Guarantor, of such request, a
List of Holders as of a date no more than 15 days prior to the time such List of
Holders is given to the QUIPS Guarantee Trustee, provided, that the Guarantor
shall not be obligated to provide such List of Holders at any time the List of
Holders does not differ from the most recent List of Holders
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given to the QUIPS Guarantee Trustee by the Guarantor. The QUIPS Guarantee
Trustee may destroy any List of Holders previously given to it on receipt of a
new List of Holders.
(b) The QUIPS Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.3 Reports by the QUIPS Guarantee Trustee
Within 60 days after ____ of each year, commencing , 199 , the
QUIPS Guarantee Trustee shall provide to the Holders such reports as are
required by Section 313(a) of the Trust Indenture Act, if any, in the form and
in the manner provided by Section 313 of the Trust Indenture Act. The QUIPS
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
SECTION 2.4 Periodic Reports to QUIPS Guarantee Trustee
The Guarantor shall provide to the QUIPS Guarantee Trustee
such documents, reports and information as required by Section 314 (if any) and
the compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act provided that such compliance certificate shall be delivered on or
before 120 days after the end of each fiscal year of the Guarantor. Delivery of
such reports, information and documents to the QUIPS Guarantee Trustee is for
informational purposes only and the QUIPS Guarantee Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Guarantor's
compliance with any of its covenants hereunder (as to which the QUIPS Guarantee
Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the QUIPS Guarantee Trustee
such evidence of compliance with any conditions precedent, if any, provided for
in this QUIPS Guarantee that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of an
Officers' Certificate.
SECTION 2.6 Guarantee Events of Default; Waiver
(a) An event of default under this QUIPS Guarantee will
occur upon the failure of the Guarantor to perform any of its payment or other
obligations hereunder (a "Guarantee Event of Default"); provided, however, that,
other than with respect to a default on any payment under this QUIPS Guarantee,
the Guarantor shall have received notice of default and shall not have cured
such default within 90 days after receipt of such notice.
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(b) The Holders of a Majority in Liquidation Amount of
QUIPS may, by vote, on behalf of all the Holders, waive any past Guarantee Event
of Default and its consequences. Upon such waiver, any such Guarantee Event of
Default shall cease to exist, and any Guarantee Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this QUIPS
Guarantee, but no such waiver shall extend to any subsequent or other default or
Guarantee Event of Default or impair any right consequent thereon.
SECTION 2.7 Guarantee Event of Default; Notice
(a) The QUIPS Guarantee Trustee shall, within 90 days
after the occurrence of a default with respect to this QUIPS Guarantee, mail by
first class postage prepaid, to all Holders, notices of all defaults actually
known to a Responsible Officer of the QUIPS Guarantee Trustee, unless such
defaults have been cured before the giving of such notice; provided, however,
that, except in the case of default in the payment of any Guarantee Payment, the
QUIPS Guarantee Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee, or a trust committee of
directors and/or Responsible Officers of the QUIPS Guarantee Trustee in good
faith determines that the withholding of such notice is in the interests of the
Holders.
(b) The QUIPS Guarantee Trustee shall not be deemed to
have knowledge of any Guarantee Event of Default unless the QUIPS Guarantee
Trustee shall have received written notice, or a Responsible Officer charged
with the administration of the Declaration shall have obtained actual knowledge,
of such Event of Default.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically described
in this QUIPS Guarantee for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
QUIPS GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the QUIPS Guarantee Trustee
(a) This QUIPS Guarantee shall be held by the QUIPS
Guarantee Trustee for the benefit of the Holders, and the QUIPS Guarantee
Trustee shall not transfer this QUIPS Guarantee to any Person except a Holder
exercising his or her rights pursuant to Section 5.4(b) or to a Successor QUIPS
Guarantee Trustee on acceptance by such Successor QUIPS Guarantee Trustee of its
appointment to act as Successor QUIPS Guarantee Trustee. The right, title and
interest of the QUIPS Guarantee Trustee shall automatically vest in any
Successor QUIPS Guarantee Trustee, and such vesting and succession of title
shall be effective
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whether or not conveyancing documents have been executed and delivered pursuant
to the appointment of such Successor QUIPS Guarantee Trustee.
(b) If an Event of Default actually known to a
Responsible Officer has occurred and is continuing, the QUIPS Guarantee Trustee
shall enforce this QUIPS Guarantee for the benefit of the Holders.
(c) The QUIPS Guarantee Trustee, before the occurrence of
any Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this QUIPS Guarantee, and no implied covenants shall be read into this
QUIPS Guarantee against the QUIPS Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6) and is
actually known to a Responsible Officer, the QUIPS Guarantee Trustee shall
exercise such of the rights and powers vested in it by this QUIPS Guarantee, and
use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.
(d) No provision of this QUIPS Guarantee shall be
construed to relieve the QUIPS Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the QUIPS
Guarantee Trustee shall be determined solely by the express
provisions of this QUIPS Guarantee, and the QUIPS Guarantee
Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
QUIPS Guarantee, and no implied covenants or obligations shall
be read into this QUIPS Guarantee against the QUIPS Guarantee
Trustee; and
(B) in the absence of bad faith on the part of
the QUIPS Guarantee Trustee, the QUIPS Guarantee Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the QUIPS Guarantee
Trustee and conforming to the requirements of this QUIPS
Guarantee; but in the case of any such certificates or
opinions that by any provision hereof are specifically
required to be furnished to the QUIPS Guarantee Trustee, the
QUIPS Guarantee Trustee shall be under a duty to examine the
same to determine whether or not they conform to the
requirements of this QUIPS Guarantee;
(ii) the QUIPS Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer,
unless it shall be proved that the
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QUIPS Guarantee Trustee was negligent in ascertaining the pertinent
facts upon which such judgment was made;
(iii) the QUIPS Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of a Majority in
Liquidation Amount of the QUIPS relating to the time, method and place
of conducting any proceeding for any remedy available to the QUIPS
Guarantee Trustee, or exercising any trust or power conferred upon the
QUIPS Guarantee Trustee under this QUIPS Guarantee; and
(iv) no provision of this QUIPS Guarantee shall require
the QUIPS Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any
of its duties or in the exercise of any of its rights or powers, if the
QUIPS Guarantee Trustee shall have reasonable grounds for believing
that the repayment of such funds or liability is not reasonably assured
to it under the terms of this QUIPS Guarantee or indemnity, reasonably
satisfactory to the QUIPS Guarantee Trustee, against such risk or
liability is not reasonably assured to it.
SECTION 3.2 Certain Rights of QUIPS Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The QUIPS Guarantee Trustee may conclusively rely,
and shall be fully protected in acting or refraining from acting, upon
any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this QUIPS Guarantee may be sufficiently evidenced by an Officers'
Certificate.
(iii) Whenever, in the administration of this QUIPS
Guarantee, the QUIPS Guarantee Trustee shall deem it desirable that a
matter be proved or established before taking, suffering or omitting
any action hereunder, the QUIPS Guarantee Trustee (unless other
evidence is herein specifically prescribed) may, in the absence of bad
faith on its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly
delivered by the Guarantor.
(iv) The QUIPS Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The QUIPS Guarantee Trustee may consult with counsel
of its selection, and the advice or opinion of such counsel with
respect to legal matters, shall be full and
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complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance
with such advice or opinion. Such counsel may be counsel to the
Guarantor or any of its Affiliates and may include any of its
employees. The QUIPS Guarantee Trustee shall have the right at any time
to seek instructions concerning the administration of this QUIPS
Guarantee from any court of competent jurisdiction.
(vi) The QUIPS Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
QUIPS Guarantee at the request or direction of any Holder, unless such
Holder shall have provided to the QUIPS Guarantee Trustee such security
and indemnity, reasonably satisfactory to the QUIPS Guarantee Trustee,
against the costs, expenses (including attorneys' fees and expenses and
the expenses of the QUIPS Guarantee Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in complying
with such request or direction, including such reasonable advances as
may be requested by the QUIPS Guarantee Trustee; provided that, nothing
contained in this Section 3.2(a)(vi) shall be taken to relieve the
QUIPS Guarantee Trustee, upon the occurrence of an Event of Default, of
its obligation to exercise the rights and powers vested in it by this
QUIPS Guarantee.
(vii) The QUIPS Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
QUIPS Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(viii) The QUIPS Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys,
and the QUIPS Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder.
(ix) Any action taken by the QUIPS Guarantee Trustee or
its agents hereunder shall bind the Holders, and the signature of the
QUIPS Guarantee Trustee or its agents alone shall be sufficient and
effective to perform any such action. No third party shall be required
to inquire as to the authority of the QUIPS Guarantee Trustee to so act
or as to its compliance with any of the terms and provisions of this
QUIPS Guarantee, both of which shall be conclusively evidenced by the
QUIPS Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this QUIPS
Guarantee the QUIPS Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the QUIPS Guarantee Trustee (i) may
request instructions from the Holders of a Majority in
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Liquidation Amount of the QUIPS, (ii) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received, and (iii) shall be protected in conclusively relying on or
acting in accordance with such instructions.
(xi) The QUIPS Guarantee Trustee shall not be liable for
any action taken, suffered, or omitted to be taken by it in good faith,
without negligence, and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
QUIPS Guarantee.
(b) No provision of this QUIPS Guarantee shall be deemed
to impose any duty or obligation on the QUIPS Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
QUIPS Guarantee Trustee shall be unqualified or incompetent in accordance with
applicable law, to perform any such act or acts or to exercise any such right,
power, duty or obligation. No permissive power or authority available to the
QUIPS Guarantee Trustee shall be construed to be a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of QUIPS
Guarantee
The recitals contained in this QUIPS Guarantee shall be taken
as the statements of the Guarantor, and the QUIPS Guarantee Trustee does not
assume any responsibility for their correctness. The QUIPS Guarantee Trustee
makes no representation as to the validity or sufficiency of this QUIPS
Guarantee.
ARTICLE IV
QUIPS GUARANTEE TRUSTEE
SECTION 4.1 QUIPS Guarantee Trustee; Eligibility
(a) There shall at all times be a QUIPS Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under
the laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Securities and Exchange Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under
such laws to exercise corporate trust powers, having a combined capital
and surplus of at least 50 million U.S. dollars ($50,000,000), and
subject to supervision or examination by Federal, State, Territorial or
District of Columbia authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements
of the supervising or examining authority referred to above, then, for
the purposes of this Section 4.1(a)(ii), the combined capital and
surplus of such corporation shall be
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deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published.
(b) If at any time the QUIPS Guarantee Trustee shall
cease to be eligible to so act under Section 4.1(a), the QUIPS Guarantee Trustee
shall immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the QUIPS Guarantee Trustee has or shall acquire
any "conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the QUIPS Guarantee Trustee and Guarantor shall in all respects
comply with the provisions of Section 310(b) of the Trust Indenture Act, subject
to the penultimate paragraph thereof.
SECTION 4.2 Appointment, Removal and Resignation of QUIPS
Guarantee Trustee
(a) Subject to Section 4.2(b), the QUIPS Guarantee
Trustee may be appointed or removed without cause at any time by the Guarantor
except during an Guarantee Event of Default.
(b) The QUIPS Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor QUIPS Guarantee Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor QUIPS Guarantee Trustee and delivered to the Guarantor.
(c) The QUIPS Guarantee Trustee shall hold office until a
Successor QUIP Guarantee Trustee shall have been appointed or until its removal
or resignation. The QUIPS Guarantee Trustee may resign from office (without need
for prior or subsequent accounting) by an instrument in writing executed by the
QUIPS Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor QUIPS Guarantee Trustee has been appointed and
has accepted such appointment by instrument in writing executed by such
Successor QUIPS Guarantee Trustee and delivered to the Guarantor and the
resigning QUIPS Guarantee Trustee.
(d) If no Successor QUIPS Guarantee Trustee shall have
been appointed and accepted appointment as provided in this Section 4.2 within
60 days after delivery of an instrument of removal or resignation, the QUIPS
Guarantee Trustee resigning or being removed may petition any court of competent
jurisdiction for appointment of a Successor QUIPS Guarantee Trustee. Such court
may thereupon, after prescribing such notice, if any, as it may deem proper,
appoint a Successor QUIPS Guarantee Trustee.
(e) No QUIPS Guarantee Trustee shall be liable for the
acts or omissions to act of any Successor QUIPS Guarantee Trustee.
(f) Upon termination of this QUIPS Guarantee or removal
or resignation of the QUIPS Guarantee Trustee pursuant to this Section 4.2, the
Guarantor shall pay to the
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QUIPS Guarantee Trustee all amounts due to the QUIPS Guarantee Trustee accrued
to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this QUIPS
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Issuer
or any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
SECTION 5.3 Obligations Not Affected
The obligations, covenants, agreements and duties of the
Guarantor under this QUIPS Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by the Issuer of any express or
implied agreement, covenant, term or condition relating to the QUIPS to be
performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer
of all or any portion of the Distributions, Final Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the QUIPS or the
extension of time for the performance of any other obligation under, arising out
of, or in connection with, the QUIPS (other than an extension of time for
payment of Distributions, Final Redemption Price, Liquidation Distribution or
other sum payable that results from the extension of any interest payment period
on the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on
the part of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the
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Holders pursuant to the terms of the QUIPS, or any action on the part of the
Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings affecting,
the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the
QUIPS;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or
(g) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a guarantor,
it being the intent of this Section 5.3 that the obligations of the Guarantor
with respect to the Guarantee Payments shall be absolute and unconditional under
any and all circumstances.
There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in Liquidation Amount of
the QUIPS have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the QUIPS Guarantee Trustee in respect of
this QUIPS Guarantee or exercising any trust or power conferred upon the QUIPS
Guarantee Trustee under this QUIPS Guarantee; provided however, that (subject to
Section 3.1) the QUIPS Guarantee Trustee shall have the right to decline to
follow any such direction if the QUIPS Guarantee Trustee shall determine that
the actions so directed would be unjustly prejudicial to the Holders not taking
part in such direction or if the QUIPS Guarantee Trustee being advised by
counsel determines that the action or proceeding so directed may not lawfully be
taken or if the QUIPS Guarantee Trustee in good faith by its board of directors
or trustees, executive committees or a trust committee or directors or trustees
and/or Responsible Officers shall determine that the action or proceedings so
directed would involve the QUIPS Guarantee Trustee in personal liability.
(b) If the QUIPS Guarantee Trustee fails to enforce such
QUIPS Guarantee, such Holder may institute a legal proceeding directly against
the Guarantor to enforce the QUIPS Guarantee Trustee's rights under this QUIPS
Guarantee, without first instituting a legal proceeding against the Issuer, the
QUIPS Guarantee Trustee or any other person or entity. The Guarantor waives any
right or remedy to require that any action be brought first against the Issuer
or any other person or entity before proceeding directly against the Guarantor.
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SECTION 5.5 Guarantee of Payment
This QUIPS Guarantee creates a guarantee of payment and not of
collection.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Issuer in respect of any amounts paid to such Holders by
the Guarantor under this QUIPS Guarantee; provided, however, that the Guarantor
shall not (except to the extent required by mandatory provisions of law) be
entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this QUIPS Guarantee, if, at the time of any such
payment, any amounts are due and unpaid under this QUIPS Guarantee. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the QUIPS, and that
the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this QUIPS Guarantee notwithstanding
the occurrence of any event referred to in subsections (a) through (g),
inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
So long as any QUIPS remain outstanding, the Guarantor shall
not (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Guarantor's
capital stock (which includes common and preferred stock), (ii) make any payment
of principal, interest or premium, if any, on or repay or repurchase or redeem
any debt securities of the Guarantor (including any Other Debentures) that rank
pari passu with or junior in right of payment to the Debentures or (iii) make
any guarantee payments with respect to any guarantee by the Guarantor of any
securities of any subsidiary of the Guarantor (including Other Guarantees) if
such guarantee ranks pari passu or junior in right of payment to the Debentures
(other than in the case of clauses (i), (ii) and (iii), (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, common stock of the Guarantor, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the QUIPS
Guarantee, (d) as a result of a reclassification of the
15
<PAGE> 20
Guarantor's capital stock solely into shares of one or more classes or series of
the Guarantor's Capital Stock or the exchange or the conversion of one class or
series of the Guarantor's capital stock for another class or series of the
Guarantor's capital stock, (e) the purchase of fractional interests in shares of
the Guarantor's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged and (f)
purchases of the Guarantor's common stock in connection with the satisfaction by
the Guarantor of its obligations (including purchases related to the issuance of
such common stock or rights) under any of the Guarantor's benefit plans for its
and its subsidiaries' directors, officers or employees or any of the Guarantor's
dividend reinvestment plans) if at such time (x) a Guarantee Event of Default or
an Event of Default (as defined in the Indenture) shall have occurred and be
continuing, (y) if such Debentures are held by the Property Trustee, the
Guarantor shall be in default with respect to its payment of any obligations
under this QUIPS Guarantee or (z) the Guarantor shall have given notice of its
election of the exercise of its right to extend the interest payment period
pursuant to Section 16.01 of the Indenture and any such extension shall have
commenced and not yet terminated.
SECTION 6.2 Ranking
This QUIPS Guarantee will constitute an unsecured obligation
of the Guarantor and will rank subordinate and junior in right of payment to
Senior Indebtedness (as defined in the Indenture), to the same extent and in the
same manner that the Debentures are subordinated to all present and future
Senior Indebtedness pursuant to the Indenture, it being understood that the
terms of Article XV of the Indenture shall apply to the obligations of the
Guarantor under this QUIPS Guarantee as if (x) such Article XV were set forth
herein in full and (y) such obligations were substituted for the term
"Securities" appearing in such Article XV, and pari passu with the Debentures
and the Other Debentures.
The right of the Guarantor to participate in any distribution of assets
of any of its subsidiaries upon any such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of that
subsidiary, except to the extent the Guarantor may itself be recognized as a
creditor of that subsidiary. Accordingly, the Guarantor's obligations under this
QUIPS Guarantee will be effectively subordinated to all existing and future
liabilities of the Guarantor's subsidiaries, and claimants should look only to
the assets of the Guarantor for payments thereunder. This QUIPS Guarantee does
not limit the incurrence or issuance of other secured or unsecured debt of the
Guarantor, including Senior Indebtedness of the Guarantor, under any indenture
that the Guarantor may enter into in the future or otherwise.
If a Declaration Event of Default has occurred and is continuing, the
rights of holders of the Common Trust Securities of the Issuer to receive
payments under the Common Trust Securities Guarantee are subordinated to the
rights of Holders of QUIPS to receive Guarantee Payments.
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ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This QUIPS Guarantee shall terminate and be of no further
force and effect (i) upon full payment of the Final Redemption Price (as defined
in the Declaration) of all QUIPS or (ii) upon liquidation of the Issuer, the
full payment of the amounts payable in accordance with the Declaration or the
distribution of the Debentures to the Holders of all of the QUIPS or payment of
the applicable Put price in respect of the Debentures. Notwithstanding the
foregoing, this QUIPS Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder must restore payment
of any sums paid under the QUIPS or under this QUIPS Guarantee.
ARTICLE VIII
COMPENSATION AND EXPENSES OF
QUIPS GUARANTEE TRUSTEE
SECTION 8.1 Compensation and Expenses of QUIPS Guarantee Trustee
The Guarantor covenants and agrees to pay to the QUIPS
Guarantee Trustee from time to time, and the QUIPS Guarantee Trustee shall be
entitled to, such compensation as shall be agreed to in writing between the
Guarantor and the QUIPS Guarantee Trustee (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust), and the Guarantor will pay or reimburse the QUIPS Guarantee Trustee upon
its request for all reasonable expenses, disbursements and advances incurred or
made by the QUIPS Guarantee Trustee in accordance with any of the provisions of
this QUIPS Guarantee (including the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Guarantor also covenants to indemnify each of the
QUIPS Guarantee Trustee (and its officers, agents, directors and employees) for,
and to hold it harmless against, any and all loss, damage, claim, liability or
expense including taxes (other than taxes based on the income of the QUIPS
Guarantee Trustee) incurred without negligence or bad faith on the part of the
QUIPS Guarantee Trustee and arising out of or in connection with the acceptance
or administration of this guarantee, including the costs and expenses of
defending itself against any claim of liability in the premises. The obligations
of the Guarantor under this Article VIII to compensate and indemnify the QUIPS
Guarantee Trustee and to pay or reimburse the QUIPS Guarantee Trustee for
expenses, disbursements and advances shall be secured by a lien prior to that of
the QUIPS upon all property and funds held or collected by the QUIPS Guarantee
Trustee as such, except funds held in trust for the benefit of the holders of
particular QUIPS.
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The provisions of this Article shall survive the termination
of this QUIPS Guarantee.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Exculpation
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this QUIPS
Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
QUIPS Guarantee or by law, except that an Indemnified Person shall be liable for
any such loss, damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which Distributions to Holders might properly be paid.
SECTION 9.2 Indemnification
The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or administration
of the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 9.2 shall survive the termination of this
QUIPS Guarantee.
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ARTICLE X
MISCELLANEOUS
SECTION 10.1 Successors and Assigns
All guarantees and agreements contained in this QUIPS
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
then outstanding. Except in connection with any merger or consolidation of the
Guarantor with or into another entity or any sale, transfer or lease of the
Guarantor's assets to another entity, in each case, to the extent permitted
under the Indenture, the Guarantor may not assign its rights or delegate its
obligations under this QUIPS Guarantee without the prior approval of the Holders
of at least a Majority in Liquidation Amount of the QUIPS.
SECTION 10.2 Amendments
Except with respect to any changes that do not materially
adversely affect the rights of Holders (in which case no consent of Holders will
be required), this QUIPS Guarantee may only be amended with the prior approval
of the Holders of a Majority in Liquidation Amount of the QUIPS (including the
stated amount that would be paid on redemption, repurchase, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined). The provisions of the Declaration with
respect to consents to amendments thereof (whether at a meeting or otherwise)
shall apply to the giving of such approval.
SECTION 10.3 Notices
All notices provided for in this QUIPS Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:
(a) If given to the Issuer, in care of any of the
Administrators at the Issuer's mailing address set forth below (or such other
address as the Issuer may give notice of to the Holders and the QUIPS Guarantee
Trustee):
Life Re Capital Trust II
c/o Life Re Corporation
969 High Ridge Road
Stamford, Connecticut 06905
Attention: W. Weldon Wilson
Telecopy: (203) 321-3200
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(b) If given to the QUIPS Guarantee Trustee, at the QUIPS
Guarantee Trustee's mailing address set forth below (or such other address as
the QUIPS Guarantee Trustee may give notice of to the Holders and the Issuer):
The Bank of New York
101 Barclay Street
21st Floor West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Telecopy: (212) 815-5915
(c) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Holders of the QUIPS and the QUIPS Guarantee Trustee):
Life Re Corporation
969 High Ridge Road
Stamford, Connecticut 06905
Attention: W. Weldon Wilson
Telecopy: (203) 321-3200
(d) If given to any Holder, at the address set forth on
the books and records of the Issuer.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 10.4 Benefit
This QUIPS Guarantee is solely for the benefit of the Holders
and, subject to Section 3.1(a), is not separately transferable from the QUIPS.
SECTION 10.5 Governing Law
THIS QUIPS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF.
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<PAGE> 25
THIS QUIPS GUARANTEE is executed as of the day and year first
above written.
LIFE RE CORPORATION, as Guarantor
By: _____________________________________
Name:
Title:
THE BANK OF NEW YORK, as Capital
Securities Guarantee Trustee
By: _____________________________________
Name:
Title:
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Exhibit 4.11
================================================================================
LIFE RE CORPORATION
AND
THE BANK OF NEW YORK,
as Unit Agent
---------------------------
MASTER UNIT AGREEMENT
---------------------------
Dated as of _________, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS................................................................................................ 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions............................................................................... 1
SECTION 102. Compliance Certificates and Opinions...................................................... 8
SECTION 103. Form of Documents Delivered to Unit Agent................................................. 9
SECTION 104. Acts of Holders; Record Dates............................................................. 10
SECTION 105. Notices, etc. to Unit Agent and the Company............................................... 11
SECTION 106. Notice to Holders; Waiver................................................................. 12
SECTION 107. Effect of Headings and Table of Contents.................................................. 12
SECTION 108. Successors and Assigns.................................................................... 12
SECTION 109. Separability Clause....................................................................... 12
SECTION 110. Benefits of Agreement..................................................................... 12
SECTION 111. Governing Law............................................................................. 13
SECTION 112. Legal Holidays............................................................................ 13
SECTION 113. Counterparts.............................................................................. 13
SECTION 114. Inspection of Agreement................................................................... 13
ARTICLE TWO
UNIT CERTIFICATE FORMS
SECTION 201. Forms of Unit Certificates Generally...................................................... 14
SECTION 202. Form of Agent's Certificate of Authentication............................................. 14
ARTICLE THREE
THE UNITS
SECTION 301. Title and Terms; Denominations............................................................ 15
SECTION 302. Rights and Obligations Evidenced by the Unit Certificates................................. 15
SECTION 303. Execution, Authentication, Delivery and Dating............................................ 15
SECTION 304. Temporary Unit Certificates............................................................... 16
SECTION 305. Registration; Registration of Transfer and Exchange....................................... 17
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 306. Mutilated, Destroyed, Lost and Stolen Unit Certificates................................... 19
SECTION 307. Persons Deemed Owners..................................................................... 20
SECTION 308. Cancellation.............................................................................. 21
SECTION 309. Substitution of Pledged Securities and Creation of Stripped Units;
Units Not Otherwise Separable......................................................... 21
SECTION 310. Payments on the Units..................................................................... 23
ARTICLE FOUR
THE PLEDGED SECURITIES
SECTION 401. Payments on the Pledged Securities........................................................ 24
SECTION 402. Transfer of Pledged Securities Upon Occurrence of
Termination Event..................................................................... 24
ARTICLE FIVE
THE PURCHASE CONTRACTS
SECTION 501. Purchase of Shares of Common Stock........................................................ 25
SECTION 502. Contract Fees............................................................................. 27
SECTION 503. Deferral of Payment Dates For Contract Fee................................................ 27
SECTION 504. Payment of Purchase Price................................................................. 29
SECTION 505. Issuance of Shares of Common Stock........................................................ 31
SECTION 506. Adjustment of Settlement Rate............................................................. 31
SECTION 507. Notice of Adjustments and Certain Other Events............................................ 36
SECTION 508. No Fractional Shares...................................................................... 37
SECTION 509. Charges and Taxes......................................................................... 38
SECTION 510. Termination Event; Notice................................................................. 38
ARTICLE SIX
REMEDIES
SECTION 601. Unconditional Rights of Holders........................................................... 38
SECTION 602. Restoration of Rights and Remedies........................................................ 39
SECTION 603. Rights and Remedies Cumulative............................................................ 39
SECTION 604. Delay or Omission Not Waiver.............................................................. 39
SECTION 605. Undertaking for Costs..................................................................... 39
SECTION 606. Waiver of Stay or Extension Laws.......................................................... 40
</TABLE>
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ARTICLE SEVEN
THE UNIT AGENT
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 701. Certain Duties and Responsibilities....................................................... 40
SECTION 702. Notice of Default......................................................................... 41
SECTION 703. Certain Rights of Unit Agent.............................................................. 41
SECTION 704. Not Responsible for Recitals or Issuance of Units......................................... 42
SECTION 705. May Hold Units............................................................................ 42
SECTION 706. Money Held in Trust....................................................................... 42
SECTION 707. Compensation and Reimbursement............................................................ 43
SECTION 708. Corporate Unit Agent Required; Eligibility................................................ 43
SECTION 709. Resignation and Removal; Appointment of Successor......................................... 44
SECTION 710. Acceptance of Appointment by Successor.................................................... 45
SECTION 711. Merger, Conversion, Consolidation or Succession to Business............................... 45
SECTION 712. Preservation of Information; Communications to Holders.................................... 46
SECTION 713. No Obligations of Unit Agent.............................................................. 46
SECTION 714. Tax Compliance............................................................................ 46
ARTICLE EIGHT
SUPPLEMENTAL AGREEMENTS
SECTION 801. Supplemental Agreements Without Consent of Holders........................................ 47
SECTION 802. Supplemental Agreements with Consent of Holders........................................... 48
SECTION 803. Execution of Supplemental Agreements...................................................... 49
SECTION 804. Effect of Supplemental Agreements......................................................... 49
SECTION 805. Reference to Supplemental Agreements...................................................... 49
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 901. Covenant Not to Merge, Consolidate, Sell or Convey Property
Except Under Certain Conditions....................................................... 50
SECTION 902. Rights and Duties of Successor Corporation................................................ 50
SECTION 903. Opinion of Counsel to Unit Agent.......................................................... 51
</TABLE>
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ARTICLE TEN
COVENANTS
<TABLE>
<S> <C> <C>
SECTION 1001. Performance Under Purchase Contracts..................................................... 51
SECTION 1002. Maintenance of Office or Agency.......................................................... 51
SECTION 1003. Company to Reserve Common Stock.......................................................... 52
SECTION 1004. Covenants as to Common Stock............................................................. 52
SECTION 1005. Statements of Officers of the Company as to Default...................................... 52
TESTIMONIUM............................................................................................. 50
SIGNATURES.............................................................................................. 50
</TABLE>
EXHIBIT A Form of Normal Unit Certificate
EXHIBIT B Form of Stripped Unit Certificate
EXHIBIT C Form of Call Option Agreement
EXHIBIT D Form of Pledge Agreement
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<PAGE> 6
MASTER UNIT AGREEMENT, dated as of ___________, 1998, between LIFE RE
CORPORATION, a Delaware corporation (the "Company"), and The Bank of New York, a
New York banking corporation, acting as unit agent for the Holders of Units from
time to time (the "Unit Agent").
RECITALS
The Company has duly authorized the execution and delivery of this
Agreement and the Unit Certificates evidencing the Units.
All things necessary to make the Company's obligations under the Units,
when the Unit Certificates are executed by the Company and authenticated,
executed on behalf of the Holders and delivered by the Unit Agent, as in this
Agreement provided, the valid obligations of the Company, and to constitute
these presents a valid agreement of the Company, in accordance with its terms,
have been done.
WITNESSETH:
For and in consideration of the premises and the purchase of the Units
by the Holders thereof, it is mutually agreed as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular; and
(b) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified
<PAGE> 7
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Unit Agent" means the Person named as the "Unit Agent" in the first
paragraph of this instrument until a successor Unit Agent shall have become such
pursuant to the applicable provisions of this Agreement, and thereafter "Unit
Agent" shall mean the Person who is then the Unit Agent hereunder.
"Agreement" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more agreements
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Applicable Market Value" has the meaning specified in Section 501.
"Board of Directors" means the board of directors of the Company or a
duly authorized committee of that board.
"Board Resolution" means one or more resolutions of the Board of
Directors, a copy of which has been certified by the Secretary or an Assistant
Secretary of the Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification and delivered
to the Unit Agent.
"Business Day" means any day that is not a Saturday, Sunday or a day on
which banking institutions or trust companies in The City of New York are
authorized or obligated by law or executive order to be closed.
"Call Option" means an option entitling the Call Option Holder to
acquire the QUIPS or Junior Subordinated Debentures underlying the related
Normal Unit on the terms and subject to the conditions set forth in the Call
Option Agreement.
"Call Option Agreement" means the Call Option Agreement, dated as of
the date hereof, between the Call Option Holder named therein and the Unit
Agent, on its own behalf and as attorney-in-fact for the Holders from time to
time of the Normal Units, the form of which is attached hereto as Exhibit C, as
the same may be amended from time to time in accordance with the terms hereof
and thereof.
"Call Option Holder" means the Person named as the Call Option Holder
in the Call Option Agreement.
"Call Settlement Date" means the date on which the Call Options are
settled pursuant to the Call Option Agreement.
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<PAGE> 8
"Closing Price" has the meaning specified in Section 501.
"Collateral Agent" means ____________________, as Collateral Agent
under the Pledge Agreement, until a successor Collateral Agent shall have become
such pursuant to the applicable provisions of the Pledge Agreement, and
thereafter "Collateral Agent" shall mean the Person who is then the Collateral
Agent thereunder.
"Common Stock" means the Common Stock, par value $.001 per share, of
the Company.
"Company" means the Person designated as the "Company" in the first
paragraph of this instrument until a successor shall have become such, and
thereafter "Company" shall mean such successor.
"Contract Fee" means, with respect to each Purchase Contract, a fee
payable [TO] [BY] the Company [BY] [TO] the Holder of the related Unit, accruing
on the Stated Amount of such Unit from and including the date of first issuance
of any Units to but excluding the Stock Purchase Date and payable quarterly in
arrears on each Quarterly Payment Date to and including the Stock Purchase Date
at a rate per annum equal to the Contract Fee Rate (and computed on the basis of
a 360-day year of twelve 30-day months), plus any additional fees accrued
thereon pursuant to Section 503.
"Contract Fee Rate" means ____%.
"Corporate Trust Office" means the principal office of the Unit Agent
in the Borough of Manhattan, The City of New York, at which at any particular
time its corporate trust business shall be administered, which office at the
date hereof is located at __________________, New York, New York ______.
"Current Market Price" has the meaning specified in Section 506(a)(8).
"Declaration" means the Declaration of Trust, dated as of February 10,
1998 and amended and restated as of the date hereof, executed by the Company and
certain trustees of the Trust, as the same may be amended or supplemented from
time to time in accordance with the terms thereof.
"Depositary" means a clearing agency registered under the Exchange Act
that is designated to act as Depositary for the Units as contemplated by Section
305.
"Exchange Act" means the Securities Exchange Act of 1934 or any statute
successor thereto, in each case as amended from time to time.
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<PAGE> 9
"Excess Treasury Securities" has the meaning specified in Section 402.
"Expiration Date" has the meaning specified in Section 104.
"Expiration Time" has the meaning specified in Section 506(a)(6).
"Global Unit Certificate" means a Unit Certificate that evidences all
or part of the Normal Units or a Unit Certificate that evidences all or a part
of the Stripped Units and is registered in the name of the Depositary or a
nominee thereof.
"Holder" means a Person in whose name a Unit Certificate is registered
in the Unit Register; "Holder", when used with respect to any particular Unit
Certificate (or Unit), means a Person in whose name such Unit Certificate (or
the Unit Certificate evidencing such Unit) is registered in the relevant Unit
Register.
"Indenture" means the Indenture, dated as of the date hereof, between
the Company and The Bank of New York, as Trustee, as the same may be amended or
supplemented from time to time in accordance with the terms thereof.
"Issuer Order" or "Issuer Request" means a written order or request
signed in the name of the Company by its Chairman of the Board, any Vice
Chairman, its President or a Vice President and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the Unit
Agent.
"Junior Subordinated Debenture Put Option" has the meaning specified
for the term "Put Option" in the Indenture.
"Junior Subordinated Debentures" means the ___% Junior Subordinated
Deferrable Interest Debentures due ____________, 2003 of the Company issued
under the Indenture.
"Normal Unit" means the rights to purchase Common Stock under a
Purchase Contract, together with ownership of the QUIPS or other Pledged
Securities pledged to secure the obligations referred to in (a) and (b) below,
subject to (a) the obligations owed to the Company under such Purchase Contract,
(b) for so long as any Call Options remain exercisable, the obligations owed to
the Call Option Holder under a Call Option and (c) the pledge arrangements
securing the foregoing obligations; provided, however, that the term "Normal
Unit" will not include any Stripped Unit.
"NYSE" has the meaning specified in Section 501.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, any Vice Chairman, the President or any Vice President and by the
Treasurer, an Assistant
-4-
<PAGE> 10
Treasurer, the Secretary or an Assistant Secretary of the Company and delivered
to the Unit Agent.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company.
"Outstanding Unit Certificates" means, as of the date of determination,
all Unit Certificates theretofore authenticated, executed and delivered pursuant
to this Agreement, except:
(a) Unit Certificates theretofore canceled by the Unit Agent
or delivered to the Unit Agent for cancellation; and
(b) Unit Certificates in exchange for or in lieu of which
other Unit Certificates have been authenticated, executed on behalf of
the Holder and delivered pursuant to this Agreement, other than any
such Unit Certificate in respect of which there shall have been
presented to the Unit Agent proof satisfactory to it that such Unit
Certificate is held by a bona fide purchaser in whose hands the Units
evidenced by such Unit Certificate are valid obligations of the
Company.
"Outstanding Units" means, as of the date of determination, all Units
evidenced by then Outstanding Unit Certificates, except, if the Termination Date
or Stock Purchase Date has passed, Units for which the underlying Pledged
Securities or the Common Stock purchasable upon settlement of the underlying
Purchase Contracts, as the case may be, have been theretofore deposited with the
Unit Agent in trust for the Holders of such Units; provided, however, that in
determining whether the Holders of the requisite number of Units have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Units owned by the Company or any Affiliate of the Company shall be disregarded
and deemed not to be outstanding, except that, in determining whether the Unit
Agent shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Units which the Unit
Agent knows to be so owned shall be so disregarded. Units so owned which have
been pledged in good faith may be regarded as Outstanding Units if the pledgee
establishes to the satisfaction of the Unit Agent the pledgee's right so to act
with respect to such Units and that the pledgee is not the Company or any
Affiliate of the Company.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pledge" means the pledge of the Pledged Securities under the Pledge
Agreement.
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<PAGE> 11
"Pledge Agreement" means the Pledge Agreement, dated as of the date
hereof, among the Company, the Call Option Holder, the Collateral Agent and the
Unit Agent, on its own behalf and as attorney-in-fact for the Holders from time
to time of the Units, the form of which is attached hereto as Exhibit D, as the
same may be amended from time to time in accordance with the terms hereof and
thereof.
"Pledged Securities" means the securities pledged to the Collateral
Agent pursuant to the Pledge and constituting a part of the Units.
"Predecessor Unit Certificate" of any particular Unit Certificate means
every previous Unit Certificate evidencing all or a portion of the rights and
obligations of the Holder under the Units evidenced thereby; and, for the
purposes of this definition, any Unit Certificate authenticated and delivered
under Section 306 in exchange for or in lieu of a mutilated, destroyed lost or
stolen Unit Certificate shall be deemed to evidence the same rights and
obligations of the Holder as the mutilated, destroyed, lost or stolen Unit
Certificate.
"Principal Agreements" means this Agreement, the Pledge Agreement and
the Call Option Agreement.
"Purchase Contract" means a contract obligating the Company to sell and
the Holder of the related Unit to purchase Common Stock on the terms and subject
to the conditions set forth in Article Five hereof.
"Purchase Contract Settlement Fund" has the meaning specified in
Section 505.
"Purchased Shares" has the meaning specified in Section 506(a)(6).
"Quarterly Payment Date" means each _________, _________, _________
and__________, commencing _________, 1998.
"QUIPS"(sm)* means ___% Quarterly Income Preferred Securities of the
Trust issued under the Declaration, which term may refer to a single security or
more than one security as the context may require.
"Record Date", when used with respect to any payment date, means the
Business Day next preceding such payment date; provided, however, that if any
Units are no longer evidenced by a Global Unit Certificate, "Record Date", when
used with respect to any payment date for such Units, means the [FIRST DAY
OF][THE FIFTEENTH DAY OF][THE FIFTEENTH DAY OF THE MONTH PRECEDING] the month in
which such payment date falls; and provided further, that if payments are in
respect of QUIPS or Junior Subordinated Debentures underlying
- --------
* QUIPS is a servicemark of Goldman, Sachs & Co.
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<PAGE> 12
Normal Units, "Record Date", when used with respect to such payments, means the
record date for such payments determined as provided under the Declaration or
the Indenture, as the case may be.
"Reorganization Event" has the meaning specified in Section 506(b).
"Responsible Officer", when used with respect to the Unit Agent, means
any officer of the Unit Agent assigned by the Unit Agent to administer its
corporate trust matters.
"Settlement Rate" has the meaning specified in Section 501.
"Stated Amount" means $_______ per Unit.
"Stock Purchase Date" means ____________, 2001.
"Stripped Unit" means the rights to purchase Common Stock under a
Purchase Contract, together with ownership of the Treasury Securities pledged to
secure the obligations referred to in (a) below, subject to (a) the obligations
owed to the Company under such Purchase Contract and (b) the pledge arrangements
securing the foregoing obligations; provided, however, that the term "Stripped
Unit" will only include Units issued as a result of a Stripped Unit Creation as
contemplated by Section 309.
"Stripped Unit Creation" has the meaning specified in Section 309(a).
"Termination Date" means the date, if any, on which a Termination Event
occurs.
"Termination Event" means the occurrence of any of the following events
at any time on or prior to the Stock Purchase Date: (a) a decree or order of a
court having jurisdiction in the premises shall have been entered adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization of the Company under the United States Bankruptcy Code or
any other similar applicable Federal or State law, and, unless such decree or
order shall have been entered within 60 days prior to the Stock Purchase Date,
such decree or order shall have continued undischarged and unstayed for a period
of 60 days, or (b) a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver or liquidator or trustee or assignee
in bankruptcy or insolvency of the Company or of its property, or for the
winding up or liquidation of its affairs, shall have been entered, and, unless
such decree or order shall have been entered within 60 days prior to the Stock
Purchase Date, such decree or order shall have continued undischarged and
unstayed for a period of 60 days, or (c) the Company shall institute proceedings
to be adjudicated a bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent seeking
reorganization under the United States Bankruptcy Code or any other similar
applicable Federal or State law, or shall consent to the
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<PAGE> 13
filing of any such petition, or shall consent to the appointment of a receiver
or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its
property, or shall make an assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they become due.
"Threshold Appreciation Price" has the meaning specified in Section
501.
"TIA" means the Trust Indenture Act of 1939 or any statute successor
thereto, in each case as amended from time to time.
"Trading Day" has the meaning specified in Section 501.
"Treasury Securities" means United States Treasury Securities.
"Trust" means Life Re Capital Trust II, a statutory business trust
created under the laws of the State of Delaware.
"Underwriting Agreement" means the Underwriting Agreement dated
________, 1998 among the Company, the Trust and Goldman, Sachs & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Donaldson, Lufkin & Jenrette
Securities Corporation, as the Underwriters named therein.
"Unit Certificate" means a certificate evidencing the rights and
obligations of a Holder in respect of the number of Normal Units or Stripped
Units, as the case may be, specified on such certificate.
"Unit Register" and "Unit Registrar" have the respective meanings
specified in Section 305.
"Units" means the Normal Units and, if any are issued, the Stripped
Units. The Purchase Contracts, Call Options and/or Pledged Securities
constituting a part of any Units are sometimes referred to herein as
"underlying" such Units and are sometimes herein said to "underlie" such Units.
"Vice President" means any vice president, whether or not designated by
a number or a word or words added before or after the title "vice president".
SECTION 102. Compliance Certificates and Opinions.
Except as otherwise expressly provided by this Agreement, upon any
application or request by the Company to the Unit Agent to take any action under
any provision of this Agreement, the Company shall furnish to the Unit Agent an
Officers' Certificate stating that
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<PAGE> 14
all conditions precedent, if any, provided for in this Agreement relating to the
proposed action have been complied with and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Agreement relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Agreement shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Unit Agent.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of
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<PAGE> 15
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Unit Agent and, where it is hereby expressly required, to the Company.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Agreement and (subject to Section 701) conclusive in favor of the Unit Agent and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Unit Agent deems sufficient.
(c) The ownership of Units shall be proved by the Unit Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Unit shall bind every future Holder of
the same Unit and the Holder of every Unit Certificate evidencing such Unit
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be done by the
Unit Agent or the Company in reliance thereon, whether or not notation of such
action is made upon such Unit Certificate.
(e) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Units entitled to give, make or take any
request, demand,
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<PAGE> 16
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Agreement to be given, made or taken by Holders of Units. If
any record date is set pursuant to this paragraph, the Holders of Outstanding
Units on such record date, and no other Holders, shall be entitled to take the
relevant action, whether or not such Holders remain Holders after such record
date; provided that no such action shall be effective hereunder unless taken on
or prior to the applicable Expiration Date by Holders of the requisite number of
Outstanding Units on such record date. Nothing in this paragraph shall be
construed to prevent the Company from setting a new record date for any action
for which a record date has previously been set pursuant to this paragraph
(whereupon the record date previously set shall automatically and with no action
by any Person be canceled and of no effect), and nothing in this paragraph shall
be construed to render ineffective any action taken by Holders of the requisite
number of Outstanding Units on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Company, at its own expense,
shall cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Unit Agent in writing and to each
Holder of Units in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the
Company may designate any date as the "Expiration Date" and from time to time
may change the Expiration Date to any earlier or later day; provided that no
such change shall be effective unless notice of the proposed new Expiration Date
is given to the Unit Agent in writing, and to each Holder of Units in the manner
set forth in Section 106, on or prior to the existing Expiration Date. If an
Expiration Date is not designated with respect to any record date set pursuant
to this Section, the Company shall be deemed to have initially designated the
180th day after such record date as the Expiration Date with respect thereto,
subject to its right to change the Expiration Date as provided in this
paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than
the 180th day after the applicable record date.
SECTION 105. Notices, etc. to Unit Agent and the Company.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of Holders or other document provided or permitted by this
Agreement to be made upon, given or furnished to, or filed with,
(a) the Unit Agent by any Holder or by the Company shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing and
personally delivered or mailed, first-class postage prepaid, to the
Unit Agent at _________________________, Attention: ____________, or at
any other address previously furnished in writing by the Unit Agent to
the Holders and the Company, or
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<PAGE> 17
(b) the Company by the Unit Agent or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing and
personally delivered or mailed, first-class postage prepaid, to the
Company at 969 High Ridge Road, Stamford, Connecticut 06905, Attention:
General Counsel, or at any other address previously furnished in
writing by the Company to the Unit Agent and the Holders.
SECTION 106. Notice to Holders; Waiver.
Where this Agreement provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Unit Register, not later than
the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Where this Agreement provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Unit Agent, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Unit Agent
shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
All covenants and agreements in this Agreement by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 109. Separability Clause.
In case any provision in this Agreement or in the Units shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof and thereof shall not in any way be affected or
impaired thereby.
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<PAGE> 18
SECTION 110. Benefits of Agreement.
Nothing in this Agreement or in the Unit Certificates, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders, any benefits or any legal or equitable
right, remedy or claim under this Agreement. The Holders from time to time shall
be beneficiaries of this Agreement and shall be bound by all of the terms and
conditions hereof and of the Units evidenced by their Unit Certificates by their
acceptance of delivery thereof.
SECTION 111. Governing Law.
THIS AGREEMENT AND THE UNITS SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 112. Legal Holidays.
In any case where any Quarterly Payment Date or the Stock Purchase Date
shall not be a Business Day, then (notwithstanding any other provision of this
Agreement or of the Units) payment in respect of distributions or interest on or
principal of Pledged Securities or Contract Fees shall not be made, Purchase
Contracts shall not be performed and other actions described herein shall not
occur, but such payments shall be made, the Purchase Contracts shall be
performed and such other actions shall occur, as applicable, on the next
succeeding Business Day with the same force and effect as if made on such
Quarterly Payment Date or Stock Purchase Date, as the case may be; provided,
that no distributions or interest shall accrue or be payable by the Company or
any Holder for the period from and after any such Quarterly Payment Date or
Stock Purchase Date, as the case may be, to the date of payment or performance;
except that if such next succeeding Business Day is in the next succeeding
calendar year, such payment shall be made or the Purchase Contracts shall be
performed on the immediately preceding Business Day with the same force and
effect as if made on such Quarterly Payment Date or the Stock Purchase Date.
SECTION 113. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which, when so executed, shall be deemed an original, but all such counterparts
shall together constitute one and the same instrument.
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<PAGE> 19
SECTION 114. Inspection of Agreement.
A copy of this Agreement shall be available at all reasonable times at
the Corporate Trust Office for inspection by any Holder.
ARTICLE TWO
UNIT CERTIFICATE FORMS
SECTION 201. Forms of Unit Certificates Generally.
Unit Certificates evidencing Normal Units shall be in substantially the
form set forth in Exhibit A hereto and Unit Certificates evidencing the Stripped
Units shall be in substantially the form of Exhibit B hereto, in each case with
such letters, numbers or other marks of identification or designation and such
legends or endorsements printed, litho graphed or engraved thereon as may be
required by the rules of any securities exchange on which the Units are listed
or Depositary therefor, or as may, consistently herewith, be determined by the
officers of the Company executing such Unit Certificates, as evidenced by their
execution of the Unit Certificates.
The definitive Unit Certificates shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers of the Company executing the Unit Certificates,
consistent with the provisions of this Agreement, as evidenced by their
execution thereof.
Every Global Unit Certificate authenticated, executed on behalf of the
Holders and delivered hereunder shall bear a legend in substantially the
following form:
THIS UNIT CERTIFICATE IS A GLOBAL UNIT CERTIFICATE WITHIN THE MEANING
OF THE MASTER UNIT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS UNIT CERTIFICATE
MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A UNIT CERTIFICATE
REGISTERED, AND NO TRANSFER OF THIS UNIT CERTIFICATE IN WHOLE OR IN
PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE MASTER UNIT AGREEMENT.
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<PAGE> 20
SECTION 202. Form of Agent's Certificate of Authentication.
The form of the Agent's certificate of authentication of the Units
shall be in substantially the form set forth on the form of the Unit
Certificates.
ARTICLE THREE
THE UNITS
SECTION 301. Title and Terms; Denominations.
The aggregate number of Units evidenced by Unit Certificates
authenticated, executed on behalf of the Holders and delivered hereunder is
limited to 1,500,000 (subject to increase up to a maximum of 225,000 to the
extent the over-allotment option of the underwriters under the Underwriting
Agreement is exercised), except for Unit Certificates authenticated, executed
and delivered upon registration of transfer of, in exchange for, or in lieu of,
other Unit Certificates pursuant to Section 304, 305, 306 or 805.
All of the Unit Certificates authenticated, executed and delivered
hereunder shall be Normal Units except for any Unit Certificates evidencing
Stripped Units issued in connection with a Stripped Unit Creation pursuant to
Section 309 and Unit Certificates authenticated, executed and delivered upon
registration of transfer of, in exchange for, or in lieu of, other Unit
Certificates evidencing Stripped Units pursuant to Section 304, 305, 306 or 805.
Unit Certificates shall be issuable only in registered form and only in
denominations of a single Unit and any integral multiple thereof.
SECTION 302. Rights and Obligations Evidenced by the Unit Certificates.
Each Unit Certificate shall evidence the number of Units specified
therein. Prior to the purchase, if any, of shares of Common Stock under the
Purchase Contracts, the Units shall not entitle the Holders to any of the rights
or privileges of a holder of shares of Common Stock, including, without
limitation, the right to vote or receive any dividends or other distributions or
to consent or to receive notice as stockholders in respect of the meetings of
stockholders or for the election of directors of the Company or for any other
matter.
SECTION 303. Execution, Authentication, Delivery and Dating.
Subject to the provisions of Section 309 hereof, upon the execution and
delivery of this Agreement, and at any time and from time to time thereafter,
the Company may deliver Unit Certificates executed by the Company to the Unit
Agent for authentication, execution on behalf of the Holders and delivery,
together with its Issuer Order for authentication of such
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<PAGE> 21
Unit Certificates, and the Unit Agent in accordance with such Issuer Order shall
authenticate, execute on behalf of the Holders and deliver such Unit
Certificates.
The Unit Certificates shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Unit Certificates may be manual or facsimile.
Unit Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Unit
Certificates or did not hold such offices at the date of such Unit Certificates.
Each Unit Certificate shall be dated the date of its authentication.
No Purchase Contract or Call Option underlying a Unit evidenced by a
Unit Certificate shall be valid until such Unit Certificate has been executed on
behalf of the Holder by the manual signature of an authorized signatory of the
Unit Agent, as such Holder's attorney-in-fact. Such signature by an authorized
signatory of the Unit Agent shall be conclusive evidence that the Holder of such
Unit Certificate has entered into the Purchase Contracts and Call Options
underlying the Units evidenced by such Unit Certificate.
No Unit Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose unless there appears on such
Unit Certificate a certificate of authentication substantially in the form
provided for herein executed by an authorized signatory of the Unit Agent by
manual signature, and such certificate upon any Unit Certificate shall be
conclusive evidence, and the only evidence, that such Unit Certificate has been
duly authenticated and delivered hereunder.
SECTION 304. Temporary Unit Certificates.
Pending the preparation of definitive Unit Certificates, the Company
shall execute and deliver to the Unit Agent, and the Unit Agent shall
authenticate, execute on behalf of the Holders, and deliver, in lieu of such
definitive Unit Certificates, temporary Unit Certificates which are in
substantially the form set forth in Exhibit A or Exhibit B hereto, with such
letters, numbers or other marks of identification or designation and such
legends or endorsements printed, lithographed or engraved thereon as may be
required by the rules of any securities exchange on which the Units are listed
or Depositary therefor, or as may, consistently herewith, be determined by the
officers of the Company executing such Unit Certificates, as evidenced by their
execution of the Unit Certificates.
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<PAGE> 22
If temporary Unit Certificates are issued, the Company will cause
definitive Unit Certificates to be prepared without unreasonable delay. After
the preparation of definitive Unit Certificates, the temporary Unit Certificates
shall be exchangeable for definitive Unit Certificates upon surrender of the
temporary Unit Certificates at the Corporate Trust Office, at the expense of the
Company and without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Unit Certificates, the Company shall execute and deliver
to the Unit Agent, and the Unit Agent shall authenticate, execute on behalf of
the Holder, and deliver in exchange therefor, one or more definitive Unit
Certificates of authorized denominations and evidencing a like number of Normal
Units or Stripped Units, as the case may be, as the temporary Unit Certificate
or Unit Certificates so surrendered. Until so exchanged, the temporary Unit
Certificates shall in all respects evidence the same benefits and the same
obligations with respect to the Units evidenced thereby as definitive Unit
Certificates.
SECTION 305. Registration; Registration of Transfer and Exchange.
The Unit Agent shall keep at the Corporate Trust Office registers (the
registers maintained in such office being herein referred to as the "Unit
Registers") in which, subject to such reasonable regulations as it may
prescribe, the Unit Agent shall provide for the registration of Unit
Certificates evidencing the Normal Units and the Stripped Units and of transfers
of Unit Certificates evidencing the Normal Units and the Stripped Units (the
Unit Agent, in such capacity, the "Unit Registrar").
Upon surrender for registration of transfer of any Unit Certificate at
the Corporate Trust Office, the Company shall execute and deliver to the Unit
Agent, and the Unit Agent shall authenticate, execute on behalf of the
designated transferee or transferees, and deliver, in the name of the designated
transferee or transferees, one or more new Unit Certificates evidencing a like
number of Normal Units or Stripped Units, as the case may be.
At the option of the Holder, Unit Certificates may be exchanged for
other Unit Certificates evidencing a like number of Normal Units or Stripped
Units, as the case may be, upon surrender of the Unit Certificates to be
exchanged at the Corporate Trust Office. Whenever any Unit Certificates are so
surrendered for exchange, the Company shall execute and deliver to the Unit
Agent, and the Unit Agent shall authenticate, execute on behalf of the Holder,
and deliver the Unit Certificates which the Holder making the exchange is
entitled to receive.
All Unit Certificates issued upon any registration of transfer or
exchange of a Unit Certificate shall evidence the ownership of the same number
of Normal Units or Stripped Units, as the case may be, and be entitled to the
same benefits and subject to the same obligations, under the Principal
Agreements as the Normal Units or Stripped Units, as the
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<PAGE> 23
case may be, evidenced by the Unit Certificate surrendered upon such
registration of transfer or exchange.
Every Unit Certificate presented or surrendered for registration of
transfer or for exchange shall (if so required by the Unit Agent) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Unit Agent duly executed, by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of a Unit Certificate, but the Company and the Unit Agent may require
payment from the Holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Unit Certificates (which, for these purposes, includes a
Stripped Unit Creation or a transfer of Pledged Securities as contemplated by
Section 504(a)), other than any exchanges pursuant to Sections 306 and 805 not
involving any transfer.
Notwithstanding the foregoing, the Company shall not be obligated to
execute and deliver to the Unit Agent, and the Unit Agent shall not be obligated
to authenticate, execute on behalf of the Holder and deliver any Unit
Certificate in respect of a Unit Certificate presented or surrendered for
registration of transfer or for exchange on or after the Stock Purchase Date or
the Termination Date. In lieu of delivery of a new Unit Certificate, upon
satisfaction of the applicable conditions specified above in this Section and
receipt of appropriate registration or transfer instructions from such Holder,
the Unit Agent shall (a) if the Stock Purchase Date has occurred, deliver the
shares of Common Stock issuable in respect of the Purchase Contracts forming a
part of the Units evidenced by such Unit Certificate, or (b) if a Termination
Event shall have occurred on or prior to the Stock Purchase Date, transfer the
liquidation or principal amount of the Pledged Securities evidenced thereby, in
each case subject to the applicable conditions and in accordance with the
applicable provisions of Article Five hereof.
The provisions of Clauses (a), (b), (c) and (d) below shall apply only
to Global Unit Certificates:
(a) Each Global Unit Certificate authenticated and executed on
behalf of the Holders under this Agreement shall be registered in the
name of the Depositary designated for such Global Unit Certificate or a
nominee thereof and delivered to such Depositary or a nominee thereof
or custodian therefor, and each such Global Unit Certificate shall
constitute a single Unit Certificate for all purposes of this
Agreement.
(b) Notwithstanding any other provision in this Agreement, no
Global Unit Certificate may be exchanged in whole or in part for Unit
Certificates registered, and no transfer of a Global Unit Certificate
in whole or in part may be registered, in the
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<PAGE> 24
name of any Person other than the Depositary for such Global Unit Certificate or
a nominee thereof unless (i) such Depositary (x) has notified the Company that
it is unwilling or unable to continue as Depositary for such Global Unit
Certificate or (y) has ceased to be a clearing agency registered under the
Exchange Act or (ii) there shall have occurred and be continuing a default by
the Company in respect of its obligations under one or more Principal
Agreements.
(c) Subject to Clause (b) above, any exchange of a Global Unit
Certificate for other Unit Certificates may be made in whole or in
part, and all Unit Certificates issued in exchange for a Global Unit
Certificate or any portion thereof shall be registered in such names as
the Depositary for such Global Unit Certificate shall direct.
(d) Every Unit Certificate authenticated and delivered upon
registration of transfer of, in exchange for or in lieu of a Global
Unit Certificate or any portion thereof, whether pursuant to this
Section, Section 304, 306 or 805 or otherwise, shall be authenticated,
executed on behalf of the Holders and delivered in the form of, and
shall be, a Global Unit Certificate, unless such Unit Certificate is
registered in the name of a Person other than the Depositary for such
Global Unit Certificate or a nominee thereof.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Unit Certificates.
If any mutilated Unit Certificate is surrendered to the Unit Agent, the
Company shall execute and deliver to the Unit Agent, and the Unit Agent shall
authenticate, execute on behalf of the Holder, and deliver in exchange therefor,
a new Unit Certificate, evidencing the same number of Normal Units or Stripped
Units, as the case may be, and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and the Unit Agent (a)
evidence to their satisfaction of the destruction, loss or theft of any Unit
Certificate, and (b) such security or indemnity as may be required by them to
save each of them and any agent of any of them harmless, then, in the absence of
notice to the Company or the Unit Agent that such Unit Certificate has been
acquired by a bona fide purchaser, the Company shall execute and deliver to the
Unit Agent, and the Unit Agent shall authenticate, execute on behalf of the
Holder, and deliver to the Holder, in lieu of any such destroyed, lost or stolen
Unit Certificate, a new Unit Certificate, evidencing the same number of Normal
Units or Stripped Units, as the case may be, and bearing a number not
contemporaneously outstanding.
Notwithstanding the foregoing, the Company shall not be obligated to
execute and deliver to the Unit Agent, and the Unit Agent shall not be obligated
to authenticate, execute on behalf of the Holder, and deliver to the Holder, on
or after the Stock Purchase Date or the
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<PAGE> 25
Termination Date, a Unit Certificate in respect of any mutilated, destroyed,
lost or stolen Unit Certificate. In lieu of delivery of a new Unit Certificate,
upon satisfaction of the applicable conditions specified above in this Section
and receipt of appropriate registration or transfer instructions from such
Holder, the Unit Agent shall (a) if the Stock Purchase Date has occurred,
deliver the shares of Common Stock issuable in respect of the Purchase Contracts
forming a part of the Units evidenced by such Unit Certificate, or (b) if a
Termination Event shall have occurred on or prior to the Stock Purchase Date,
transfer the liquidation or principal amount of the Pledged Securities evidenced
thereby, in each case subject to the applicable conditions and in accordance
with the applicable provisions of Article Five hereof.
Upon the issuance of any new Unit Certificate under this Section, the
Company and the Unit Agent may require the payment by the Holder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Unit Agent) connected therewith.
Every new Unit Certificate issued pursuant to this Section in lieu of
any destroyed, lost or stolen Unit Certificate shall constitute an original
additional contractual obligation of the Company and of the Holder, whether or
not the destroyed, lost or stolen Unit Certificate shall be at any time
enforceable by anyone, and shall be entitled to all the benefits and be subject
to all the obligations of the Principal Agreements equally and proportionately
with any and all other Unit Certificates delivered hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
settlement of mutilated, destroyed, lost or stolen Unit Certificates.
SECTION 307. Persons Deemed Owners.
Prior to due presentment of a Unit Certificate for registration of
transfer, the Company and the Unit Agent, and any agent of the Company or the
Unit Agent, may treat the Person in whose name such Unit Certificate is
registered as the owner of the Units evidenced thereby, for the purpose of
receiving payments of distributions or interest on the Pledged Securities,
receiving or making payments of Contract Fees and performance of the underlying
Purchase Contracts and Call Options and for all other purposes whatsoever,
whether or not the payment of distributions or interest on the Pledged
Securities or any Contract Fee payable in respect of the Purchase Contracts
constituting a part of the Units evidenced thereby shall be overdue and
notwithstanding any notice to the contrary, and neither the Company nor the Unit
Agent, nor any agent of the Company or the Unit Agent, shall be affected by
notice to the contrary.
Notwithstanding the foregoing, with respect to any Global Unit
Certificate, nothing herein shall prevent the Company, the Unit Agent or any
agent of the Company or the Unit
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<PAGE> 26
Agent, from giving effect to any written certification, proxy or other
authorization furnished by any Depositary (or its nominee), as a Holder, with
respect to such Global Unit Certificate or impair, as between such Depositary
and owners of beneficial interests in such Global Unit Certificate, the
operation of customary practices governing the exercise of rights of such
Depositary (or its nominee) as Holder of such Global Unit Certificate.
SECTION 308. Cancellation.
All Unit Certificates surrendered for delivery of shares of Common
Stock on or after the Stock Purchase Date, transfer of Pledged Securities after
the occurrence of a Termination Event or registration of transfer or exchange
shall, if surrendered to any Person other than the Unit Agent, be delivered to
the Unit Agent and, if not already canceled, shall be promptly canceled by it.
The Company may at any time deliver to the Unit Agent for cancellation any Unit
Certificates previously authenticated, executed and delivered hereunder which
the Company may have acquired in any manner whatsoever, and all Unit
Certificates so delivered shall, upon Issuer Order, be promptly canceled by the
Unit Agent. No Unit Certificates shall be authenticated, executed on behalf of
the Holder and delivered upon transfer of, in exchange for or in lieu of any
Unit Certificates canceled as provided in this Section, except as expressly
permitted by this Agreement. All canceled Unit Certificates held by the Unit
Agent shall be disposed of as directed by Issuer Order.
If the Company or any Affiliate of the Company shall acquire any Unit
Certificate, such acquisition shall not operate as a cancellation of such Unit
Certificate unless and until such Unit Certificate is delivered to the Unit
Agent canceled or for cancellation.
SECTION 309. Substitution of Pledged Securities and Creation of Stripped
Units; Units Not Otherwise Separable.
(a) A Holder of Normal Units may obtain the release from the
Pledge of such Holder's Pledged Securities underlying such Normal Units, free
and clear of the Company's and the Call Option Holder's security interests
therein, and convert such Normal Units into Stripped Units (collectively, a
"Stripped Unit Creation") at any time after the original issuance of such Normal
Units and on or prior to the second Business Day immediately preceding the Stock
Purchase Date by:
(i) delivering to the Collateral Agent: (w) Treasury
Securities that through their scheduled payments will generate not
later than the Stock Purchase Date an amount of cash that is at least
equal to the aggregate Stated Amount of such Normal Units, (x) if any
Contract Fees are or will be payable by the Holders to the Company,
Treasury Securities that through their scheduled payments will generate
not later than each Quarterly Payment Date falling after the date on
which the requirements for such Stripped Unit Creation contained in
this Section 309(a) are satisfied and on or before
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<PAGE> 27
the Stock Purchase Date an amount of cash that is at least equal to the
aggregate Contract Fees that are scheduled to be payable in respect of
the Purchase Contracts underlying such Normal Units on such Quarterly
Payment Date (assuming for this purpose that no Contract Fees will then
have been deferred under Section 503); (y) if there are any deferred
Contract Fees payable by such Holder to the Company on the date on
which the requirements for such Stripped Unit Creation contained in
this Section 309(a) are satisfied, an amount of cash equal to (1) the
aggregate unpaid amount of such Contract Fees accrued to such date, if
such date is a Quarterly Payment Date, and (2) the aggregate unpaid
amount of such Contract Fees accrued to the Quarterly Payment Date
immediately preceding such date plus interest thereon at a rate per
annum equal to the Contract Fee Rate for the period from and including
such Quarterly Payment Date to but excluding such date (calculated on
the basis of a 360-day year of twelve 30-day months), if such date is
not a Quarterly Payment Date; and (z) if the Call Options underlying
such Normal Units remain exercisable on the date on which the
requirements contained in this Section 309(a) for such Stripped Unit
Creation are satisfied, an instrument from the Call Option Holder
releasing its security interest in the Pledged Securities securing such
Call Options and agreeing that such Call Options no longer underlie
such Normal Units (or the Stripped Units they become); and
(ii) surrendering the Unit Certificate evidencing such Normal
Units, with the form of Request to Create Stripped Units thereon duly
completed and executed, to the Unit Agent, whereupon the Unit Agent
shall promptly request the Collateral Agent to release the Pledged
Securities underlying such Normal Units;
provided, however, that if Treasury Securities are the Pledged Securities
underlying such Normal Units, a Stripped Unit Creation may only be effected with
respect to a number of Normal Units that will result in the release from the
Pledge of Treasury Securities in denominations of $1,000 or integral multiples
thereof.
(b) Upon receipt of the items described in clause (i) of Section
309(a) above and the request from the Unit Agent described in clause (ii) of
Section 309(a) above, the Collateral Agent will, in accordance with the terms of
the Pledge Agreement, release to the Unit Agent, on behalf of the Holder, from
the Pledge, free and clear of the Company's and the Call Option Holders's
security interests therein, the securities that theretofore had been the Pledged
Securities underlying such Normal Units, and upon receipt thereof the Unit Agent
shall promptly:
(i) cancel the Unit Certificate for such Normal Units;
(ii) transfer such released Pledged Securities to the Holder
or, subject to Section 305, the Holder's designee;
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(iii) authenticate, execute on behalf of such Holder and
deliver to the Holder or, subject to Section 305, the Holder's designee
a Unit Certificate executed by the Company in accordance with Section
303 evidencing a number of Stripped Units equal to the number of such
Normal Units.
Concurrently with the release of the securities that theretofore had been the
Pledged Securities underlying such Normal Units as contemplated by the preceding
sentence, the Treasury Securities delivered to the Collateral Agent as
contemplated by clause (i) of Section 309(a) above shall thereupon be
substituted for such securities as Pledged Securities underlying the Stripped
Units created from such Normal Units.
(c) Except for a Stripped Unit Creation effected in compliance
with this Section 309, for so long as the Purchase Contract underlying a Normal
Unit remains in effect such Normal Unit shall not be separable into its
constituent parts, and the rights and obligations of the Holder of such Normal
Unit in respect of the Pledged Securities, Purchase Contract and Call Option
underlying such Normal Unit may be acquired, and may be transferred and
exchanged, only as an integrated Normal Unit. For so long as the Purchase
Contract underlying a Stripped Unit remains in effect such Stripped Unit shall
not be separable into its constituent parts, and the rights and obligations of
the Holder of such Stripped Unit in respect of the Pledged Securities and
Purchase Contract underlying such Stripped Unit may be acquired, and may be
transferred and exchanged, only as an integrated Stripped Unit. Other than a
Unit Certificate, no Holder of a Unit, nor any transferee thereof, shall be
entitled to receive a certificate evidencing the ownership of Pledged Securities
or any other rights or obligations underlying such Unit for so long as the
Purchase Contract underlying such Unit remains in effect.
SECTION 310. Payments on the Units.
Contract Fees (if any) payable by the Company to the Holders, and all
amounts payable to Holders as required by Section 401 or 504(b), will be payable
at the office of the Unit Agent in The City of New York maintained for that
purpose or, at the option of the Company, by check mailed to the address of the
Person entitled thereto at such address as it appears on the relevant Unit
Register; provided, however, that for so long as any Units are evidenced by
Global Certificates, the Unit Agent will pay each such amount payable in respect
of such Units by wire transfer in same-day funds, no later than 2:00 p.m., New
York City time, on the Business Day such amount is received by the Unit Agent
(or, if such amount is received by the Unit Agent after 1:00 p.m., New York City
time, on a Business Day or on a day that is not a Business Day, no later than
10:00 a.m., New York City time, on the next succeeding Business Day), to the
Depositary, to the account or accounts designated by it for such purpose.
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ARTICLE FOUR
THE PLEDGED SECURITIES
SECTION 401. Payments on the Pledged Securities.
As provided by the terms of the Pledge Agreement, on each Quarterly
Payment Date, subject to receipt by the Collateral Agent of the relevant
payments in respect of the Pledged Securities underlying any Holder's Units, (a)
the Collateral Agent (i) shall, on behalf of such Holder, pay to the Company the
Contract Fees, if any, then payable by such Holder to the Company and (ii)
shall, subject to Section 504(b), remit to the Unit Agent the amount of such
payments remaining after the payment referred to in clause (i) and (b) the
amount referred to in clause (a)(ii) above shall, subject to receipt thereof by
the Unit Agent from the Collateral Agent, be paid to the Person in whose name
the Unit Certificate (or one or more Predecessor Unit Certificates) evidencing
such Units is registered at the close of business on the Record Date next
preceding such Quarterly Payment Date.
In addition, in the event that (a) the Call Options are exercised and
the Aggregate Consideration Deliverable on Exercise of the Call Options includes
a cash amount in respect of deferred distributions on the QUIPS or deferred
interest payments on the Junior Subordinated Debentures and (b) the Call
Settlement Date is not a Quarterly Payment Date, pursuant to the Pledge
Agreement the Collateral Agent shall, on behalf of the Holders of the Normal
Units, pay to the Company on the Call Settlement Date an amount equal to the
Contract Fees, if any, then payable by such Holders to the Company.
SECTION 402. Transfer of Pledged Securities Upon Occurrence of Termination
Event.
Upon the occurrence of a Termination Event and the transfer to the Unit
Agent of the Pledged Securities underlying each Holder's Units pursuant to the
terms of the Pledge Agreement, the Unit Agent shall request transfer
instructions with respect to such Pledged Securities from such Holder by written
request mailed to such Holder at his address as it appears in the relevant Unit
Register. Thereafter, upon surrender to the Unit Agent of a Unit Certificate
evidencing a Holder's Units, with transfer instructions in proper form for
transfer of the underlying Pledged Securities, the Unit Agent shall transfer the
Pledged Securities evidenced by such Unit Certificate to such Holder in
accordance with such instructions; provided, however, that if the Pledged
Securities are to be transferred to a Person other than the Person in whose name
such Unit Certificate is registered, no such transfer shall be made unless the
Person requesting the transfer has paid any transfer and other taxes required by
reason of such transfer to a Person other than the registered Holder of such
Unit Certificate or has established to the satisfaction of the Company that such
tax either has been paid or is not payable. Until the foregoing conditions to
transfer any of the Pledged Securities
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<PAGE> 30
underlying any Units has been met, the Unit Agent shall hold such Pledged
Securities as custodian for the Holder of such Units.
If upon a Termination Event any Holder of Units would, after satisfying
the foregoing conditions, otherwise be entitled to receive (or have transferred
to such Holder's designee) Treasury Securities of any series having a principal
amount that is not an integral multiple of $1,000, such Holder shall instead be
entitled to receive (or have transferred to such Holder's designee) Treasury
Securities of such series in a principal amount equal to the next lower integral
multiple of $1,000 plus a portion of the net proceeds from the sale of Treasury
Securities of such series contemplated by the succeeding sentence representing
such Holder's interest therein. As soon as practicable after transfer to the
Unit Agent of the Pledged Securities as provided in the Pledge Agreement, the
Unit Agent shall, on behalf of all Holders who, by virtue of the preceding
sentence, will not be entitled to a portion of the Treasury Securities of any
series to which they would otherwise be entitled aggregate and sell the Treasury
Securities of such series representing such portion to or through one or more
U.S. government securities dealers at then prevailing prices, deduct from the
proceeds of such sales all commissions and other out-of-pocket transaction costs
incurred in connection with such sales and, until the net proceeds therefrom
have been distributed to the Holders entitled thereto or their designees, hold
such proceeds in trust for such Holders.
ARTICLE FIVE
THE PURCHASE CONTRACTS
SECTION 501. Purchase of Shares of Common Stock.
Each Purchase Contract underlying a Unit shall obligate the Holder of
such Unit to purchase, and the Company to sell, on the Stock Purchase Date, at a
price equal to the Stated Amount, a number of shares of Common Stock equal to
the Settlement Rate, unless, on or prior to the Stock Purchase Date, there shall
have occurred a Termination Event. The "Settlement Rate" is equal to (a) if the
Applicable Market Value (as defined below) is greater than or equal to $_____
(the "Threshold Appreciation Price"), _______ of a share of Common Stock per
Purchase Contract, (b) if the Applicable Market Value is less than the Threshold
Appreciation Price but is greater than the Stated Amount, a fractional share of
Common Stock per Purchase Contract equal to the Stated Amount divided by the
Applicable Market Value (rounded upward or downward to the nearest 1/10,000th of
a share or, if there is not a nearest 1/10,000th of a share, to the next lower
1/10,000th of a share) and (c) if the Applicable Market Value is less than or
equal to the Stated Amount, one share of Common Stock per Purchase Contract, in
each case subject to adjustment as provided in Section 506. As provided in
Section 509, no fractional shares of Common Stock will be issued upon settlement
of Purchase Contracts.
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<PAGE> 31
The "Applicable Market Value" means the average of the Closing Prices
per share of Common Stock on each of the twenty consecutive Trading Days ending
on the last Trading Day immediately preceding the Stock Purchase Date. The
"Closing Price" of the Common Stock on any date of determination means the
closing sale price (or, if no closing price is reported, the last reported sale
price) of the Common Stock on the New York Stock Exchange (the "NYSE") on such
date or, if the Common Stock is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal United States
securities exchange on which the Common Stock is so listed, or if the Common
Stock is not so listed on a United States national or regional securities
exchange, as reported by The NASDAQ Stock Market, or, if the Common Stock is not
so reported, the last quoted bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or, if such bid price is not available, the market value of the
Common Stock on such date as determined by a nationally recognized investment
banking firm retained for this purpose by the Company. A "Trading Day" means a
day on which the Common Stock (A) is not suspended from trading on any national
or regional securities exchange or association or over-the-counter market at the
close of business and (B) has traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of the Common Stock.
Each Holder of a Unit Certificate evidencing Normal Units, by his
acceptance thereof, irrevocably authorizes the Unit Agent to enter into and
perform the underlying Purchase Contracts and Call Options on his behalf as his
attorney-in-fact, agrees to be bound by the terms and provisions thereof,
covenants and agrees to perform his obligations under such Purchase Contracts
and Call Options, consents to the provisions of the Principal Agreements,
irrevocably authorizes the Unit Agent to enter into and perform the Call Option
Agreement and the Pledge Agreement on his behalf as his attorney-in-fact, and
consents to and agrees to be bound by the Pledge of the Pledged Securities
underlying such Normal Units pursuant to the Pledge Agreement. Each Holder of a
Unit Certificate evidencing Stripped Units, by his acceptance thereof,
irrevocably authorizes the Unit Agent to enter into and perform the underlying
Purchase Contracts on his behalf as his attorney-in-fact, agrees to be bound by
the terms and provisions thereof, covenants and agrees to perform his
obligations under such Purchase Contracts, consents to the provisions of the
Principal Agreements, irrevocably authorizes the Unit Agent to perform the
Pledge Agreement on his behalf as his attorney-in-fact, and consents to and
agrees to be bound by the Pledge of the Pledged Securities underlying such
Stripped Units pursuant to the Pledge Agreement. Each Holder of Units, by his
acceptance thereof, further irrevocably covenants and agrees that, unless such
Holder satisfies its obligations to the Company under the Purchase Contracts
underlying such Units as provided in Section 504(a), then to the extent and in
the manner provided in Section 504(b) and the Pledge Agreement, but subject to
the terms thereof, payments in respect of all or a portion of the principal of
or proceeds from the Pledged Securities on the Stock Purchase Date shall be paid
by the Collateral Agent to the Company in satisfaction of
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<PAGE> 32
such Holder's obligations under such Purchase Contract and such Holder shall
acquire no right, title or interest in such payments.
Upon registration of transfer of a Unit Certificate, the transferee
shall be bound (without the necessity of any other action on the part of such
transferee) by the terms of the Purchase Contracts and any Call Options
evidenced thereby and by the Pledge Agreement and the transferor shall be
released from all such obligations evidenced by the Unit Certificate so
transferred. The Company covenants and agrees, and each Holder of a Unit
Certificate, by his acceptance thereof, likewise covenants and agrees, to be
bound by the provisions of this paragraph.
SECTION 502. Contract Fees.
Subject to Section 503, if any Contract Fees are or will be payable by
the Company to the Holders, the Company shall pay, prior to 2:00 p.m., New York
City time, on each Quarterly Payment Date to and including the Stock Purchase
Date, the Contract Fees payable in respect of each Purchase Contract to the
Person in whose name the Unit Certificate (or one or more Predecessor Unit
Certificates) evidencing such Purchase Contract is registered at the close of
business on the Record Date next preceding such Quarterly Payment Date. The
Company's obligations with respect to such Contract Fees [SUBORDINATION LANGUAGE
FROM INDENTURE TO BE INSERTED].
Subject to Section 503, if any Contract Fees are or will be payable by
the Holders to the Company, the Collateral Agent, on behalf of the Holders,
shall pay, on each Quarterly Payment Date to and including the Stock Purchase
Date, the Contract Fees payable in respect of each Purchase Contract to the
Company. Such payment will be funded out of payments received by the Collateral
Agent in respect of Pledged Securities.
Each Unit Certificate delivered under this Agreement upon registration
of transfer of, in exchange for or in lieu of any other Unit Certificate shall
carry the rights to receive and obligations to pay Contract Fees accrued and
unpaid, and to accrue, which were carried by the Purchase Contracts evidenced by
such other Unit Certificate.
SECTION 503. Deferral of Payment Dates For Contract Fee.
So long as no default in the Company's obligations under the Principal
Agreements has occurred and is continuing, the Company shall have the right, at
any time prior to the Stock Purchase Date, to defer the payment of any or all of
the Contract Fees, if any, otherwise payable by the Company on any Quarterly
Payment Date, but only if the Company shall give the Holders and the Unit Agent
written notice of its election to defer such payment (specifying the amount to
be deferred) at least five Business Days prior to the earlier of (a) the next
succeeding Quarterly Payment Date or (b) the date the Company is required to
give
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notice of the Record Date or Quarterly Payment Date with respect to payment of
such Contract Fee to the NYSE or other applicable self-regulatory organization
or to Holders, or (c) the Record Date for such Quarterly Payment Date. Any
Contract Fees so deferred shall bear additional Contract Fees thereon at a rate
per annum equal to the Contract Fee Rate (computed on the basis of a 360-day
year of twelve 30-day months), compounding on each succeeding Quarterly Payment
Date, until paid in full. Deferred Contract Fees (and additional Contract Fees
accrued thereon) shall be due on the next succeeding Quarterly Payment Date
except to the extent that payment is deferred pursuant to this Section. No
Contract Fees may be deferred to a date that is after the Stock Purchase Date.
In the event the Company exercises its option to defer the payment of
Contract Fees (if any) payable by it, then, until all deferred Contract Fees
(including additional Contract Fees accrued thereon) have been paid in full, the
Company shall not (a) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Company's capital stock, (b) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu with or junior in right of payment to the Contract
Fees or (c) make any guarantee payments with respect to any guarantee by the
Company of any securities of any subsidiary of the Company if such guarantee
ranks pari passu or junior in right of payment to the Contract Fees (other than,
in the case of clauses (a), (b) and (c), (i) dividends or distributions in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, common stock of the Company, (ii) any declaration of a dividend in
connection with the implementation of a stockholder's rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (iii) payments under the
Company's guarantee of the QUIPS, (iv) as a result of a reclassification of the
Company's capital stock solely into shares of one or more classes or series of
the Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock, (v) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the securities being converted or exchanged and (vi)
purchases of common stock in connection with the satisfaction by the Company of
its obligations under any of the Company's benefit plans for its and its
subsidiaries' directors, officers or employees or any of the company's dividend
reinvestment plans).
If any Contract Fees are payable by a Holder to the Company and
payments made in respect of Pledged Securities underlying such Holder's Units
are insufficient to cover such Holder's obligation to pay such Contract Fees,
such obligation shall be deferred until the earlier of the date sufficient cash
is available and the Stock Purchase Date. Any such Contract Fees so deferred
shall bear additional Contract Fees thereon at a rate per annum equal to the
Contract Fee Rate (computed on the basis of a 360-day year of twelve 30-day
months), compounding on each succeeding Quarterly Payment Date, until paid in
full.
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<PAGE> 34
SECTION 504. Payment of Purchase Price.
(a) A Holder of Units shall, by no later than 10:00 a.m., New York City
time, on the Stock Purchase Date, deliver to the Unit Agent payment of the
purchase price for the shares of Common Stock to be purchased pursuant to the
Purchase Contracts underlying such Units, which payment shall be made in lawful
money of the United States by certified or cashier's check payable to the order
of the Company in immediately available funds in an amount equal to the
aggregate Stated Amount of such Holder's Units, plus, if there are unpaid
Contract Fees accrued and payable by such Holder to the Company on the Stock
Purchase Date and the cash received by the Collateral Agent on such date in
respect of the Pledged Securities underlying such Units is less than the amount
of such unpaid Contract Fees, an amount sufficient to cover such shortfall.
By 11:00 a.m., New York City time, on the Stock Purchase Date, the Unit
Agent shall (i) transfer to the Company all of the payments the Company shall
have received as contemplated by the preceding sentence, (ii) notify the
Collateral Agent and the Company as to the number of Normal Units and the number
of Stripped Units, respectively, with respect to which payment has been received
as aforesaid (such Units being collectively referred to as "Paid Units") and the
number of Normal Units and the number of Stripped Units, respectively, with
respect to which payment has not been received as aforesaid (such Units being
collectively referred to as "Unpaid Units"), and (iii) request the Collateral
Agent to release the Pledged Securities underlying the Paid Units (or, in the
case of Treasury Securities, the cash payments received thereon) from the Pledge
to the Unit Agent (for delivery to the Holders of such Units entitled thereto),
free and clear of the Company's security interest therein.
By 1:00 p.m., New York City time, on the Stock Purchase Date, the
Collateral Agent shall, as provided by the terms of the Pledge Agreement, comply
with the request referred to in clause (iii) of the preceding sentence (subject
to the Company's right to prevent the Collateral Agent from doing so to the
extent the aggregate amount the Company has received as contemplated by clause
(i) of the preceding sentence is less than the aggregate amount payable with
respect to the Units referred to in such request). The Unit Agent shall
thereupon, subject to its receipt from the Collateral Agent of the Pledged
Securities (or cash) referred to in such request and subject to Section 305,
transfer such released Pledged Securities (or cash) to the respective Holders
entitled thereto in accordance with the settlement instructions specified in the
form of Settlement Instructions appearing on the Unit Certificates evidencing
the Paid Units; provided, however, that if any such Unit Certificate is not
surrendered to the Unit Agent with the form of Settlement Instructions thereon
duly completed and executed, the Unit Agent shall hold such Pledged Securities
(or cash), and any distributions or interest received on such Pledged
Securities, as custodian for the Holder entitled thereto, to be delivered to
such Holder (without any interest thereon and subject to
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Section 305) upon surrender of such Unit Certificate to the Unit Agent (with the
form of Settlement Instructions thereon duly completed and executed).
(b) With respect to each Holder's Unpaid Units, pursuant to the
terms of the Pledge Agreement,
(i) (x) if QUIPS underlie such Unpaid Units, the
Collateral Agent, on behalf of such Holder, shall exercise such
Holder's right under the Declaration to require the Trust to distribute
Junior Subordinated Debentures having an aggregate principal amount
equal to the aggregate liquidation amount of such QUIPS, in exchange
for such QUIPS, and, upon receiving such Junior Subordinated
Debentures, shall thereupon, as Put Agent, exercise the Junior
Subordinated Debenture Put Option with respect thereto and (y) if
Junior Subordinated Debentures underlie such Unpaid Units, the
Collateral Agent, on behalf of such Holder, shall, as Put Agent,
exercise the Junior Subordinated Debenture Put Option with respect
thereto;
(ii) the Collateral Agent shall deliver to the Company,
out of the proceeds from the exercise of such Junior Subordinated
Debenture Put Option or, if Treasury Securities underlie such Unpaid
Units, the proceeds from the payment of such Treasury Securities at
maturity, an amount equal to the aggregate Stated Amount of such Unpaid
Units plus the Unpaid Contract Fees, if any, payable by such Holder to
the Company in respect of such Unpaid Units to satisfy in full such
Holder's obligations under such Unpaid Units; and
(iii) the Collateral Agent shall remit to the Unit Agent,
on behalf of such Holder, the remainder of the proceeds, if any, from
the Pledged Securities underlying such Unpaid Units for distribution to
such Holder.
The amount referred to in clause (iii) above shall, subject to receipt thereof
by the Unit Agent from the Collateral Agent, be paid to the Person in whose name
the Unit Certificate (or one or more Predecessor Unit Certificates) evidencing
such Unpaid Units is registered at the close of Business on the Record Date next
preceding the Stock Purchase Date.
(c) Each Holder will be entitled to apply any unpaid amounts owing
by the Company to such Holder as a set-off to reduce, dollar-for-dollar, any
amounts then owing by such Holder to the Company in respect of such Holder's
Units, and such set-off amounts will be treated for all purposes as having been
paid in full by such Holder as required hereby.
(d) The Company shall not be obligated to issue any shares of
Common Stock in respect of a Purchase Contract or deliver any certificates
therefor to the Holder of the related Unit unless the Company shall have
received payment in full of the aggregate purchase price
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<PAGE> 36
for the shares of Common Stock to be purchased thereunder in the manner herein
set forth (either directly or by operation of set-off as contemplated by the
preceding sentence).
SECTION 505. Issuance of Shares of Common Stock.
On the Stock Purchase Date, upon receipt by the Company of payment in
full of the aggregate purchase price for the shares of Common Stock purchased by
the Holders pursuant to the foregoing provisions of this Article, and subject to
Section 506(b), the Company shall deposit with the Unit Agent, for the benefit
of the Holders of the Units, one or more certificates representing the shares of
Common Stock registered in the name of the Unit Agent (or its nominee) as
custodian for the Holders (such certificates for shares of Common Stock,
together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Purchase Contract Settlement Fund") to which the
Holders are entitled hereunder. Subject to the foregoing, upon surrender of a
Unit Certificate to the Unit Agent on or after the Stock Purchase Date, with the
form of Settlement Instructions thereon duly completed and executed, the Holder
of such Unit Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Common Stock which such
Holder is entitled to receive pursuant to the provisions of this Article Five
(after taking into account all Units then held by such Holder) together with
cash in lieu of fractional shares as provided in Section 509 and any dividends
or distributions with respect to such shares constituting part of the Purchase
Contract Settlement Fund, but without any interest thereon, and the Unit
Certificate so surrendered shall forthwith be cancelled. Such shares shall be
registered in the name of the Holder or the Holder's designee as specified in
the form of Settlement Instructions appearing on the surrendered Unit
Certificate.
If any shares of Common Stock issued in respect of a Purchase Contract
are to be registered to a Person other than the Person in whose name the Unit
Certificate evidencing such Purchase Contract is registered, no such
registration shall be made unless the Person requesting such registration has
paid any transfer and other taxes required by reason of such registration in a
name other than that of the registered Holder of the Unit Certificate
evidencing such Purchase Contract or has established to the satisfaction of the
Company that such tax either has been paid or is not payable.
SECTION 506. Adjustment of Settlement Rate.
(a) Adjustments for Dividends, Distributions, Stock Splits, Etc.
(1) In case the Company shall pay or make a dividend or other
distribution on any class of Common Stock of the Company in Common Stock, the
Settlement Rate in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be increased by dividing such Settlement
Rate by a fraction of which the numerator shall be the number of
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shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after the opening of
business on the day following the date fixed for such determination. For the
purposes of this paragraph (1), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not pay any dividend or
make any distribution on shares of Common Stock held in the treasury of the
Company.
(2) In case the Company shall issue rights, options or warrants to all
holders of its Common Stock (not being available on an equivalent basis to
Holders of the Units upon settlement of the Purchase Contracts underlying such
Units) entitling them, for a period expiring within 45 days after the record
date for the determination of stockholders entitled to receive such rights,
options or warrants, to subscribe for or purchase shares of Common Stock at a
price per share less than the Current Market Price per share of the Common Stock
on the date fixed for the determination of stockholders entitled to receive such
rights, options or warrants (other than pursuant to a dividend reinvestment
plan), the Settlement Rate in effect at the opening of business on the day
following the date fixed for such determination shall be increased by dividing
such Settlement Rate by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such Current Market Price
and the denominator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination plus the number
of shares of Common Stock so offered for subscription or purchase, such increase
to become effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of this
paragraph (2), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company but shall include
shares issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. The Company shall not issue any such rights, options or
warrants in respect of shares of Common Stock held in the treasury of the
Company.
(3) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Settlement Rate in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the Settlement Rate in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately reduced, such increase or reduction, as the
case
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may be, to become effective immediately after the opening of business on the day
following the day upon which such subdivision or combination becomes effective.
(4) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock evidences of its indebtedness or assets
(including securities, but excluding any rights or warrants referred to in
paragraph (2) of this Section, any dividend or distribution paid exclusively in
cash and any dividend or distribution referred to in paragraph (1) of this
Section), the Settlement Rate shall be adjusted so that the same shall equal the
rate determined by dividing the Settlement Rate in effect immediately prior to
the close of business on the date fixed for the determination of stockholders
entitled to receive such distribution by a fraction of which the numerator shall
be the Current Market Price per share of the Common Stock on the date fixed for
such determination less the then fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and described in a Board
Resolution filed with the Unit Agent) of the portion of the assets or evidences
of indebtedness so distributed applicable to one share of Common Stock and the
denominator shall all be such Current Market Price per share of the Common
Stock, such adjustment to become effective immediately prior to the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such distribution. In any case in which this
paragraph (4) is applicable, paragraph (2) of this Section shall not be
applicable.
(5) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding any cash that is distributed in
a Reorganization Event to which Section 506(b) applies or as part of a
distribution referred to in paragraph (4) of this Section) in an aggregate
amount that, combined together with (I) the aggregate amount of any other
distributions to all holders of its Common Stock made exclusively in cash within
the 12 months preceding the date of payment of such distribution and in respect
of which no adjustment pursuant to this paragraph (5) or paragraph (6) of this
Section has been made and (II) the aggregate of any cash plus the fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), as of the expiration of such
tender or exchange offer, of consideration payable in respect of any tender or
exchange offer by the Company or any of its subsidiaries for all or any portion
of the Common Stock expiring within the 12 months preceding the date of payment
of such distribution and in respect of which no adjustment pursuant to this
paragraph (5) or paragraph (6) of this Section has been made, exceeds 12.5% of
the product of the Current Market Price per share of the Common Stock on the
date for the determination of holders of shares of Common Stock entitled to
receive such distribution times the number of shares of Common Stock outstanding
on such date, then, and in each such case, immediately after the close of
business on such date for determination, the Settlement Rate shall be increased
so that the same shall equal the rate determined by dividing the Settlement Rate
in effect immediately prior to the close of business on the date fixed for
determination of the stockholders entitled to receive such distribution by a
fraction (i) the numerator of which shall be equal to the
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Current Market Price per share of the Common Stock on the date fixed for such
determination less an amount equal to the quotient of (x) the excess of such
combined amount over such 12.5% and (y) the number of shares of Common Stock
outstanding on such date for determination and (ii) the denominator of which
shall be equal to the Current Market Price per share of the Common Stock on such
date for determination.
(6) In case a tender or exchange offer made by the Company or any
subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders (based on the acceptance (up
to any maximum specified in the terms of the tender or exchange offer) of
Purchased Shares) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) that, combined together with (I) the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution), as of the expiration of such tender or exchange offer, of
consideration payable in respect of any other tender or exchange offer by the
Company or any of its subsidiaries for all or any portion of the Common Stock
expiring within the 12 months preceding the expiration of such tender or
exchange offer and in respect of which no adjustment pursuant to paragraph (5)
of this Section or this paragraph (6) has been made and (II) the aggregate
amount of any distributions to all holders of the Company's Common Stock made
exclusively in cash within 12 months preceding the expiration of such tender or
exchange offer and in respect of which no adjustment pursuant to paragraph (5)
of this Section or this paragraph (6) has been made, exceeds 12.5% of the
product of the Current Market Price per share of the Common Stock as of the last
time (the "Expiration Time") tenders could have been made pursuant to such
tender or exchange offer (as it may be amended) times the number of shares of
Common Stock outstanding (including any tendered shares) on the Expiration Time,
then, and in each such case, immediately prior to the opening of business on the
day after the date of the Expiration Time, the Settlement Rate shall be adjusted
so that the same shall equal the rate determined by dividing the Settlement Rate
immediately prior to the close of business on the date of the Expiration Time by
a fraction (i) the numerator of which shall be equal to (A) the product of (I)
the Current Market Price per share of the Common Stock on the date of the
Expiration Time and (II) the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time less (B) the amount of
cash plus the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of Purchased Shares, and
(ii) the denominator of which shall be equal to the product of (A) the Current
Market Price per share of the Common Stock as of the Expiration Time and (B) the
number of shares of Common Stock outstanding (including any tendered shares) as
of the Expiration Time less the number of all shares validly tendered and not
withdrawn as of the Expiration Time (the shares deemed so accepted, up to any
such maximum, being referred to as the "Purchased Shares").
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(7) The reclassification of Common Stock into securities including
securities other than Common Stock (other than any reclassification upon a
Reorganization Event to which Section 506(b) applies) shall be deemed to involve
(i) a distribution of such securities other than Common Stock to all holders of
Common Stock (and the effective date of such reclassification shall be deemed to
be "the date fixed for the determination of stockholders entitled to receive
such distribution" and the "date fixed for such determination" within the
meaning of paragraph (4) of this Section), and (ii) a subdivision or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of shares
of Common Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (3) of this Section).
(8) The "Current Market Price" per share of Common Stock on any day
means the average of the daily Closing Prices for the 5 consecutive Trading Days
selected by the Company commencing not more than 20 Trading Days before, and
ending not later than, the earlier of the day in question and the day before the
"ex" date with respect to the issuance or distribution requiring such
computation. For purposes of this paragraph, the term " 'ex' date", when used
with respect to any issuance or distribution, shall mean the first date on which
the Common Stock trades regular way on such exchange or in such market without
the right to receive such issuance or distribution.
(9) All adjustments to the Settlement Rate shall be calculated to the
nearest 1/10,000th of a share of Common Stock (or, if there is not a nearest
1/10,000th of a share, to the next lower 1/10,000th of a share). No adjustment
in the Settlement Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however, that
any adjustments which by reason of this subparagraph are not required to be made
shall be carried forward and taken into account in any subsequent adjustment. If
an adjustment is made to the Settlement Rate pursuant to paragraph (1), (2),
(3), (4), (5), (6), (7) or (10) of this Section 506(a), an adjustment shall also
be made to the Applicable Market Value solely to determine which of clauses (a),
(b) or (c) of the definition of Settlement Rate in Section 501 will apply on the
Stock Purchase Date. Such adjustment shall be made by multiplying the Applicable
Market Value by a fraction of which the numerator shall be the Settlement Rate
immediately after such adjustment pursuant to paragraph (1), (2), (3), (4),
(5), (6), (7) or (10) of this Section 506(a) and the denominator shall be the
Settlement Rate immediately before such adjustment.
(10) The Company may make such increases in the Settlement Rate, in
addition to those required by this Section, as it considers to be advisable in
order to avoid or diminish any income tax to any holders of shares of Common
Stock resulting from any dividend or
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distribution of stock or issuance of rights or warrants to purchase or subscribe
for stock or from any event treated as such for income tax purposes or for any
other reasons.
(b) Adjustment for Consolidation, Merger or Other Reorganization Event.
In the event of (i) any consolidation or merger of the Company with or into
another Person (other than a merger or consolidation in which the Company is the
continuing corporation and in which the Common Stock outstanding immediately
prior to the merger or consolidation is not exchanged for cash, securities or
other property of the Company or another corporation), (ii) any sale, transfer,
lease or conveyance to another Person of the property of the Company as an
entirety or substantially as an entirety, (iii) any statutory exchange of
securities of the Company with another Person (other than in connection with a
merger or acquisition) or (iv) any liquidation, dissolution or winding up of the
Company (any such event, a "Reorganization Event"), the Settlement Rate will be
adjusted to provide that each Holder of Units will receive on the Stock Purchase
Date with respect to each Purchase Contract forming a part thereof, the kind and
amount of securities, cash and other property receivable upon such
Reorganization Event by a Holder of the number of shares of Common Stock
issuable on account of each Purchase Contract if the Stock Purchase Date had
occurred immediately prior to such Reorganization Event, assuming such Holder of
Common Stock is not a Person with which the Company consolidated or into which
the Company merged or which merged into the Company or to which such sale or
transfer was made, as the case may be ("constituent Person"), or an Affiliate of
a constituent Person, and failed to exercise his rights of election, if any, as
to the kind or amount of securities, cash and other property receivable upon
such Reorganization Event (provided that if the kind or amount of securities,
cash and other property receivable upon such Reorganization Event is not the
same for each share of Common Stock held immediately prior to such
Reorganization Event by other than a constituent Person or an Affiliate thereof
and in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this Section the kind and amount
of securities, cash and other property receivable upon such Reorganization Event
by each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). In the event of
such a Reorganization Event, the Person formed by such consolidation, merger or
exchange or the Person which acquires the assets of the Company or, in the event
of a liquidation or dissolution of the Company, the Company or a liquidating
trust created in connection therewith, shall execute and deliver to the Unit
Agent an agreement supplemental hereto providing that the Holders of each
Outstanding Unit shall have the rights provided by this Section 506. Such
supplemental agreement shall provide for adjustments which, for events
subsequent to the effective date of such supplemental agreement, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section. The above provisions of this Section shall similarly apply to
successive Reorganization Events.
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SECTION 507. Notice of Adjustments and Certain Other Events.
(a) Whenever the Settlement Rate is adjusted as herein provided,
the Company shall:
(i) forthwith compute the adjusted Settlement Rate in
accordance with Section 506 and prepare and transmit to the Unit Agent
an Officers' Certificate setting forth the Settlement Rate, the method
of calculation thereof in reasonable detail, and the facts requiring
such adjustment and upon which such adjustment is based; and
(ii) within 10 Business Days following the occurrence of an
event that permits or requires an adjustment to the Settlement Rate
pursuant to Section 506 (or if the Company is not aware of such
occurrence, as soon as practicable after becoming so aware), provide a
written notice to the Holders of the Units of the occurrence of such
event and a statement in reasonable detail setting forth the method by
which the adjustment to the Settlement Rate was determined and setting
forth the adjusted Settlement Rate.
(b) The Unit Agent shall not at any time be under any duty or
responsibility to any holder of Units to determine whether any facts exist which
may require any adjustment of the Settlement Rate, or with respect to the nature
or extent or calculation of any such adjustment when made, or with respect to
the method employed in making the same. The Unit Agent shall not be accountable
with respect to the validity or value (or the kind or amount) of any shares of
Common Stock, or of any securities or property, which may at the time be issued
or delivered with respect to any Purchase Contract; and the Unit Agent makes no
representation with respect thereto. The Unit Agent shall not be responsible for
any failure of the Company to issue, transfer or deliver any shares of Common
Stock pursuant to a Purchase Contract or to comply with any of the duties,
responsibilities or covenants of the Company contained in this Article.
SECTION 508. No Fractional Shares.
No fractional shares or scrip representing fractional shares of Common
Stock shall be issued or delivered upon settlement on the Stock Purchase Date.
If Unit Certificates evidencing more than one Purchase Contract shall be
surrendered for settlement at one time by the same Holder, the number of full
shares of Common Stock which shall be delivered upon settlement shall be
computed on the basis of the aggregate number of Purchase Contracts evidenced by
the Unit Certificates so surrendered. Instead of any fractional share of Common
Stock which would otherwise be deliverable upon settlement of any Purchase
Contracts on the Stock Purchase Date, the Company, through the Unit Agent, shall
make a cash payment in respect of such fractional interest in an amount equal to
such fraction times
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the Applicable Market Value. The Company shall provide the Unit Agent from time
to time with sufficient funds to permit the Unit Agent to make all cash payments
required by this Section 508 in a timely manner.
SECTION 509. Charges and Taxes.
The Company will pay all stock transfer and similar taxes attributable
to the initial issuance and delivery of the shares of Common Stock pursuant to
the Purchase Contracts; provided, however, that the Company shall not be
required to pay any such tax or taxes which may be payable in respect of any
exchange of or substitution for a Unit Certificate evidencing a Purchase
Contract or any issuance of a share of Common Stock in a name other than that of
the registered Holder of a Unit Certificate surrendered in respect of the
Purchase Contracts evidenced thereby, other than in the name of the Unit Agent,
as custodian for such Holder, and the Company shall not be required to issue or
deliver such share certificates or Unit Certificates unless or until the Person
or Persons requesting the transfer or issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
SECTION 510. Termination Event; Notice.
The Purchase Contracts and the obligations and rights of the Company
and the Holders thereunder, including, without limitation, all obligations and
rights to pay or receive any accrued or deferred Contract Fees or to settle such
Purchase Contracts pursuant to this Article Five, shall immediately and
automatically terminate, without the necessity of any notice or action by any
Holder, the Unit Agent or the Company, if, on or prior to the Stock Purchase
Date, a Termination Event shall have occurred. Upon the occurrence of a
Termination Event, the Company shall give written notice to the Unit Agent, the
Collateral Agent and the Holders, at their addresses as they appear in the Unit
Registers. Upon and after the occurrence of a Termination Event, the provisions
of this Article Five (other than this Section 510) shall automatically terminate
and be of no further force or effect, and the Unit Certificates shall thereafter
represent only the right to receive the Pledged Securities forming a part of the
Units theretofore evidenced thereby in accordance with the provisions of Section
402 and the Pledge Agreement.
ARTICLE SIX
REMEDIES
SECTION 601. Unconditional Rights of Holders.
Notwithstanding any other provision in this Agreement, the Holder of
any Unit shall have the right, which is absolute and unconditional, to purchase
Common Stock pursuant to
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the Purchase Contract underlying such Unit and to receive payment of Contract
Fees, if any, payable by the Company to such Holder with respect to such
Purchase Contract and, in each such case, to institute suit for the enforcement
of any such right, and such rights shall not be impaired without the consent of
such Holder.
SECTION 602. Restoration of Rights and Remedies.
If any Holder of Units has instituted any proceeding to enforce any
right or remedy under this Agreement and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to such Holder,
then and in every such case, subject to any determination in such proceeding,
the Company and such Holder shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of such
Holder shall continue as though no such proceeding had been instituted.
SECTION 603. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement of
mutilated, destroyed, lost or stolen Unit Certificates in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Holders
of Units is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 604. Delay or Omission Not Waiver.
No delay or omission of any Holder to exercise any right or remedy
shall impair any such right or remedy or constitute a waiver of any such right.
Every right and remedy given by this Article or by law to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by such
Holders.
SECTION 605. Undertaking for Costs.
All parties to this Agreement agree, and each Holder of any Unit by his
acceptance of the Unit Certificate evidencing such Unit shall be deemed to have
agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Agreement, or in any suit against
the Unit Agent for any action taken, suffered or omitted by it as Unit Agent,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; provided that the
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provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Unit Agent, to any suit instituted by any
Holder of Units, or group of Holders, holding in the aggregate more than 10% of
the Outstanding Units, or to any suit instituted by any Holder of Units for the
enforcement of payments due in respect of Pledged Securities or Contract Fees on
Purchase Contracts underlying such Units on or after the respective due dates
therefor, or for enforcement of the right to purchase shares of Common Stock
under the Purchase Contracts constituting a part of such Units.
SECTION 606. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Agreement; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Unit Agent or the Holders, but will suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE SEVEN
THE UNIT AGENT
SECTION 701. Certain Duties and Responsibilities.
(a)(i) The Unit Agent undertakes to perform, with respect to
the Units, such duties and only such duties as are specifically set
forth in this Agreement, and no implied covenants or obligations shall
be read into this Agreement against the Unit Agent; and
(ii) in the absence of bad faith or negligence on its part,
the Unit Agent may, with respect to the Units, conclusively rely, as to
the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Unit
Agent and conforming to the requirements of this Agreement, but in the
case of any certificates or opinions which by any provision hereof are
specifically required to be furnished to the Unit Agent, the Unit Agent
shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Agreement.
(b) No provision of this Agreement shall be construed to relieve
the Unit Agent from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that
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(i) this Subsection shall not be construed to limit the
effect of Subsection (a) of this Section;
(ii) the Unit Agent shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it shall
be proved that the Unit Agent was negligent in ascertaining the
pertinent facts; and
(iii) no provision of this Agreement shall require the Unit
Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(c) Whether or not therein expressly so provided, every provision
of this Agreement relating to the conduct or affecting the liability of or
affording protection to the Unit Agent shall be subject to the provisions of
this Section.
SECTION 702. Notice of Default.
Within 90 days after the occurrence of any default by the Company
hereunder, of which a Responsible Officer of the Unit Agent has actual
knowledge, the Unit Agent shall transmit by mail to all Holders of Units, as
their names and addresses appear in the Unit Registers, notice of such default
hereunder, unless such default shall have been cured or waived.
SECTION 703. Certain Rights of Unit Agent.
Subject to the provisions of Section 701:
(a) the Unit Agent may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by an Officers' Certificate, Issuer
Order or Issuer Request, and any resolution of the Board of Directors
of the Company may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Agreement the Unit
Agent shall deem it desirable that a matter be proved or established
prior to taking, suffering or
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omitting any action hereunder, the Unit Agent (unless other evidence be
herein specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate of the Company;
(d) the Unit Agent may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Unit Agent shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Unit Agent, in its
discretion, may make reasonable further inquiry or investigation into
such facts or matters related to the issuance of the Units and the
execution, delivery and performance of the Purchase Contracts as it may
see fit, and, if the Unit Agent shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and promises of the Company, personally or by agent or
attorney; and
(f) the Unit Agent may execute any of its powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Unit Agent shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder.
SECTION 704. Not Responsible for Recitals or Issuance of Units.
The recitals contained herein and in the Unit Certificates shall be
taken as the statements of the Company and the Unit Agent assumes no
responsibility for their correctness. The Unit Agent makes no representations as
to the validity or sufficiency of this Agreement or of the Units. The Unit Agent
shall not be accountable for the use or application by the Company of the
proceeds in respect of the QUIPS or Purchase Contracts.
SECTION 705. May Hold Units.
Any Unit Registrar or any other agent of the Company, or the Unit
Agent, in its individual or any other capacity, may become the owner or pledgee
of Units and may otherwise deal with the Company with the same rights it would
have if it were not Unit Registrar or such other agent, or the Unit Agent.
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SECTION 706. Money Held in Trust.
Money held by the Unit Agent in trust hereunder need not be segregated
from the other funds except to the extent required by law. The Unit Agent shall
be under no obligation to invest or pay interest on any money received by it
hereunder except as otherwise agreed with the Company.
SECTION 707. Compensation and Reimbursement.
The Company agrees:
(i) to pay to the Unit Agent from time to time reasonable
compensation for all services rendered by it hereunder;
(ii) except as otherwise expressly provided herein, to
reimburse the Unit Agent upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Unit Agent in
accordance with any provision of this Agreement (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(iii) to indemnify the Unit Agent and any predecessor Unit
Agent for, and to hold each of them harmless against, any loss,
liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or
administration of its duties hereunder, including the costs and
expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
SECTION 708. Corporate Unit Agent Required; Eligibility.
There shall at all times be an Unit Agent hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000, subject to supervision or examination by Federal or
State authority and having its Corporate Trust Office in the Borough of
Manhattan, The City of New York, if there be such a corporation in the Borough
of Manhattan, The City of New York qualified and eligible under this Article and
willing to act on reasonable terms. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Unit Agent shall cease to be eligible in
accordance
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with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 709. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Unit Agent and no appointment
of a successor Unit Agent pursuant to this Article shall become effective until
the acceptance of appointment by the successor Unit Agent in accordance with the
applicable requirements of Section 710.
(b) The Unit Agent may resign at any time by giving written notice
thereof to the Company 60 days prior to the effective date of such resignation.
If the instrument of acceptance by a successor Unit Agent required by Section
710 shall not have been delivered to the Unit Agent within 30 days after the
giving of such notice of resignation, the resigning Unit Agent may petition any
court of competent jurisdiction for the appointment of a successor Unit Agent.
(c) The Unit Agent may be removed at any time by Act of the
Holders of a majority in number of the Outstanding Units delivered to the Unit
Agent and the Company.
(d) If at any time
(i) the Unit Agent fails to comply with Section 310(b) of
the TIA, as if the Unit Agent were an indenture trustee under an
indenture qualified under the TIA, after written request therefor by
the Company or by any Holder who has been a bona fide Holder of a Unit
for at least six months, or
(ii) the Unit Agent shall cease to be eligible under
Section 708 and shall fail to resign after written request therefor by
the Company or by any such Holder, or
(iii) the Unit Agent shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Unit
Agent or of its property shall be appointed or any public officer shall
take charge or control of the Unit Agent or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (x) the Company by a Board Resolution may remove the
Unit Agent, or (y) any Holder who has been a bona fide Holder of a Unit for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Unit Agent
and the appointment of a successor Unit Agent.
(e) If the Unit Agent shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Unit Agent for any
cause, the Company, by a Board
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Resolution, shall promptly appoint a successor Unit Agent and shall comply with
the applicable requirements of Section 710. If no successor Unit Agent shall
have been so appointed by the Company and accepted appointment in the manner
required by Section 710, any Holder who has been a bona fide Holder of a Unit
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Unit Agent.
(f) The Company shall give, or shall cause such successor Unit Agent to
give, notice of each resignation and each removal of the Unit Agent and each
appointment of a successor Unit Agent by mailing written notice of such event by
first-class mail, postage prepaid, to all Holders of Units as their names and
addresses appear in the Unit Registers. Each notice shall include the name of
the successor Unit Agent and the address of its Corporate Trust Office.
SECTION 710. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Unit Agent,
every such successor Unit Agent so appointed shall execute, acknowledge and
deliver to the Company and to the retiring Unit Agent an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring Unit
Agent shall become effective and such successor Unit Agent, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
agencies and duties of the retiring Unit Agent; but, on the request of the
Company or the successor Unit Agent, such retiring Unit Agent shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Unit Agent all the rights, powers and trusts of the retiring Unit
Agent and shall duly assign, transfer and deliver to such successor Unit Agent
all property and money held by such retiring Unit Agent hereunder.
(b) Upon request of any such successor Unit Agent, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Unit Agent all such rights, powers and agencies
referred to in paragraph (a) of this Section.
(c) No successor Unit Agent shall accept its appointment unless at the
time of such acceptance such successor Unit Agent shall be qualified and
eligible under this Article.
SECTION 711. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Unit Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Unit Agent shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Unit Agent, shall be the successor of the
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Unit Agent hereunder, provided such corporation shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Unit
Certificates shall have been authenticated and executed on behalf of the
Holders, but not delivered, by the Unit Agent then in office, any successor by
merger, conversion or consolidation to such Unit Agent may adopt such
authentication and execution and deliver the Unit Certificates so authenticated
and executed with the same effect as if such successor Unit Agent had itself
authenticated and executed such Units.
SECTION 712. Preservation of Information; Communications to Holders.
(a) The Unit Agent shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders received by the Unit
Agent in its capacity as Unit Registrar.
(b) If three or more Holders (herein referred to as "applicants") apply
in writing to the Unit Agent, and furnish to the Unit Agent reasonable proof
that each such applicant has owned a Unit for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders with respect to their rights
under this Agreement or under the Units and is accompanied by a copy of the form
of proxy or other communication which such applicants propose to transmit, then
the Unit Agent shall, within five Business Days after the receipt of such
application, afford such applicants access to the information preserved at the
time by the Unit Agent in accordance with Section 712(a).
(c) Every Holder of Units, by receiving and holding the Unit
Certificates evidencing the same, agrees with the Company and the Unit Agent
that none of the Company, the Unit Agent nor any agent of any of them shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the Holders in accordance with Section 712(b), regardless
of the source from which such information was derived.
SECTION 713. No Obligations of Unit Agent.
Except to the extent otherwise provided in this Agreement, the Unit
Agent assumes no obligations and shall not be subject to any liability under
this Agreement or any Purchase Contract or Call Option in respect of the
obligations of the Holder of any Unit thereunder. The Company agrees, and each
Holder of a Unit Certificate, by his acceptance thereof, shall be deemed to have
agreed, that the Agent's execution of the Unit Certificates on behalf of the
Holders shall be solely as agent and attorney-in-fact for the Holders, and that
the Unit Agent shall have no obligation to perform such Purchase Contracts or
Call Options on behalf of the Holders, except to the extent expressly provided
in Article Five hereof.
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SECTION 714. Tax Compliance.
(a) The Unit Agent, on its own behalf and on behalf of the
Company, will comply with all applicable certification, information reporting
and withholding (including "backup" withholding) requirements imposed by
applicable tax laws, regulations or administrative practice with respect to (i)
any payments made with respect to the Units or (ii) the issuance, delivery,
holding, transfer, redemption or exercise of rights under the Units. Such
compliance shall include, without limitation, the preparation and timely filing
of required returns and the timely payment of all amounts required to be
withheld to the appropriate taxing authority or its designated agent.
(b) The Unit Agent shall comply with any direction received from
the Company with respect to the application of such requirements to particular
payments or Holders or in other particular circumstances, and may for purposes
of this Agreement rely on any such direction in accordance with the provisions
of Section 701(a)(ii) hereof.
(c) The Unit Agent shall maintain all appropriate records
documenting compliance with such requirements, and shall make such records
available, on written request, to the Company or to its authorized
representative within a reasonable period of time after receipt of such request.
ARTICLE EIGHT
SUPPLEMENTAL AGREEMENTS
SECTION 801. Supplemental Agreements Without Consent of Holders.
Without the consent of any Holders, the parties to any Principal
Agreement, at any time and from time to time, may enter into one or more
agreements supplemental hereto or thereto, in form satisfactory to such parties,
for any of the following purposes:
(1) to evidence the succession of another Person to any such
party, and the assumption by any such successor of the covenants of
such party herein or therein and under the Units; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company; or
(3) to evidence and provide for the acceptance of appointment
hereunder by a successor Unit Agent; or
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(4) to evidence the succession of another Person to the rights
of the Call Option Holder under the Call Options, in connection with a
transfer of such rights by the Call Option Holder to such Person; or
(5) to make provision with respect to the rights of Holders
pursuant to the requirements of Section 506(b); or
(6) to cure any ambiguity, to correct or supplement any
provisions herein or therein which may be inconsistent with any other
provisions herein or therein, or to make any other provisions with
respect to such matters or questions arising under such Principal
Agreement, provided such action shall not adversely affect the
interests of the Holders.
SECTION 802. Supplemental Agreements with Consent of Holders.
With the consent of the Holders of not less than a majority of the
Outstanding Units (or, with respect to modifications that adversely affect only
the Holders of Normal Units or only the Holders of Stripped Units, with the
consent of the Holders of not less than a majority of the Outstanding Units that
comprise Normal Units or Stripped Units, as the case may be), by Act of said
Holders delivered to the parties to any Principal Agreement, such parties (when
authorized, in the case of the Company, by a Board Resolution) may enter into an
agreement or agreements supplemental to such Principal Agreement for the purpose
of modifying in any manner the terms of the Units, or the provisions of such
Principal Agreement or the rights of the Holders in respect of the Units;
provided, however, that no such supplemental agreement shall, without the
consent of the Holder of each Outstanding Unit affected thereby,
(1) change any payment date;
(2) change the amount or type of Pledged Securities underlying
a Unit, impair the right of the Holder of any Unit to receive
distributions or interest payments on the underlying Pledged Securities
or otherwise adversely affect the Holder's rights in or to such Pledged
Securities (including the rights of Holders of Normal Units to effect a
Stripped Unit Creation);
(3) reduce the Contract Fees, if any, or other amounts
receivable by Holders in respect of Units or increase the Contract
Fees, if any, or other amounts payable by Holders in respect of Units
or change any place where, or the coin or currency in which, any
Contract Fees or other amounts receivable or payable in respect of
Units are payable;
(4) impair the right to institute suit for the enforcement of
any Purchase Contract;
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(5) reduce the number of shares of Common Stock to be
purchased pursuant to any Purchase Contract, increase the price to
purchase shares of Common Stock upon settlement of any Purchase
Contract, change the Stock Purchase Date or otherwise adversely affect
the Holder's rights under any Purchase Contract; or
(6) reduce the amount payable on exercise of any Call Option,
extend the Call Option Execution Date (as defined in the Call Option
Agreement) or otherwise adversely affect any Holder's rights under any
Call Option; or
(7) reduce the percentage of the Outstanding Units the consent
of whose Holders is required for any such supplemental agreement.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental agreement, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 803. Execution of Supplemental Agreements.
In executing, or accepting the additional agencies created by, any
supplemental agreement permitted by this Article or the modifications thereby of
the agencies created by this Agreement, the Unit Agent shall be entitled to
receive and (subject to Section 701) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental agreement
is authorized or permitted by this Agreement. The Unit Agent may, but shall not
be obligated to, enter into any such supplemental agreement which affects the
Agent's own rights, duties or immunities under this Agreement or otherwise.
SECTION 804. Effect of Supplemental Agreements.
Upon the execution of any supplemental agreement under this Article,
the relevant Principal Agreement shall be modified in accordance therewith, and
such supplemental agreement shall form a part of such Principal Agreement for
all purposes; and every Holder of Unit Certificates theretofore or thereafter
authenticated, executed on behalf of the Holder and delivered hereunder shall be
bound thereby.
SECTION 805. Reference to Supplemental Agreements.
Unit Certificates authenticated, executed on behalf of the Holders and
delivered after the execution of any supplemental agreement pursuant to this
Article may, and shall if required by the Unit Agent, bear a notation in form
approved by the Unit Agent as to any matter provided for in such supplemental
agreement. If the Company shall so determine, new Unit Certificates so modified
as to conform, in the opinion of the Unit Agent and the Company, to any such
supplemental agreement may be prepared and executed by the
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Company and authenticated, executed on behalf of the Holders and delivered by
the Unit Agent in exchange for Outstanding Unit Certificates evidencing the same
number of Normal Units or Stripped Units, as the case may be.
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 901. Covenant Not to Merge, Consolidate, Sell or Convey Property
Except Under Certain Conditions.
The Company covenants that it will not merge or consolidate with any
other Person or sell or convey all or substantially all of its assets to any
Person, except that the Company may merge or consolidate with, or sell or convey
all or substantially all of its assets to, any other Person, provided that (a)
the Company shall be the continuing corporation, or the successor (if other than
the Company) shall be a corporation organized and existing under the laws of the
United States of America or a State thereof and such corporation shall assume
the obligations of the Company under the Purchase Contracts and the Pledge
Agreement by one or more supplemental agreements in form satisfactory to the
Unit Agent and, in the case of the Pledge Agreement, the Collateral Agent,
executed and delivered to the Unit Agent, and, in the case of the Pledge
Agreement, the Collateral Agent by such corporation, and (b) the Company or such
successor corporation, as the case may be, shall not, immediately after such
merger or consolidation, or such sale or conveyance, be in default in the
performance of any covenant or condition under any Principal Amount or under any
of the Units.
SECTION 902. Rights and Duties of Successor Corporation.
In case of any such consolidation, merger, sale or conveyance and upon
any such assumption by the successor corporation, such successor corporation
shall succeed to and be substituted for the Company with the same effect as if
it had been named herein as the Company. Such successor corporation thereupon
may cause to be signed, and may issue either in its own name or in the name of
Life Re Corporation, any or all of the Unit Certificates evidencing Units
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Unit Agent; and, upon the order of such successor
corporation, instead of the Company, and subject to all the terms, conditions
and limitations in this Agreement prescribed, the Unit Agent shall authenticate
and execute on behalf of the Holders and deliver any Unit Certificates which
previously shall have been signed and delivered by the officers of the Company
to the Unit Agent for authentication and execution, and any Unit Certificate
evidencing Units which such successor corporation thereafter shall cause to be
signed and delivered to the Unit Agent for that purpose. All the Unit
Certificates so issued shall in all respects have the same legal rank and
benefit under this Agreement as the Unit Certificates theretofore or thereafter
issued in accordance with the terms of this
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Agreement as though all of such Unit Certificates had been issued at the date of
the execution hereof.
In case of any such consolidation, merger, sale or conveyance such
change in phraseology and form (but not in substance) may be made in the Unit
Certificates evidencing Units thereafter to be issued as may be appropriate.
SECTION 903. Opinion of Counsel to Unit Agent.
The Unit Agent, subject to Sections 701 and 703, may receive an Opinion
of Counsel as conclusive evidence that any such consolidation, merger, sale or
conveyance, and any such assumption, complies with the provisions of this
Article.
ARTICLE TEN
COVENANTS
SECTION 1001. Performance Under Purchase Contracts.
The Company covenants and agrees for the benefit of the Holders from
time to time of the Units that it will duly and punctually perform its
obligations under the Purchase Contracts in accordance with the terms of the
Purchase Contracts and this Agreement.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York an office or agency where Unit Certificates may be presented or surrendered
for acquisition of shares of Common Stock upon settlement and for transfer of
Pledged Securities upon occurrence of a Termination Event, where Unit
Certificates may be surrendered for registration of transfer or exchange or for
effecting Stripped Unit Creations, where payment of Contract Fees, if any,
payable by the Company to the Holders may be made and where notices and demands
to or upon the Company in respect of the Units and this Agreement may be served.
The Company will give prompt written notice to the Unit Agent of the location,
and any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Unit Agent with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office, and the Company hereby appoints the Unit Agent as its agent to receive
all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where Unit Certificates may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such
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designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York for such purposes. The Company will give prompt written notice to
the Unit Agent of any such designation or rescission and of any change in the
location of any such other office or agency. The Company hereby designates as
the place of payment for the Units the Corporate Trust Office and appoints the
Unit Agent at its Corporate Trust Office as paying agent in such city.
SECTION 1003. Company to Reserve Common Stock.
The Company shall at all times prior to the Stock Purchase Date reserve
and keep available, free from preemptive rights, out of its authorized but
unissued Common Stock the full number of shares of Common Stock issuable against
tender of payment in respect of all Purchase Contracts underlying the Units.
SECTION 1004. Covenants as to Common Stock.
The Company covenants that all shares of Common Stock which may be
issued against tender of payment in respect of the Purchase Contracts underlying
the Units will, upon issuance, be newly issued (i.e., not issued out of treasury
shares) and be duly authorized, validly issued, fully paid and nonassessable.
SECTION 1005. Statements of Officers of the Company as to Default.
The Company will deliver to the Unit Agent, within 120 days after the
end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate, stating whether or not to the best knowledge of the
signers thereof the Company is in default in the performance and observance of
any of the terms, provisions and conditions hereof, and if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LIFE RE CORPORATION
Attested by
______________________________ By:________________________________
THE BANK OF NEW YORK, as Unit Agent
Attested by
______________________________ By:______________________________________
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EXHIBIT A
FORM OF NORMAL UNIT CERTIFICATE
LIFE RE CORPORATION
____% ADJUSTABLE CONVERSION-RATE EQUITY SECURITY UNITS
(STATED AMOUNT $_______ PER NORMAL UNIT)
No. _____ ________Normal Units
This Unit Certificate certifies that is the registered Holder of the
number of Normal Units set forth above. Each Normal Unit represents the right to
purchase Common Stock under a Purchase Contract with Life Re Corporation, a
Delaware corporation (the "Company"), together with ownership of the QUIPS(sm)*
or other Pledged Securities pledged to secure the obligations referred to in (a)
and (b) below, subject to (a) the obligations owed to the Company under such
Purchase Contract, (b) for so long as any Call Options remain exercisable, the
obligations owed to the Call Option Holder under a Call Option and (c) the
pledge arrangements securing the foregoing obligations.
Each Purchase Contract evidenced hereby is governed by a Master Unit
Agreement, dated as of __________, 1998 (the "Master Unit Agreement"), between
the Company and The Bank of New York, as unit agent (herein called the "Unit
Agent"). All terms used herein which are defined in the Master Unit Agreement
have the meanings set forth therein. Each Call Option evidenced hereby is
governed by the Call Option Agreement. The Pledge of the Pledged Securities
evidenced hereby is governed by the Pledge Agreement. Reference is hereby made
to the Master Unit Agreement, the Call Option Agreement and the Pledge
Agreement, and any supplemental agreements thereto, for a description of the
respective rights, limitations of rights, obligations, duties and immunities
thereunder of the Unit Agent, the Company, the Call Option Holder, the
Collateral Agent and the Holders. The summary contained herein is qualified in
its entirety by the provisions of the Principal Agreements, and the Principal
Agreements shall govern the rights of the parties to the extent that there is
any conflict between such summary and such provisions.
Each Purchase Contract evidenced hereby obligates the Holder of this
Unit Certificate to purchase, and the Company to sell, on _________, 2001 (the
"Stock Purchase Date"), at a price equal to $_______ (the "Stated Amount"), a
number of shares of Common Stock, par value $.001 per share ("Common Stock"), of
the Company equal to the Settlement Rate,
- --------
* QUIPS is a servicemark of Goldman, Sachs & Co.
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unless on or prior to the Stock Purchase Date there shall have occurred a
Termination Event. The "Settlement Rate" is equal to (a) if the Applicable
Market Value (as defined in the Master Unit Agreement) is greater than or equal
to $_____ (the "Threshold Appreciation Price"), __________ of a share of Common
Stock per Purchase Contract, (b) if the Applicable Market Value is less than the
Threshold Appreciation Price but is greater than the Stated Amount, a fractional
share of Common Stock per Purchase Contract equal to the Stated Amount divided
by the Applicable Market Value (rounded to the nearest 1/10,000th of a share or,
if there is no nearest 1/10,000th of a share, rounded downward to the nearest
1/10,000th of a share) and (c) if the Applicable Market Amount is less than or
equal to the Stated Amount, one share of Common Stock per Purchase Contract, in
each case subject to adjustment as provided in the Master Purchase Agreement. No
fractional shares of Common Stock will be issued upon settlement of Purchase
Contracts. The purchase price for the shares of Common Stock to be purchased
pursuant to each Purchase Contract evidenced hereby, if not paid by 10:00 a.m.,
New York City time, on the Stock Purchase Date, shall be paid by application of
payments received by the Company on the Stock Purchase Date from the Collateral
Agent pursuant to the Pledge Agreement in respect of the Pledged Securities
pledged to secure such Holder's obligations under such Purchase Contract.
The Purchase Contracts and the obligations and rights of the Company
and the Holders thereunder, including, without limitation, the rights and
obligations to receive and pay accrued or deferred Contract Fees, shall
immediately and automatically terminate, without the necessity of any notice or
action by any Holder, the Unit Agent or the Company, if, on or prior to the
Stock Purchase Date, a Termination Event shall have occurred. Upon and after the
occurrence of a Termination Event, the Collateral Agent shall release the
Pledged Securities from the Pledge. The Normal Units shall thereafter represent
the right to receive the Pledged Securities forming a part of such Normal Units
in accordance with the provisions of the Master Unit Agreement and the Pledge
Agreement.
The Call Options evidenced hereby entitle the Call Option Holder to
acquire the QUIPS (or Junior Subordinated Debentures substituted therefor)
evidenced hereby on or before ___________, 2001, unless prior to the exercise
thereof there shall have occurred a Termination Event. The Call Option Holder
may exercise such Call Options only in whole together with the Call Options
underlying the other Normal Units, by delivering to the Unit Agent a notice of
exercise and delivering to the Collateral Agent the Aggregate Consideration
Deliverable Upon Exercise of Call Options, whereupon the QUIPS or Junior
Subordinated Debentures underlying the Normal Units will be released from the
Pledge and the Treasury Securities constituting all or part of the Aggregate
Consideration Deliverable Upon Exercise of Call Options delivered to the
Collateral Agent will be substituted as the Pledged Securities underlying the
Normal Units.
The [COMPANY] [HOLDER] shall pay, on each __________, __________,
__________ and __________, commencing __________, 1998 (each, a "Quarterly
Payment Date"), in respect of each Purchase Contract evidenced hereby, a fee
(the "Contract Fee") accruing on
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<PAGE> 61
the Stated Amount of such Unit from and including the date of first issuance of
any Units at a rate per annum equal to ____% (the "Contract Fee Rate") (computed
on the basis of a 360- day year of twelve 30-day months and subject to deferral
as described in the Master Unit Agreement), plus any additional fees accrued
thereon pursuant to Section 503 of the Master Unit Agreement. [THE COMPANY'S
OBLIGATIONS WITH RESPECT TO CONTRACT FEES SHALL BE, TO THE EXTENT PROVIDED IN
THE MASTER UNIT AGREEMENT, SUBORDINATE AND SUBJECT IN RIGHT OF PAYMENT TO ALL
SENIOR INDEBTEDNESS] [SUCH PAYMENT WILL BE FUNDED OUT OF PAYMENTS MADE IN
RESPECT OF THE PLEDGED SECURITIES EVIDENCED HEREBY].
Payments due to the Holder in respect of the Normal Units evidenced
hereby will be payable to the Person in whose name this Unit Certificate (or a
Predecessor Unit Certificate) is registered at the close of business on the
Record Date next preceding the relevant payment date.
The transfer of any Unit Certificate will be registered and Unit
Certificates may be exchanged as provided in the Master Unit Agreement. The Unit
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents permitted by the Master Unit Agreement. No
service charge shall be required for any such registration of transfer or
exchange, but the Company and the Unit Agent may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Except as provided in the Master Unit Agreement in connection with a
Stripped Unit Creation, for so long as the Purchase Contract underlying a Normal
Unit remains in effect, such Normal Unit shall not be separable into its
constituent parts, and the rights and obligations of the Holder of such Normal
Unit in respect of the Pledged Securities and Purchase Contract constituting
such Normal Unit may be transferred and exchanged only as an integrated Normal
Unit.
Upon registration of transfer of this Unit Certificate, the transferee
shall be bound (without the necessity of any other action on the part of such
transferee) by the terms of the Purchase Contracts and Call Options evidenced
hereby and by the Pledge Agreement, and the transferor shall be released from
such obligations. The Company covenants and agrees, and the Holder, by his
acceptance hereof, likewise covenants and agrees, to be bound by the provisions
of this paragraph.
The Holder of this Unit Certificate, by his acceptance hereof,
irrevocably authorizes the Unit Agent to enter into and perform the related
Purchase Contracts and Call Options evidenced hereby on his behalf as his
attorney-in-fact, agrees to be bound by the terms and provisions thereof,
covenants and agrees to perform his obligations under such Purchase Contracts
and Call Options, consents to the provisions of the Principal Agreements,
irrevocably authorizes the Unit Agent to enter into and perform the Call Option
Agreement and the Pledge Agreement on his behalf as his attorney-in-fact, and
consents to and agrees to be bound by the Pledge of the Pledged Securities
evidenced hereby pursuant to the Pledge Agreement.
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Subject to certain exceptions, the provisions of the Principal
Agreements may be amended with the consent of the Holders of at least a majority
of the Outstanding Units or, if the amendment affects only the Holders of the
Normal Units or only the Holders of the Stripped Units, at least a majority of
the Outstanding Units comprising Normal Units or Stripped Units, as the case may
be.
The Purchase Contracts and Call Options shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
The Company, the Unit Agent and any agent of the Company or the Unit
Agent may treat the Person in whose name this Unit Certificate is registered as
the owner of the Normal Units evidenced hereby for the purpose of receiving
payments of distributions or interest on the Pledged Securities, receiving the
rights and performing the obligations under the Purchase Contracts and for all
other purposes whatsoever, whether or not any payments in respect thereof be
overdue and notwithstanding any notice to the contrary, and neither the Company,
the Unit Agent nor any such agent shall be affected by notice to the contrary.
The Purchase Contracts shall not, prior to the settlement thereof,
entitle the Holder to any of the rights of a holder of shares of Common Stock.
Copies of the Principal Agreements are available for inspection at the
offices of the Unit Agent.
Unless the certificate of authentication hereon has been executed by
the Unit Agent by manual signature, this Unit Certificate shall not be entitled
to any benefit under the Principal Agreements or be valid or obligatory for any
purpose.
A-4
<PAGE> 63
IN WITNESS WHEREOF, the Company and the Holder hereby agree to their
respective obligations under the Purchase Contracts evidenced by this
instrument, and the Holder hereby acknowledges that the Pledged Securities
evidenced by this instrument are subject to the Pledge under the Pledge
Agreement.
LIFE RE CORPORATION
By:_________________________________
Attest: _______________________
HOLDER SPECIFIED ABOVE
By: [Unit Agent name],
_________________________________
as Attorney-in-Fact of such Holder
By:_________________________________
IN WITNESS WHEREOF, the Holder hereby agrees, for the benefit of the Call Option
Holder, to its obligations under any Call Options evidenced by this instrument,
and the Holder hereby acknowledges, for the benefit of the Call Option Holder,
that the Pledged Securities evidenced by this instrument are subject to the
Pledge under the Pledge Agreement.
HOLDER SPECIFIED ABOVE
By: [Unit Agent name],
_________________________________
as Attorney-in-Fact of such Holder
Dated:
Agent's Certificate of Authentication
This is one of the Unit Certificates referred to in the within
mentioned Master Unit Agreement.
________________________________,
as Unit Agent
By: _____________________________
By:_________________________________
A-5
<PAGE> 64
SETTLEMENT INSTRUCTIONS
The undersigned Holder directs that a certificate for shares of Common
Stock deliverable upon settlement on or after the Stock Purchase Date of the
Purchase Contracts underlying the number of Normal Units evidenced by this Unit
Certificate be registered in the name of, and delivered, together with a check
in payment for any fractional share, to the undersigned at the address indicated
below unless a different name and address have been indicated below. If shares
are to be registered in the name of a Person other than the under signed, the
undersigned will pay any transfer tax payable incident thereto.
Dated: _________________________ ______________________________________
Signature
If shares are to be registered in the REGISTERED HOLDER
name of and delivered to a Person
other than the Holder, please print Please print name and address of
such Person's name and address: Registered Holder:
________________________________ ______________________________________
Name Name
________________________________ ______________________________________
Address Address
________________________________ ______________________________________
Social Unit or other Taxpayer
Identification Number, if any
______________________________________
A-6
<PAGE> 65
REQUEST TO CREATE STRIPPED UNITS
The undersigned Holder directs that (a) the Pledged Securities
underlying the number of Normal Units indicated below (which number does not
exceed the number of Normal Units evidenced by this Unit Certificate) be
released from the Pledge and registered in the name of, and delivered, to the
undersigned at the address indicated below unless a different name and address
have been indicated below and (b) a corresponding number of Stripped Units be
registered in the name of, and delivered, to the undersigned at the address
indicated below unless a difference name and address have been indicated below.
If the released Pledged Securities or the Stripped Units are to be registered in
the name of a Person other than the undersigned, the undersigned will pay any
transfer tax payable incident thereto.
The undersigned confirms that the requisite Treasury Securities, any
required cash and the instrument from the Call Option Holder have been delivered
to the Collateral Agent.
Dated: _________________________ _________________________________
Signature
If released Pledged Securities are to be REGISTERED HOLDER
registered in the name of and delivered to a
Person other than the Holder, please print Please print name and address of
such Person's name and address: Registered Holder:
____________________________________ ________________________________
Name Name
____________________________________ ________________________________
Address Address
____________________________________ ________________________________
Social Unit or other Taxpayer
Identification Number, if any
_________________________________
If Stripped Units are to be registered in
the name of and delivered to a Person
other than the Holder, please print
such Person's name and address.
A-7
<PAGE> 66
______________________________________
Name
______________________________________
Address
______________________________________
Social Unit or other Taxpayer
Identification Number, if any
A-8
<PAGE> 67
EXHIBIT B
FORM OF STRIPPED UNIT CERTIFICATE
LIFE RE CORPORATION
____% ADJUSTABLE CONVERSION-RATE EQUITY SECURITY UNITS
(STATED AMOUNT $_______ PER UNIT)
No. _____ _____ Stripped Units
This Unit Certificate certifies that is the registered Holder of the
number of Stripped Units set forth above. Each Stripped Unit represents the
right to purchase Common Stock under a Purchase Contract with Life Re
Corporation, a Delaware corporation (the "Company"), together with ownership of
the Treasury Securities pledged to secure the obligations referred to in (a)
below, subject to (a) the obligations owed to the Company under such Purchase
Contract and (b) the pledge arrangements securing the foregoing obligations.
Each Purchase Contract evidenced hereby is governed by a Master Unit
Agreement, dated as of __________, 1998 (the "Master Unit Agreement"), between
the Company and The Bank of New York, as unit agent (herein called the "Unit
Agent"). All terms used herein which are defined in the Master Unit Agreement
have the meanings set forth therein. The Pledge of the Pledged Securities
evidenced hereby is governed by the Pledge Agreement. Reference is hereby made
to the Master Unit Agreement and the Pledge Agreement, and any supplemental
agreements thereto, for a description of the respective rights, limitations of
rights, obligations, duties and immunities thereunder of the Unit Agent, the
Company, the Collateral Agent and the Holders. The summary contained herein is
qualified in its entirety by the provisions of the Principal Agreements, and the
Principal Agreements shall govern the rights of the parties to the extent that
there is any conflict between such summary and such provisions.
Each Purchase Contract evidenced hereby obligates the Holder of this
Unit Certificate to purchase, and the Company to sell, on _________, 2001 (the
"Stock Purchase Date"), at a price equal to $_______ (the "Stated Amount"), a
number of shares of Common Stock, par value $.001 per share ("Common Stock"), of
the Company equal to the Settlement Rate, unless on or prior to the Stock
Purchase Date there shall have occurred a Termination Event. The "Settlement
Rate" is equal to (a) if the Applicable Market Value (as defined in the Master
Unit Agreement) is greater than or equal to $_____ (the "Threshold Appreciation
Price"), __________ of a share of Common Stock per Purchase Contract, (b) if the
Applicable Market Value is less than the Threshold Appreciation Price but is
greater than the Stated
B-1
<PAGE> 68
Amount, a fractional share of Common Stock per Purchase Contract equal to the
Stated Amount divided by the Applicable Market Value (rounded to the nearest
1/10,000th of a share or, if there is no nearest 1/10,000th of a share, rounded
downward to the nearest 1/10,000th of a share) and (c) if the Applicable Market
Amount is less than or equal to the Stated Amount, one share of Common Stock per
Purchase Contract, in each case subject to adjustment as provided in the Master
Purchase Agreement. No fractional shares of Common Stock will be issued upon
settlement of Purchase Contracts. The purchase price for the shares of Common
Stock to be purchased pursuant to each Purchase Contract evidenced hereby, if
not paid by 10:00 a.m., New York City time, on the Stock Purchase Date, shall be
paid by application of payments received by the Company on the Stock Purchase
Date from the Collateral Agent pursuant to the Pledge Agreement in respect of
the Pledged Securities pledged to secure such Holder's obligations under such
Purchase Contract.
The Purchase Contracts and the obligations and rights of the Company
and the Holders thereunder, including, without limitation, the rights and
obligations to receive and pay accrued or deferred Contract Fees, shall
immediately and automatically terminate, without the necessity of any notice or
action by any Holder, the Unit Agent or the Company, if, on or prior to the
Stock Purchase Date, a Termination Event shall have occurred. Upon and after the
occurrence of a Termination Event, the Collateral Agent shall release the
Pledged Securities from the Pledge. The Stripped Units shall thereafter
represent the right to receive the Pledged Securities forming a part of such
Stripped Units in accordance with the provisions of the Master Unit Agreement
and the Pledge Agreement.
The [COMPANY] [HOLDER] shall pay, on each __________, __________,
__________ and __________, commencing __________, 1998 (each, a "Quarterly
Payment Date"), in respect of each Purchase Contract evidenced hereby, a fee
(the "Contract Fee") accruing on the Stated Amount of such Unit from and
including the date of first issuance of any Units at a rate per annum equal to
____% (the "Contract Fee Rate") (computed on the basis of a 360- day year of
twelve 30-day months and subject to deferral as described in the Master Unit
Agreement), plus any additional fees accrued thereon pursuant to Section 503 of
the Master Unit Agreement. [THE COMPANY'S OBLIGATIONS WITH RESPECT TO CONTRACT
FEES SHALL BE, TO THE EXTENT PROVIDED IN THE MASTER UNIT AGREEMENT, SUBORDINATE
AND SUBJECT IN RIGHT OF PAYMENT TO ALL SENIOR INDEBTEDNESS] [SUCH PAYMENT WILL
BE FUNDED OUT OF PAYMENTS MADE IN RESPECT OF THE PLEDGED SECURITIES EVIDENCED
HEREBY].
Payments due to the Holder in respect of the Stripped Units evidenced
hereby will be payable to the Person in whose name this Unit Certificate (or a
Predecessor Unit Certificate) is registered at the close of business on the
Record Date next preceding the relevant payment date.
The transfer of any Unit Certificate will be registered and Unit
Certificates may be exchanged as provided in the Master Unit Agreement. The Unit
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents
B-2
<PAGE> 69
permitted by the Master Unit Agreement. No service charge shall be required for
any such registration of transfer or exchange, but the Company and the Unit
Agent may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. For so long as the Purchase
Contract underlying a Stripped Unit remains in effect, such Stripped Unit shall
not be separable into its constituent parts, and the rights and obligations of
the Holder of such Stripped Unit in respect of the Pledged Securities and
Purchase Contract constituting such Stripped Unit may be transferred and
exchanged only as an integrated Stripped Unit.
Upon registration of transfer of this Unit Certificate, the transferee
shall be bound (without the necessity of any other action on the part of such
transferee) by the terms of the Purchase Contracts evidenced hereby and by the
Pledge Agreement, and the transferor shall be released from such obligations.
The Company covenants and agrees, and the Holder, by his acceptance hereof,
likewise covenants and agrees, to be bound by the provisions of this paragraph.
The Holder of this Unit Certificate, by his acceptance hereof,
irrevocably authorizes the Unit Agent to enter into and perform the related
Purchase Contracts evidenced hereby on his behalf as his attorney-in-fact,
agrees to be bound by the terms and provisions thereof, covenants and agrees to
perform his obligations under such Purchase Contracts, consents to the
provisions of the Principal Agreements, irrevocably authorizes the Unit Agent to
enter into and perform the Pledge Agreement on his behalf as his
attorney-in-fact, and consents to and agrees to be bound by the Pledge of the
Pledged Securities evidenced hereby pursuant to the Pledge Agreement.
Subject to certain exceptions, the provisions of the Principal
Agreements may be amended with the consent of the Holders of at least a majority
of the Outstanding Units or, if the amendment affects only the Holders of the
Normal Units or only the Holders of the Stripped Units, at least a majority of
the Outstanding Units comprising Normal Units or Stripped Units, as the case may
be.
The Purchase Contracts shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York.
The Company, the Unit Agent and any agent of the Company or the Unit
Agent may treat the Person in whose name this Unit Certificate is registered as
the owner of the Stripped Units evidenced hereby for the purpose of receiving
payments of distributions or interest on the Pledged Securities, receiving the
rights and performing the obligations under the Purchase Contracts and for all
other purposes whatsoever, whether or not any payments in respect thereof be
overdue and notwithstanding any notice to the contrary, and neither the Company,
the Unit Agent nor any such agent shall be affected by notice to the contrary.
B-3
<PAGE> 70
The Purchase Contracts shall not, prior to the settlement thereof,
entitle the Holder to any of the rights of a holder of shares of Common Stock.
Copies of the Principal Agreements are available for inspection at the
offices of the Unit Agent.
Unless the certificate of authentication hereon has been executed by
the Unit Agent by manual signature, this Unit Certificate shall not be entitled
to any benefit under the Principal Agreements or be valid or obligatory for any
purpose.
B-4
<PAGE> 71
IN WITNESS WHEREOF, the Company and the Holder hereby agree to their
respective obligations under the Purchase Contracts evidenced by this
instrument, and the Holder hereby acknowledges that the Pledged Securities
evidenced by this instrument are subject to the Pledge under the Pledge
Agreement.
LIFE RE CORPORATION
By:_________________________________
Attest: _______________________
HOLDER SPECIFIED ABOVE
By: [Unit Agent name],
_________________________________
as Attorney-in-Fact of such Holder
By:_________________________________
Dated:
Agent's Certificate of Authentication
This is one of the Unit Certificates referred to in the within
mentioned Master Unit Agreement.
_______________________________,
as Unit Agent
By: __________________________
By:_________________________________
B-5
<PAGE> 72
SETTLEMENT INSTRUCTIONS
The undersigned Holder directs that a certificate for shares of Common
Stock deliverable upon settlement on or after the Stock Purchase Date of the
Purchase Contracts underlying the number of Stripped Units evidenced by this
Unit Certificate be registered in the name of, and delivered, together with a
check in payment for any fractional share, to the undersigned at the address
indicated below unless a different name and address have been indicated below.
If shares are to be registered in the name of a Person other than the under
signed, the undersigned will pay any transfer tax payable incident thereto.
Dated: _________________________ ____________________________________
Signature
If shares are to be registered in the REGISTERED HOLDER
name of and delivered to a Person
other than the Holder, please print Please print name and address of
such Person's name and address: Registered Holder:
_____________________________________ _____________________________________
Name Name
_____________________________________ _____________________________________
Address Address
_____________________________________ _____________________________________
Social Unit or other Taxpayer
Identification Number, if any
_____________________________________
B-6
<PAGE> 1
Exhibit 4.13
================================================================================
LIFE RE CORPORATION
GOLDMAN, SACHS & CO.,
as Call Option Holder
..........................................
as Collateral Agent
AND
THE BANK OF NEW YORK,
as Unit Agent and as Attorney-In-Fact
---------------------------
PLEDGE AGREEMENT
---------------------------
Dated as of ......................., 1998
================================================================================
<PAGE> 2
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of ............................ , 1998,
among Life Re Corporation, a Delaware corporation (the "Company", as such term
is more fully defined in the Master Unit Agreement referred to below), Goldman,
Sachs & Co., as Call Option Holder, ............................., as Collateral
Agent, and The Bank of New York, as Unit Agent and as attorney-in-fact of the
Holders from time to time of the Units.
RECITALS
The Company and the Unit Agent are parties to the Master Unit
Agreement, dated as of the date hereof (as the same may be supplemented or
amended from time to time in accordance with the terms thereof, the "Master Unit
Agreement"). The Master Unit Agreement contemplates that the QUIPS(SM)*, Junior
Subordinated Debentures and Treasury Securities that from time to time underlie
the Units be pledged to the Collateral Agent to secure the obligations of the
Holders of Units under the Purchase Contracts and Call Options that underlie
such Units.
Pursuant to the terms of the Principal Agreements and the Unit
Certificates, the Holders from time to time of the Units irrevocably authorize
the Unit Agent, as attorney-in-fact of such Holders, to execute and deliver this
Agreement on behalf of such Holders and to grant the pledge provided hereby of
the Pledged Securities underlying such Units as provided herein and subject to
the terms hereof.
Accordingly, the Company, the Call Option Holder, the Collateral Agent
and the Unit Agent, on its own behalf and as attorney-in-fact of the Holders
from time to time of the Units, agree as follows:
SECTION 1. Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) capitalized terms used herein and not defined are used
herein as defined in the Master Unit Agreement; and
(b) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision.
"Aggregate Consideration Deliverable on Exercise of the Call Options"
has the meaning specified in the Call Option Agreement.
- --------
* QUIPS is a servicemark of Goldman, Sachs & Co.
<PAGE> 3
"Agreement" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more agreements
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Applicable Treasury Regulations" means Subpart O-Book-Entry Procedure
of Title 31 of the Code of Federal Regulations (31 CFR Section 306.115 et seq.)
and any other regulations of the United States Treasury Department from time to
time applicable to the transfer or pledge of book-entry Treasury Securities.
SECTION 2. The Pledge. The Holders from time to time of the Units
acting through the Unit Agent, as their attorney-in-fact, hereby pledge to the
Collateral Agent (for the benefit of the Company and the Call Option Holder as
their interests may appear), and grant to the Collateral Agent, the Company and
the Call Option Holder (as their interests may appear) a security interest in
all of the right, title and interest of such Holders in and to, the Pledged
Securities underlying such Units (and proceeds therefrom), as collateral
security to ensure the performance when due by such Holders of their respective
obligations under the Purchase Contracts and Call Options underlying such Units.
Concurrently with the execution of this Agreement, the initial Holders of the
first 1,500,000 Normal Units issued under the Master Unit Agreement, the Unit
Agent and the Collateral Agent are causing 1,500,000 QUIPS to be delivered to,
and registered in the name of, the Collateral Agent, and such QUIPS will
thereupon constitute Pledged Securities forming a part of such Normal Units. As
used in this Section 2, the term "delivery" shall have the meaning ascribed to
it in the Uniform Commercial Code of the State of New York. In the event that
any or all of the additional 225,000 Normal Units that may be issued as a result
of an exercise of the overallotment option of the underwriters under the
Underwriting Agreement are issued pursuant to the Master Unit Agreement at or
after the execution of this Agreement, the initial Holders of such Normal Units,
the Unit Agent and the Collateral Agent shall cause a number of QUIPS equal to
the number of such Normal Units to be delivered to, and registered in the name
of, the Collateral Agent, and such QUIPS will thereupon constitute Pledged
Securities forming a part of such Normal Units. In addition, the execution
hereof by the Unit Agent and the Collateral Agent shall constitute an
acknowledgment by the Collateral Agent (as securities intermediary or otherwise)
of the Pledge and of its holding of such QUIPS or other Pledged Securities
substituted therefor in accordance with the provisions hereof subject to the
Pledge and of its crediting such QUIPS or other Pledged Securities to a separate
account for purposes of perfecting the Pledge under applicable law, including,
to the extent applicable, the Uniform Commercial Code as adopted and in effect
in any applicable jurisdiction and the Applicable Treasury Regulations. Subject
to the Pledge, the Holders from time to time of the Units shall have full
beneficial ownership of the Pledged Securities underlying such Units, and shall
be entitled (directly or through the Collateral Agent) to all of the rights
provided by such Pledged Securities, and the Company and the Call Option Holder
shall have no rights with respect to such Pledged Securities other than their
respective security interests therein.
-2-
<PAGE> 4
SECTION 3. Payments in Respect of the Pledged Securities. Any payment
received by the Collateral Agent in respect of the Pledged Securities underlying
any Normal Units or Stripped Units shall be paid by the Collateral Agent, by
wire transfer in same day funds no later than 1:00 p.m., New York City time, on
the date of receipt (or, if such payment is received by the Collateral Agent on
a day that is not a Business Day or after noon, New York City time, on a
Business Day, then such payment shall be made by the Collateral Agent no later
than 10:00 a.m., New York City time, on the next succeeding Business Day), as
follows:
(a) in the case of payments not scheduled to fall on the Stock
Purchase Date, (i) first, to the Company, to the account designated by
it for such purpose, in an amount equal to the Contract Fees, if any,
then payable to the Company in respect of such Units, and (ii) second,
to the extent of any amount remaining after the payment (if any)
referred to in clause (i) above, to the Unit Agent, to the account
designated by it for payments in respect of Normal Units or the account
designated by it for payments in respect of Stripped Units, as the case
may be; and
(b) in the case of payments scheduled to fall on the Stock
Purchase Date, (i) with respect to payments received in respect of
Units which are Paid Units (as specified in the notice from the Unit
Agent referred to in Section 4), (x) first, to the Company, to the
account designated by it for such purpose, in an amount equal to the
unpaid Contract Fees, if any, payable to the Company in respect of such
Paid Units, and (y) second, to the extent of any amount remaining after
the payment (if any) referred to in clause (x) above, to the Unit
Agent, to the account designated by it for payments in respect of Paid
Units which are Normal Units or the account designated by it for
payments in respect of Paid Units which are Stripped Units, as the case
may be; and (ii) with respect to payments received in respect of Units
which are Unpaid Units (as specified in the notice from the Unit Agent
referred to in Section 4), (x) first, to the Company, to the account
designated by it for such purpose, in an amount equal to the unpaid
Contract Fees, if any, payable to the Company in respect of such Unpaid
Units, and (y) second, to the extent of any amount remaining after the
payment (if any) referred to in (x) above, to the Unit Agent, to the
account designated by it for payments in respect of Unpaid Units which
are Normal Units; provided, however, that if the Company disputes the
notice from the Unit Agent referred to in Section 4 and notifies the
Collateral Agent, prior to noon, New York City time, on the Stock
Purchase Date, that the number of Paid Units or the number of Unpaid
Units (or both) is different than that indicated in such notice, the
foregoing payments with respect to any Paid Units or Unpaid Units
subject to dispute shall not be paid until such dispute is resolved.
All payments received by the Unit Agent as provided herein
shall be applied by the Unit Agent pursuant to the provisions of the Master Unit
Agreement.
-3-
<PAGE> 5
SECTION 4. Notice with Respect to Numbers of Paid Units and Unpaid
Units; Exercise of Junior Subordinated Debenture Put Options with Respect to
Unpaid Units. By 11:00 a.m., New York City time, on the Stock Purchase Date, the
Unit Agent shall, as provided in the Master Unit Agreement, notify the Company
and the Collateral Agent as to the number of Normal Units and the number of
Stripped Units, respectively, which are Paid Units and the number of Normal
Units and the number of Stripped Units, respectively, which are Unpaid Units.
Promptly after receiving such notification, (a) if QUIPS underlie the Unpaid
Units of any Holder, the Collateral Agent, on behalf of such Holder, shall
exercise such Holder's right under the Declaration to require the Trust to
distribute Junior Subordinated Debentures having an aggregate principal amount
equal to the aggregate liquidation amount of such QUIPS, in exchange for such
QUIPS, and, upon receiving such Junior Subordinated Debentures, shall thereupon,
as Put Agent, exercise the Junior Subordinated Debenture Put Option with respect
thereto and (b) if Junior Subordinated Debentures underlie such Unpaid Units,
the Collateral Agent, on behalf of such Holder, shall, as Put Agent, exercise
the Junior Subordinated Debenture Put Option with respect thereto. The payment
received by the Collateral Agent from the exercise of any Junior Subordinated
Debenture Put Option shall then be applied by the Collateral Agent in accordance
with Section 3(b).
SECTION 5. Release and Substitution of Pledged Securities. (a) Upon
notice to the Collateral Agent by the Company or the Unit Agent that there has
occurred a Termination Event, the Collateral Agent shall release all Pledged
Securities from the Pledge and shall transfer such Pledged Securities, free and
clear of any lien, pledge or security interest created hereby, to the Unit Agent
for delivery by the Unit Agent pursuant to the provisions of the Master Unit
Agreement.
(b) Upon notice to the Collateral Agent by the Call Option Holder that
the Call Option Holder is exercising the Call Options in accordance with the
terms of the Call Option Agreement with respect to the QUIPS or Junior
Subordinated Debentures underlying the Normal Units, provided that the
Collateral Agent receives the requisite Aggregate Consideration Deliverable on
Exercise of the Call Options on the Call Settlement Date specified in such
notice, the Collateral Agent shall transfer such QUIPS or Junior Subordinated
Debentures, free and clear of any lien, pledge or security interest created
hereby, to the Call Option Holder or its designee as specified in such notice,
whereupon (i) the Treasury Securities constituting all or a part of the
Aggregate Consideration Deliverable Upon Exercise of the Call Options so
received by the Collateral Agent shall be subject to the Pledge with respect to
the Normal Units and (ii) the Pledge shall cease to constitute a security
interest for the benefit of the Call Option Holder.
-4-
<PAGE> 6
(c) In connection with a Stripped Unit Creation, upon request by the
Unit Agent to the Collateral Agent to release the then Pledged Securities
underlying the number of Normal Units indicated in such request, provided that
the Collateral Agent has received (i) the Treasury Securities and cash required
by Section 309(a)(i) of the Master Unit Agreement for a Stripped Unit Creation
relating to such Normal Units and (ii) if the Call Options underlying such
Normal Units remain exercisable on the date of receipt of such instruction, an
instrument from the Call Option Holder releasing its security interest in the
Pledged Securities underlying such Normal Units and agreeing that such Call
Options no longer underlie such Normal Units (or the Stripped Units they
become), the Collateral Agent shall release such Pledged Securities, free and
clear of any lien, pledge or security interest created hereby, to the Unit Agent
for delivery by the Unit Agent pursuant to the provisions of the Master Unit
Agreement, whereupon the Treasury Securities so received by the Collateral Agent
shall be subject to the Pledge and constitute the Pledged Securities underlying
the Stripped Units so created.
(d) In connection with the delivery to the Collateral Agent of Treasury
Securities pursuant to Section 5(b) or (c), such delivery shall be by Federal
Reserve Bank-Wire to the account of the Collateral Agent designated by it for
such purpose, and the Collateral Agent and the Call Option Holder or
transferring Holder of Normal Units, as the case may be, shall take appropriate
action (i) so that the applicable Federal Reserve Bank through which such
Treasury Securities have been purchased will reflect such transfer and the
Pledge of such Treasury Securities in accordance with Applicable Treasury
Regulations and (ii) as may be required to perfect the Pledge under Applicable
Treasury Regulations.
(e) In the event the Trust is dissolved while any QUIPS are Pledged
Securities underlying Normal Units, the Junior Subordinated Debentures issued
upon dissolution thereof shall be delivered to the Collateral Agent in exchange
for such QUIPS, whereupon such QUIPS shall cease to constitute Pledged
Securities and the Junior Subordinated Debentures so received by the Collateral
Agent shall be subject to the Pledge and constitute the Pledged Securities
underlying such Normal Units.
(f) On the Stock Purchase Date, the Collateral Agent shall release the
QUIPS or Junior Subordinated Debentures underlying Units which are Paid Units
(as specified in the notice from the Unit Agent referred to in Section 4), free
and clear of any lien, pledge or security interest created hereby, to the Unit
Agent for delivery pursuant to the provisions of the Master Unit Agreement;
provided, however, that if the Company disputes the notice from the Unit Agent
referred to in Section 4 and notifies the Collateral Agent, prior to noon, New
York City time, on the Stock Purchase Date, that the number of Paid Units is
different from that indicated in such notice, the foregoing release with respect
to any Paid Units subject to dispute shall not be made until such dispute is
resolved.
-5-
<PAGE> 7
SECTION 6. Rights and Remedies. (a) The Collateral Agent shall have all
of the rights and remedies with respect to the Pledged Securities of a secured
party under the Uniform Commercial Code as in effect in the State of New York
(the "Code") (whether or not said Code is in effect in the jurisdiction where
the rights and remedies are asserted) and, with respect to Pledged Securities
which are Treasury Securities, the Applicable Treasury Regulations, and such
additional rights and remedies to which a secured party is entitled under the
laws in effect in any jurisdiction where any rights and remedies hereunder may
be asserted.
(b) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, in the event the Collateral Agent is unable
to make payments due to the Company pursuant to the Purchase Contracts
underlying any Units, the Collateral Agent shall have and may exercise, with
reference to the Pledged Securities underlying such Units and the obligations of
the Holders of such Units, any and all of the rights and remedies available to a
secured party under the Code and the Applicable Treasury Regulations after
default by a debtor, and as otherwise granted herein or under any other law.
(c) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, the Collateral Agent is hereby irrevocably
authorized to receive and collect all payments of principal of or distributions
or interest on the Pledged Securities, in each case subject to the provisions
hereof.
(d) The Unit Agent, the Call Option Holder and each Holder of Units
agree that, from time to time, upon the written request of the Collateral Agent,
the Unit Agent, the Call Option Holder or such Holder of Units shall execute and
deliver such further documents and do such other acts and things as the
Collateral Agent may reasonably request in order to maintain the Pledge, and the
perfection and priority thereof, and to confirm the rights of the Collateral
Agent hereunder.
SECTION 7. The Collateral Agent. The Collateral Agent, the Company and
the Call Option Holder hereby agree among themselves as follows (it being
understood and agreed that neither the Unit Agent nor any Holder of Units shall
have any rights under this Section 7):
7.01 Appointment, Powers and Immunities. The Collateral Agent shall act
hereunder as agent for the Company and the Call Option Holder, with such powers
as are specifically vested in the Collateral Agent by the terms of this
Agreement, together with such other powers as are reasonably incidental thereto.
The Collateral Agent: (a) shall have no duties or responsibilities except those
expressly set forth in this Agreement and no implied covenants or obligations
shall be inferred from this Agreement against the Collateral Agent, nor shall
the Collateral Agent be bound by the provisions of any agreement by any party
hereto beyond the specific terms hereof; (b) shall not be responsible to the
Company or the Call Option Holder
-6-
<PAGE> 8
for any recitals contained in this Agreement, or in any certificate or other
document referred to or provided for in, or received by it under, this
Agreement, the Units, the Master Unit Agreement, or the Call Option Agreement or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement (other than as against the Collateral Agent), the
Units, the Master Unit Agreement or the Call Option Agreement or any other
document referred to or provided for herein or therein or for any failure by the
Company, the Call Option Holder, or any other Person (except the Collateral
Agent) to perform any of its obligations hereunder or thereunder; (c) shall not
be required to initiate or conduct any litigation or collection proceedings
hereunder (except pursuant to directions furnished under Section 7.02 hereof);
(d) shall not be responsible for any action taken or omitted to be taken by it
hereunder or under any other document or instrument referred to or provided for
herein or in connection herewith or therewith, except for its own negligence;
and (e) shall not be required to advise any party as to selling or retaining, or
taking or refraining from taking any action with respect to, any Units or any
property deposited hereunder. Subject to the foregoing, during the term of this
Agreement the Collateral Agent shall take all reasonable action in connection
with the safekeeping and preservation of the Pledged Securities hereunder.
No provision of this Agreement shall require the Collateral Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder. In no event shall the Collateral
Agent be liable for any amount in excess of the value of the Pledged Securities.
7.02 Instructions of the Company. The Company (or, with respect to
matters relating to the Call Options, the Call Option Holder) shall have the
right, by one or more instruments in writing executed and delivered to the
Collateral Agent, to direct the time, method and place of conducting any
proceeding for any right or remedy available to the Collateral Agent, or of
exercising any power conferred on the Collateral Agent, or to direct the taking
or refraining from taking of any action authorized by this Agreement; provided,
however, that (a) no Company direction shall in any way adversely affect the
rights of the Call Option Holder hereunder or under the Call Options and no Call
Option Holder direction shall in any way adversely affect the rights of the
Company hereunder or under the Purchase Contracts, (b) such direction shall not
conflict with the provisions of any law or of this Agreement and (c) the
Collateral Agent shall be adequately indemnified as provided herein. Nothing in
this Section 7.02 shall impair the right of the Collateral Agent in its
discretion to take any action or omit to take any action which it deems proper
and which is not inconsistent with such direction.
7.03 Reliance by Collateral Agent. The Collateral Agent shall be
entitled to rely upon any certification, order, judgment, opinion, notice or
other communication (including, without limitation, any thereof by telephone,
telecopy, telex, telegram or cable) believed by it to be genuine and correct and
to have been signed or sent by or on behalf of the proper
-7-
<PAGE> 9
Person or Persons (without being required to determine the correctness of any
fact stated therein), and upon advice and statements of legal counsel and other
experts selected by the Collateral Agent. As to any matters not expressly
provided for by this Agreement, the Collateral Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder in accordance with
instructions given by the Company or the Call Option Holder, as the case may be,
in accordance with this Agreement.
7.04 Rights in Other Capacities. The Collateral Agent and its
affiliates may (without having to account therefor to the Company or the Call
Option Holder) accept deposits from, lend money to, make investments in and
generally engage in any kind of banking, trust or other business with the Unit
Agent and any Holder of Units as if it were not acting as the Collateral Agent,
and the Collateral Agent and its affiliates may accept fees and other
consideration from the Unit Agent and any Holder of Units without having to
account for the same to the Company or the Call Option Holder, provided that the
Collateral Agent covenants and agrees with the Company and the Call Option
Holder that the Collateral Agent shall not accept, receive or permit there to be
created in its favor any security interest, lien or other encumbrance of any
kind in or upon the Pledged Securities.
7.05 Non-Reliance on Collateral Agent. The Collateral Agent shall not
be required to keep itself informed as to the performance or observance by the
Unit Agent or any Holder of Units of this Agreement, the Master Unit Agreement,
the Call Option Agreement, the Units or any other document referred to or
provided for herein or therein or to inspect the properties or books of the Unit
Agent or any Holder of Units. The Collateral Agent shall not have any duty or
responsibility to provide the Company or the Call Option Holder with any credit
or other information concerning the affairs, financial condition or business of
the Unit Agent or any Holder of Units that may come into the possession of the
Collateral Agent or any of its affiliates.
7.06 Compensation and Indemnity. The Company agrees: (a) to pay the
Collateral Agent from time to time reasonable compensation for all services
rendered by it hereunder and (b) to indemnify the Collateral Agent for, and to
hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of its powers and duties under this Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of such powers and
duties.
7.07 Failure to Act. In the event of any ambiguity in the provisions of
this Agreement or any dispute between or conflicting claims by or among the
undersigned and/or any other person or entity with respect to any funds or
property deposited hereunder, the Collateral Agent shall be entitled, at its
sole option, to refuse to comply with any and all claims, demands or
instructions with respect to such property or funds so long as such dispute or
conflict shall continue, and the Collateral Agent shall not be or become liable
in any way
-8-
<PAGE> 10
to any of the undersigned for its failure or refusal to comply with such
conflicting claims, demands or instructions. The Collateral Agent shall be
entitled to refuse to act until either (a) such conflicting or adverse claims or
demands shall have been finally determined by a court of competent jurisdiction
or settled by agreement between the conflicting parties as evidenced in a
writing satisfactory to the Collateral Agent or (b) the Collateral Agent shall
have received security or an indemnity satisfactory to the Collateral Agent
sufficient to save the Collateral Agent harmless from and against any and all
loss, liability or expense which the Collateral Agent may incur by reason of its
acting. The Collateral Agent may in addition elect to commence an interpleader
action or seek other judicial relief or orders as the Collateral Agent may deem
necessary. Notwithstanding anything contained herein to the contrary, the
Collateral Agent shall not be required to take any action that is in its opinion
contrary to law or to the terms of this Agreement, or which would in its opinion
subject it or any of its officers, employees or directors to liability.
7.08 Resignation of Collateral Agent. Subject to the appointment and
acceptance of a successor Collateral Agent as provided below, (a) the Collateral
Agent may resign at any time by giving notice thereof to the Company, the Unit
Agent and, if the Call Options are exercisable or have been exercised but not
settled, the Call Option Holder, (b) the Collateral Agent may be removed at any
time by the Company (provided, that, if the Call Options are exercisable or have
been exercised but not settled, the Call Option Holder shall have consented to
such removal), and (c) if the Collateral Agent fails to perform any of its
material obligations hereunder in any material respect for a period of not less
than 20 days after receiving notice of such failure by the Unit Agent and such
failure shall be continuing, the Collateral Agent may be removed by the Unit
Agent. The Unit Agent shall promptly notify the Company and, if the Call Options
are exercisable or have been exercised but not settled, the Call Option Holder
of any removal of the Collateral Agent pursuant to clause (c) of the immediately
preceding sentence. Upon any such resignation or removal, the Company and, if
the Call Options are exercisable or have been exercised but not settled, the
Call Option Holder shall have the right to appoint a successor Collateral Agent.
If no successor Collateral Agent shall have been so appointed and shall have
accepted such appointment within 30 days after the retiring Collateral Agent's
giving of notice of resignation or such removal, then the retiring Collateral
Agent may petition any court of competent jurisdiction for the appointment of a
successor Collateral Agent. The Collateral Agent shall be a bank which has an
office in New York, New York with a combined capital and surplus of at least
$50,000,000. Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent, and the retiring Collateral Agent
shall take all appropriate action to transfer any money and property held by it
hereunder (including the Pledged Securities) to such successor Collateral Agent.
The retiring Collateral Agent shall, upon such succession, be discharged from
its duties and obligations as Collateral Agent hereunder. After any retiring
Collateral Agent's resignation hereunder as Collateral Agent, the provisions of
this Section 6 shall continue in effect for its
-9-
<PAGE> 11
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Collateral Agent.
7.09 Right to Appoint Agent or Advisor. The Collateral Agent shall have
the right to appoint agents or advisors in connection with any of its duties
hereunder, and the Collateral Agent shall not be liable for any action taken or
omitted by such agents or advisors selected in good faith.
The provisions of this Section 7 shall survive termination of this
Agreement and the resignation or removal of the Collateral Agent.
SECTION 8 Miscellaneous.
8.01 Amendments. This Agreement may be amended in the manner set forth
in Section 801 of the Master Unit Agreement. In executing any amendment
permitted by this Section, the Collateral Agent shall be entitled to receive and
(subject to Section 8.01 hereof) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement.
8.02 No Waiver. No failure on the part of the Collateral Agent or any
of its agents to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Collateral Agent
or any of its agents of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
8.03 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The Company, the Call
Option Holder, the Collateral Agent and the Holders from time to time of the
Units, acting through the Unit Agent as their attorney-in-fact, hereby submit to
the nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York state court sitting in New
York City for the purposes of all legal proceedings arising out of or relating
to this Agreement or the transactions contemplated hereby. The Company, the Call
Option Holder, the Collateral Agent and the Holders from time to time of the
Units, acting through the Unit Agent as their attorney-in-fact, irrevocably
waive, to the fullest extent permitted by applicable law, any objection which
they may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
-10-
<PAGE> 12
8.04 Legal Holidays. In any case where any Quarterly Payment Date or
the Stock Purchase Date shall not be a Business Day, then (notwithstanding any
other provision of this Agreement or of the Units) the actions required by this
Agreement to occur on such date shall not occur on such date, but instead shall
occur on the next succeeding Business Day with the same force and effect as if
they had occurred on such Quarterly Payment Date or Stock Purchase Date, as the
case may be; except that if such next succeeding Business Day is in the next
calendar year, such actions shall occur on the immediately preceding Business
Day with the same force and effect as if made on such Quarterly Payment Date or
Stock Purchase Date.
8.05 Notices. All notices, requests, consents and other communications
provided for herein (including, without limitation, any modifications of, or
waivers or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by telecopy) delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof or, as to any party, at such other address as shall be designated by such
party in a notice to the other parties. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
8.06 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the Company,
the Call Option Holder, the Collateral Agent and the Unit Agent, and the Holders
from time to time of the Units, by their acceptance of the same, shall be deemed
to have agreed to be bound by the provisions hereof and to have ratified the
agreements of, and the grant of the Pledge hereunder by, the Unit Agent.
8.07 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
8.08 Severability. If any provision hereof is invalid or unenforceable
in any jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in order to carry out the intentions of the parties
hereto as nearly as may be possible and (b) the invalidity or unenforceability
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
8.09 Expenses, etc. The Company agrees to reimburse the Collateral
Agent for: (a) all reasonable out-of-pocket costs and expenses of the Collateral
Agent (including, without limitation, the reasonable fees and expenses of
counsel to the Collateral Agent), in connection with (i) the negotiation,
preparation, execution and delivery or performance of this Agreement and (ii)
any modification, supplement or waiver of any of the terms of this
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<PAGE> 13
Agreement; (b) all reasonable costs and expenses of the Collateral Agent
(including, without limitation, reasonable fees and expenses of counsel) in
connection with (i) any enforcement or proceedings resulting or incurred in
connection with causing any Holder of Units to satisfy its obligations under the
Purchase Contracts or Call Options forming a part of the Units and (ii) the
enforcement of this Section 8.09; and (c) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Agreement or any other document referred to
herein and all costs, expenses, taxes, assessments and other charges incurred in
connection with any filing, registration, recording or perfection of any
security interest contemplated hereby.
8.10 Security Interest Absolute. All rights of the Collateral Agent and
security interests hereunder, and all obligations of the Holders from time to
time of the Units here under, shall be absolute and unconditional irrespective
of:
(g) any lack of validity or enforceability of any provision of the
Units or any other agreement or instrument relating thereto;
(h) any change in the time, manner or place of payment of, or any
other term of, or any increase in the amount of, all or any of the
obligations of Holders of Units under the related Purchase Contracts or
Call Options or any other amendment or waiver of any term of, or any
consent to any departure from any requirement of, the Master Unit
Agreement or any Units or any other agreement or instrument relating
thereto; or
(i) any other circumstance which might otherwise constitute a
defense available to, or discharge of, borrower, a guarantor or a
pledgor.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LIFE RE CORPORATION
By:________________________________
Name:
Title:
Address for Notices:
969 High Ridge Road
Stamford, Connecticut 06905
Attention: General Counsel
Telecopy:
GOLDMAN, SACHS & CO.,
as Call Option Holder
___________________________________
(Goldman, Sachs & Co.)
Address for Notices:
85 Broad Street
New York, New York 10004
Attention: ....................
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<PAGE> 15
..................................
as Collateral Agent
By:_______________________________________
Name:
Title:
Address for Notices:
[ ]
Attention: .......................
THE BANK OF NEW YORK,
as Unit Agent and as attorney-in-fact of the Holders
from time to time of the Units
By:_______________________________________
Name:
Title:
Address for Notices:
[ ]
Attention: .......................
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<PAGE> 1
Exhibit 4.14
================================================================================
GOLDMAN, SACHS & CO.,
as Call Option Holder
AND
THE BANK OF NEW YORK,
as Unit Agent and as Attorney-In-Fact
---------------------------
CALL OPTION AGREEMENT
---------------------------
Dated as of ......................., 1998
================================================================================
<PAGE> 2
CALL OPTION AGREEMENT
CALL OPTION AGREEMENT, dated as of .........., 1998, between
Goldman, Sachs & Co., as Call Option Holder, and The Bank of New York, as Unit
Agent and as attorney-in-fact of the Holders from time to time of the Normal
Units.
RECITALS
Life Re Corporation and the Unit Agent are parties to the Master Unit
Agreement, dated as the date hereof (as the same may be supplemented or amended
in accordance with the terms thereof, the "Master Unit Agreement"). The Master
Unit Agreement contemplates that the Company will issue QUIPS(SM)* and Junior
Subordinated Debentures, and that QUIPS or Junior Subordinated Debentures will
underlie Normal Units outstanding from time to time thereunder.
It is intended that the Holders from time to time of the Normal Units
grant Call Options entitling the Call Option Holder to acquire the QUIPS or
Junior Subordinated Debentures underlying the related Normal Units on the terms
and subject to the conditions set forth herein. Pursuant to the terms of the
Principal Agreements and the Unit Certificates for the Normal Units, the Holders
from time to time of the Normal Units irrevocably authorize the Unit Agent, as
attorney-in-fact of such Holders, to enter into such Call Options and execute
and deliver this Agreement on behalf of such Holders.
Accordingly, the Call Option Holder and the Unit Agent, on its own
behalf and as attorney-in-fact of the Holders from time to time of the Normal
Units, agree as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1. Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) capitalized terms used herein and not defined are used herein as
defined in the Master Unit Agreement; and
- --------
* QUIPS is a servicemark of Goldman, Sachs & Co.
<PAGE> 3
(b) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision.
"Aggregate Consideration Deliverable on Exercise of the Call
Options" means consideration comprised of:
(a) Treasury Securities that through their scheduled
payments will generate not later than each Quarterly
Payment Date falling after the Call Settlement Date
and on or before the Stock Purchase Date an amount of
cash that is at least equal to the aggregate
distributions or interest payments that are scheduled
to be payable in respect of the QUIPS or Junior
Subordinated Debentures underlying the Normal Units
on such Quarterly Payment Date (assuming for this
purpose that no distributions or payments will then
have been deferred);
(b) Treasury Securities that through their scheduled
payments will generate not later than the Stock
Purchase Date an amount of cash equal to the
aggregate Liquidation Amount of the QUIPS or
principal amount of the Junior Subordinated
Debentures underlying the Normal Units; and
(c) if the Company is, at the Call Settlement Date,
deferring distributions on the QUIPS or interest
payments on the Junior Subordinated Debentures, an
amount in cash equal to (i) the aggregate deferred
distributions on the QUIPS or deferred interest
payments on the Junior Subordinated Debentures
underlying the Normal Units accrued to the Call
Settlement Date, if the Call Settlement Date is a
Quarterly Payment Date, and (ii) the aggregate
deferred distributions on the QUIPS or deferred
interest payments on the Junior Subordinated
Debentures underlying the Normal Units accrued to the
Quarterly Payment Date immediately preceding the Call
Settlement Date plus interest thereon at the QUIPS
Distribution Rate for the period from and including
such Quarterly Payment Date to but excluding such
Call Settlement Date (computed on the basis of a
360-day year of twelve 30-day months), if the Call
Settlement Date is not a Quarterly Payment Date.
"Call Option Expiration Date" means .........................,
2001 (or, if such date is not a Business Day, the next succeeding
Business Day).
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<PAGE> 4
ARTICLE TWO
CALL OPTION
SECTION 2.1 Grant. The Unit Agent, on behalf of and as attorney-in-fact
for the Holders from time to time of the Normal Units, hereby grants the Call
Options to the Call Option Holder on the terms and subject to the conditions set
forth herein.
SECTION 2.2 Consideration. As consideration for such Call Options,
concurrently with the execution hereof, the Call Option Holder is paying to the
underwriters under the Underwriting Agreement (who are acting in this regard on
behalf of the initial investors in the Normal Units) an amount equal to
$.............. per Call Option.
SECTION 2.3 Expiration or Termination of Call Options. The Call Options
shall be irrevocable, but the Call Options and the rights of the Call Option
Holder and the obligations of the Holders of Normal Units thereunder shall (a)
expire on the Call Option Expiration Date if the Call Settlement Date has not
occurred on or prior to such date and (b) automatically terminate upon the
occurrence of a Termination Event.
ARTICLE THREE
EXERCISE OF CALL OPTIONS
SECTION 3.1 Exercise Mechanics.
(a) The Call Option Holder may exercise all (but not less than all) the
Call Options by (i) delivering to the Unit Agent and the Collateral Agent, on or
prior to the Call Option Settlement Date, a notice, substantially in the form
set forth in Annex A attached hereto, stating that the Call Option Holder is
exercising its Call Options and specifying the Call Settlement Date therefor
(which may not be after the Call Option Expiration Date) and (ii) delivering to
the Collateral Agent, by Noon, New York City time, on the Call Settlement Date,
the Aggregate Consideration Deliverable on Exercise of the Call Options.
(b) Pursuant to the Pledge Agreement, upon receipt by the Collateral
Agent of the Aggregate Consideration Deliverable on Exercise of the Call Options
in the manner contemplated hereby and by the Pledge Agreement, the Collateral
Agent shall transfer the QUIPS or Junior Subordinated Debentures underlying the
Normal Units, free and clear of any lien, pledge or security interest created by
the Pledge Agreement, to the Call Option Holder or its designee as specified in
the notice referred to in Section 3.1(a) above.
(c) The Unit Agent shall, not later than three Business Days following
the Call Settlement Date, mail notice of the exercise of the Call Options to the
Holders in the manner prescribed by the Master Unit Agreement.
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<PAGE> 5
ARTICLE FOUR
MISCELLANEOUS
4.1 Amendments. This Agreement may be amended in the manner set forth
in Section 801 of the Master Unit Agreement.
4.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The Call Option Holder, the
Unit Agent and the Holders from time to time of the Normal Units, acting through
the Unit Agent as their attorney-in-fact, hereby submit to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York state court sitting in New York City for the
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. The Call Option Holder, the Unit Agent
and the Holders from time to time of the Normal Units, acting through the Unit
Agent as their attorney-in-fact, irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of the venue of any such proceeding brought in such a court and
any claim that any such proceeding brought in such a court has been brought in
an inconvenient forum.
4.3 Notices. All notices, requests, consents and other communications
provided for herein (including, without limitation, any modifications of, or
waivers or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by telecopy) delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof or, as to any party, at such other address as shall be designated by such
party in a notice to the other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
4.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the Call Option
Holder and the Unit Agent, and the Holders from time to time of the Normal
Units, by their acceptance of the same, shall be deemed to have agreed to be
bound by the provisions hereof and to have ratified the agreements of, and the
grant of the Call Options hereunder by, the Unit Agent.
4.05 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
-4-
<PAGE> 6
4.6 Severability. If any provision hereof is invalid or unenforceable
in any jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in order to carry out the intentions of the parties
hereto as nearly as may be possible and (b) the invalidity or unenforceability
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
-5-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
GOLDMAN, SACHS & CO.,
as Call Option Holder
____________________________________
(Goldman, Sachs & Co.)
Address for Notices:
85 Broad Street
New York, New York 10004
Attention: ................
THE BANK OF NEW YORK,
as Unit Agent and as attorney-in-fact of the Holders
from time to time of the Normal Units
By:_________________________________
Name:
Title:
Address for Notices:
[ ]
Attention: .................
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<PAGE> 8
ANNEX I
EXERCISE NOTICE
Reference is made to the Call Option Agreement, dated as of ..........,
1998 (the "Call Option Agreement"), between Goldman, Sachs & Co., as Call Option
Holder, and The Bank of New York, as Unit Agent and attorney-in-fact of the
Holders from time to time of the Normal Units. Capitalized terms used herein but
not defined are used herein as defined in the Call Option Agreement.
The undersigned hereby exercises all of the Call Options underlying the
Normal Units and specifies ____________________ as the Call Settlement Date.
Certificates representing the QUIPS or Junior Subordinated Debentures underlying
the Normal Units should be registered in the name of
______________________________ and delivered to [insert address].
GOLDMAN, SACHS & CO.
By:___________________________________
(Goldman, Sachs & Co.)
Date:__________________________
I-1
<PAGE> 1
Exhibit 5.1
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
March 9, 1998
Life Re Corporation
969 High Ridge Road
Stamford, CT 06905
Ladies and Gentleman:
We have acted as counsel to Life Re Corporation, a Delaware corporation
(the "Company"), and Life Re Capital Trust II, a Delaware business trust (the
"Trust"), in connection with the preparation and filing with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, of a
Registration Statement on Form S-3 (Registration No. 333-46213) (as amended, the
"Registration Statement") with respect to the registration of (i) junior
subordinated deferrable interest debentures of the Company (the "Junior
Subordinated Debentures"), (ii) quarterly income preferred securities of the
Trust (the "QUIPS"), (iii) shares of common stock of the Company, par value
$.001 per share (the "Common Stock"), (iv) stock purchase contracts of the
Company for the purchase of Common Stock (the "Purchase Contracts"), (v)
adjustable conversion-rate equity security units of the Company, each
representing (a) the right to purchase Common Stock under a Purchase Contract
and (b) ownership of QUIPS, Junior Subordinated Debentures or other securities
securing the holder's obligation to purchase Common Stock under a Purchase
Contract (the "Units") and (vi) a guarantee of certain payment obligations of
the Trust with respect to the QUIPS to be executed and delivered by the Company
for the benefit of the holders of the QUIPS. Capitalized terms defined in the
Registration Statement and used but not otherwise defined herein are used herein
as such terms are defined in the Registration Statement.
In so acting, we have reviewed the Registration Statement, including the
form of Indenture (the "Indenture") between the Company and The Bank of New
York, as Debenture Trustee, the form of Junior Subordinated Debenture set forth
in
<PAGE> 2
Life Re Corporation
March 9, 1998
Page 2
the Indenture, the form of Amended and Restated Declaration of Trust (the
"Declaration") among the Company, as Sponsor, The Bank of New York, as Property
Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the
Administrators named therein, the form of QUIPS set forth in the Declaration,
the form of Guarantee Agreement (the "Guarantee Agreement") by and between the
Company and The Bank of New York, as Guarantee Trustee, the form of Guarantee
set forth in the Guarantee Agreement, the form of Master Unit Agreement (the
"Master Unit Agreement") by and between the Company and The Bank of New York, as
Unit Agent, and the form of Units set forth in the Master Unit Agreement, each
of which is being filed as an exhibit to the Registration Statement. In
addition, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of such corporate records, agreements, documents
and other instruments, and such certificates or comparable documents of public
officials and of officers and representatives of the Company and the Trust, and
have made such inquiries of such officers and representatives, as we have deemed
relevant and necessary as a basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of
fact material to this opinion that have not been independently established, we
have relied upon certificates or comparable documents of officers and
representatives of the Company and the Trust. We have also assumed (i) the due
organization and valid existence of the Company and the Trust, (ii) that each of
the Company and the Trust has the requisite power and authority to enter into
and perform its respective obligations under the Indenture, the Junior
Subordinated Debentures, the Declaration, the QUIPS, the Guarantee Agreement,
the Guarantee, the Master Unit Agreement and the Units and (iii) the due
authorization, execution and delivery of the Indenture, the Junior Subordinated
Debentures, the Declaration, the QUIPS, the Guarantee Agreement, the Guarantee,
the Master Unit Agreement and the Units by the Company and the Trust, as the
case may be.
Based on the foregoing, and subject to the qualifications stated herein, we
are of the opinion that when the Indenture, the Declaration, the Guarantee
Agreement and the Master Unit Agreement will have been duly authorized, executed
and delivered by the other parties thereto:
1. The Junior Subordinated Debentures, when duly executed and
authenticated by the Debenture Trustee pursuant to
<PAGE> 3
Life Re Corporation
March 9, 1998
Page 3
the terms of the Indenture and issued, delivered and sold against
payment therefor in accordance with the terms of the Indenture and as
contemplated by the Registration Statement, will be validly issued and
will constitute the legally binding obligations of the Company,
enforceable against the Company in accordance with their terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
2. The QUIPS, when duly executed and authenticated by the
Property Trustee in accordance with the terms of the Declaration and
issued, delivered and sold against payment therefor in accordance with
the terms of the Declaration and as contemplated by the Registration
Statement, will be validly issued, fully paid and nonassessable.
3. The Purchase Contracts, when issued, delivered and sold
against payment therefor in accordance with the terms of the Master
Unit Agreement and as contemplated by the Registration Statement, will
be validly issued and will constitute the legally binding obligations
of the Company, enforceable against the Company in accordance with
their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles
of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
4. The Units, when duly executed and authenticated by the Unit
Agent in accordance with the terms of the Master Unit Agreement and
issued, delivered and sold against payment therefor in accordance with
the terms of the Master Unit Agreement and as contemplated by the
Registration Statement, will be validly issued, fully paid and
nonassessable.
5. The Common Stock to be issued pursuant to the Purchase
Contracts, when issued, delivered and sold against payment therefor
in accordance with the terms of the Master Unit Agreement and the
Purchase Contracts and as contemplated by the Registration Statement
(assuming that the Company has reserved for issuance the requisite
number of shares of Common Stock), will be validly issued, fully paid
and nonassessable.
<PAGE> 4
Life Re Corporation
March 9, 1998
Page 4
6. The Guarantee, when duly executed and authenticated by the
Guarantee Trustee pursuant to the terms of the Guarantee Agreement and
when the QUIPS to which such Guarantee relates have been duly issued,
delivered and sold against receipt by the Trust of payment therefor in
accordance with the terms of the Declaration and as contemplated by
the Registration Statement, will constitute the legally binding
obligation of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding
at law or in equity).
The opinions expressed herein are limited to the laws of the State of New
York, the corporate laws of the State of Delaware and the federal laws of the
United States, and we express no opinion as to the effect on the matters covered
by this opinion of the laws of any other jurisdiction.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to our firm under the
caption "Legal Matters" in the Prospectus which is part of the Registration
Statement.
The opinions expressed herein are rendered solely for your benefit in
connection with the transactions described herein. This opinion may not be used
or relied upon by any other person and may not be disclosed to a third party,
filed with a governmental agency, quoted, cited or otherwise referred to without
our prior written consent, except as noted above.
Very truly yours,
/s/ WEIL, GOTSHAL & MANGES LLP
<PAGE> 1
Exhibit 8.1
March 9, 1998
Life Re Corporation,
969 High Ridge Road,
Stamford, Connecticut 06905.
Dear Sirs:
We have acted as special tax counsel to Life Re Corporation
("Life Re") and Life Re Capital Trust II (the "Trust") in connection with the
Registration Statement on Form S-3 of Life Re and the Trust filed with the
Securities and Exchange Commission on February 18, 1998 (the "Registration
Statement") and hereby confirm to you our opinion as set forth under the heading
"Certain Federal Income Tax Consequences" in the Prospectus included in the
Registration Statement.
We hereby consent to the filing with the Securities and
Exchange Commission of this letter as an exhibit to the Registration Statement
and the reference to us under the heading "Certain Federal Income Tax
Consequences." In giving such consent, we do not thereby admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
Very truly yours,
/s/ Sullivan & Cromwell
<PAGE> 1
Exhibit 15.1
The Board of Directors
Life Re Corporation
We are aware of the incorporation by reference in the Registration
Statement (Form S-3 No. 333-46213) of Life Re Corporation for the registration
of 1,725,000 Units of our reports dated May 1, 1997; July 29, 1997; and October
30, 1997 relating to the unaudited condensed consolidated interim financial
statements of Life Re Corporation that are included in its Forms 10-Q for the
quarters ended March 31, 1997; June 30, 1997; and September 30, 1997.
/s/ Ernst & Young LLP
Stamford, Connecticut
March 9, 1998
<PAGE> 1
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3 No. 333-46213) and related Prospectus of
Life Re Corporation for the registration of 1,725,000 Units and to the
incorporation by reference therein of our report dated February 4, 1997, with
respect to the consolidated financial statements and schedule of Life Re
Corporation included in its Annual Report (Form 10-K) for the year ended
December 31, 1996, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Stamford, Connecticut
March 9, 1998
<PAGE> 1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
==============================================================================
Exhibit 25.1
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
------------
LIFE RE CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 01-0437851
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
969 High Ridge Road
Stamford, Connecticut 06905
(Address of principal executive offices) (Zip code)
------------
Junior Subordinated Debentures
(Title of the indenture securities)
==============================================================================
<PAGE> 2
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- ------------------------------------------------------------------------------
Name Address
- ------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street,
New York New York, N.Y. 10006, and
Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza,
New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
- 3 -
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 5th day of March, 1998.
THE BANK OF NEW YORK
By: /s/VAN K. BROWN
----------------------
Name: VAN K. BROWN
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE> 5
EXHIBIT 7
-----------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
at 48 Wall Street, New York, N.Y. 01286
And Foreign and Domestic Subsidiaries
a member of the Federal Reserve System, at the close of business September 30,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN THOUSANDS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin.................................$ 5,004,638*
Interest-bearing balances.......................................................... 1,271,514
Securities:
Held-to-maturity securities........................................................ 1,105,782
Available-for-sale securities...................................................... 3,164,271
Federal funds sold and Securities purchased under agreements to resell............... 5,723,829
Loans and lease financing receivables:
Loans and leases, net of unearned income.............................34,916,196
LESS: Allowance for loan and lease losses...............................581,177
LESS: Allocated transfer risk reserve.......................................429
Loans and leases, net of unearned income, allowance and reserve.................... 34,334,590
Assets held in trading accounts...................................................... 2,035,284
Premises and fixed assets (including capitalized leases)............................. 671,664
Other real estate owned.............................................................. 13,306
Investments in unconsolidated subsidiaries and associated companies.................. 210,685
Customers liability to the bank on acceptances outstanding .......................... 1,463,446
Intangible assets.................................................................... 753,190
Other assets......................................................................... 1,754,795
-----------
Total assets.........................................................................$57,536,995
===========
LIABILITIES
Deposits
In domestic offices................................................................$27,270,824
Noninterest-bearing..................................................12,160,977
Interest-bearing.....................................................15,109,847
In foreign offices. Edge and Agreement subsidiaries and IBFs....................... 14,687,806
Noninterest-bearing.....................................................657,479
Interest-bearing.....................................................14,030,327
Federal funds purchased and Securities sold under agreements to repurchase........... 1,946,099
Demand notes issued to the U.S. Treasury............................................. 283,793
Trading liabilities.................................................................. 1,553,539
Other borrowed money:
With remaining maturity of one year or less........................................ 2,245,014
With remaining maturity of more than one year through three years.................. 0
With remaining maturity of more than three years................................... 45,664
Bank's liability on acceptances executed and outstanding............................. 1,473,588
Subordinated notes and debentures.................................................... 1,018,940
Other liabilities.................................................................... 2,193,031
-----------
Total liabilities.................................................................... 52,718,298
-----------
EQUITY CAPITAL
Common stock......................................................................... 1,135,284
Surplus.............................................................................. 731,319
Undivided profits and capital reserves............................................... 2,943,008
Net unrealized holding gains (losses) on available-for-sale securities............... 25,428
Cumulative foreign currency transaction adjustments.................................. (16,342)
-----------
Total equity capital................................................................. 4,818,697
-----------
Total liabilities and equity capital.................................................$57,536,995
===========
</TABLE>
I Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
-----------------------------------
<PAGE> 1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
==============================================================================
Exhibit 25.2
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
------------
LIFE RE CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 01-0437851
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
969 High Ridge Road
Stamford, Connecticut 06905
(Address of principal executive offices) (Zip code)
------------
Guarantee of Quarterly Income Preferred Securities
of Life Re Capital Trust II
(Title of the indenture securities)
==============================================================================
<PAGE> 2
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- ------------------------------------------------------------------------------
Name Address
- ------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street,
New York New York, N.Y. 10006, and
Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza,
New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published pursuant
to law or to the requirements of its supervising or examining authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 5th day of March, 1998.
THE BANK OF NEW YORK
By: /s/ VAN K. BROWN
-------------------------------
Name: VAN K. BROWN
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE> 5
EXHIBIT 7
______________________________________________________________________________
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries.
a member of the Federal Reserve System, at the close of business September 30,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
<S> <C>
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin......... $ 5,004,638
Interest-bearing balances.................................. 1,271,514
Securities:
Held-to-maturity securities................................ 1,105,782
Available-for-sale securities.............................. 3,164,271
Federal funds sold and Securities purchased under agreements
to resell.................................................. 5,723,829
Loans and lease financing receivables:
Loans and leases, net of unearned income.........34,916,196
LESS: Allowance for loan and lease losses...........581,177
LESS: Allocated transfer risk reserve...................429
Loans and leases, net of unearned income, allowance,
and reserve............................................... 34,334,590
Assets held in trading accounts............................. 2,035,284
Premises and fixed assets (including capitalized leases).... 671,664
Other real estate owned..................................... 13,306
Investments in unconsolidated subsidiaries and
associated companies....................................... 210,685
Customers' liability to this bank on acceptances
outstanding................................................ 1,463,445
Intangible assets........................................... 753,190
Other assets................................................ 1,784,795
-----------
Total assets................................................ $57,536,995
===========
LIABILITIES:
Deposits:
In domestic offices........................................ $27,270,824
Noninterest-bearing..............................12,160,977
Interest-bearing.................................15,109,847
In foreign offices, Edge and Agreement subsidiaries,
and IBFs.................................................. 14,687,806
Noninterest-bearing.................................657,479
Interest-bearing.................................14,030,327
Federal funds purchased and Securities sold under agreements
to repurchase.............................................. 1,946,099
Demand notes issued to the U.S. Treasury.................... 283,793
Trading liabilities......................................... 1,553,539
Other borrowed money:
With remaining maturity of one year or less................ 2,245,014
With remaining maturity of more than one year through
three years............................................... 0
With remaining maturity of more than three years........... 45,664
Bank's liability on acceptances executed and outstanding.... 1,473,588
Subordinated notes and debentures........................... 1,018,940
Other liabilities........................................... 2,193,031
-----------
Total liabilities........................................... 52,718,298
-----------
EQUITY CAPITAL
Common stock................................................ 1,135,264
Surplus..................................................... 731,319
Undivided profits and capital reserves...................... 2,943,006
Net unrealized holding gains (losses) on available-for-sale
securities................................................. 25,426
Cumulative foreign currency translation adjustments......... ( 16,342)
-----------
Total equity capital........................................ 4,818,697
-----------
Total liabilities and equity capital........................ $57,536,995
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that the Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
_______________________________________________________________________________
<PAGE> 1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
==============================================================================
Exhibit 25.3
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, NY 10286
(Address of principal executive offices) (Zip code)
------------
LIFE RE CAPITAL TRUST II
(Exact name of obligor as specified in its charter)
Delaware To be applied for
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
969 High Ridge Road
Stamford, Connecticut 06905
(Address of principal executive offices) (Zip code)
------------
Quarterly Income Preferred Securities
(Title of the indenture securities)
==============================================================================
<PAGE> 2
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- ------------------------------------------------------------------------------
Name Address
- ------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street,
New York New York, N.Y. 10006, and
Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza,
New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published pursuant
to law or to the requirements of its supervising or examining authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and State
of New York, on the 5th day of March, 1998.
THE BANK OF NEW YORK
By: /s/ VAN K. BROWN
-------------------------------
Name: VAN K. BROWN
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE> 5
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depository
institutions:
Noninterest-bearing balances and
currency and coin........... $ 5,004,638
Interest-bearing balances........ 1,271,514
Securities:
Held-to-maturity securities...... 1,105,782
Available-for-sale securities.... 3,164,271
Federal funds sold and Securities
purchased under agreements
to resell........................ 5,723,829
Loans and lease financing receivables:
Loans and leases, net of unearned
income............34,916,196
LESS: Allowance for loan and
lease losses.........581,177
LESS: Allocated transfer risk
reserve..................429
Loans and leases, net of unearned
income, allowance, and
reserve..................... 34,334,590
Assets held in trading accounts....... 2,035,284
Premises and fixed assets (including
capitalized leases).............. 671,664
Other real estate owned............... 13,306
Investments in unconsolidated
subsidiaries and associated
companies........................ 210,685
Customers' liability to the bank on
acceptances outstanding.......... 1,463,446
Intangible assets..................... 753,190
Other assets.......................... 1,784,795
-----------
Total assets.......................... $57,536,995
===========
LIABILITIES
Deposits:
In domestic offices.............. $27,270,824
Noninterest-bearing....12,160,977
Interest-bearing.......15,109,847
In foreign offices, Edge and
Agreement subsidiaries, and
IBFs........................ 14,687,806
Noninterest-bearing.......657,479
Interest-bearing.......14,030,327
Federal funds purchased and Securities
sold under agreements to
repurchase....................... 1,946,099
Demand notes issued to the
U.S. Treasury.................... 283,793
Trading liabilities................... 1,553,539
Other borrowed money:
With remaining maturity of one
year or less................ 2,245,014
With remaining maturity of more
than one year through three
years....................... 0
With remaining maturity of more
than three years............ 45,664
Bank's liability on acceptances
executed and outstanding......... 1,473,588
Subordinated notes and debentures..... 1,018,940
Other liabilities..................... 2,193,031
-----------
Total liabilities..................... 52,718,298
-----------
EQUITY CAPITAL
Common stock.......................... 1,135,284
Surplus............................... 731,319
Undivided profits and capital
reserves......................... 2,943,008
Net unrealized holding gains (losses)
on available-for-sale
securities....................... 25,428
Cumulative foreign currency
translation adjustments.......... (16,342)
-----------
Total equity capital.................. 4,818,697
-----------
Total liabilities and equity capital.. $57,536,995
===========
</TABLE>
I, Robert E. Kerlman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Kerlman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
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