<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 8, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C>
EXECUTIVE RISK INC. EXECUTIVE RISK CAPITAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS (EXACT NAME OF REGISTRANT AS SPECIFIED
CHARTER) IN ITS TRUST AGREEMENT)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
6331 6331
(PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER)
06-1388171 06-6442501
(I.R.S. EMPLOYER (I.R.S. EMPLOYER
IDENTIFICATION NO.) IDENTIFICATION NO.)
</TABLE>
------------------------
82 HOPMEADOW STREET
SIMSBURY, CONNECTICUT 06070-7683
(860) 408-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
LEROY A. VANDER PUTTEN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
EXECUTIVE RISK INC.
SIMSBURY, CT 06070-7683
(860) 408-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENTS FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
JAMES A. FITZPATRICK, JR., ESQ. CRAIG E. CHAPMAN, ESQ.
JONATHAN FREEDMAN, ESQ. BROWN & WOOD LLP
DEWEY BALLANTINE ONE WORLD TRADE CENTER
1301 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10048
NEW YORK, NEW YORK 10019-6092
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8.675% Series B Capital Securities of
Executive Risk Capital Trust................. $125,000,000 100% $125,000,000 $37,878.79
- ----------------------------------------------------------------------------------------------------------------
8.675% Series B Junior Subordinated
Deferrable Interest Debentures of Executive
Risk Inc.(2).................................
- ----------------------------------------------------------------------------------------------------------------
Executive Risk Inc. Series B Guarantee with
respect to 8.675% Series B Capital
Securities(3)................................
- ----------------------------------------------------------------------------------------------------------------
Total.............................. $125,000,000(4) 100% $125,000,000(5) $37,878.79
================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
(2) No separate consideration will be received for the 8.675% Series B Junior
Subordinated Deferrable Interest Debentures of Executive Risk Inc. (the "New
Junior Subordinated Debentures") distributed upon any liquidation of
Executive Risk Capital Trust.
(3) No separate consideration will be received for the Executive Risk Inc.
Series B Guarantee (the "New Guarantee") with respect to the 8.675% Series B
Capital Securities of Executive Risk Capital Trust (the "New Capital
Securities").
(4) This Registration Statement is deemed to cover rights of holders of New
Junior Subordinated Debentures under the Indenture, the rights of holders of
New Capital Securities under the Amended and Restated Declaration of Trust,
the rights of holders of New Capital Securities under the New Guarantee and
certain backup undertakings as described herein.
(5) Such amount represents the liquidation amount of the New Capital Securities
to be exchanged hereunder and the principal amount of New Junior
Subordinated Debentures that may be distributed to holders of New Capital
Securities upon any liquidation of Executive Risk Capital Trust.
------------------------
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 THIS 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 APRIL 8, 1997
PROSPECTUS
EXECUTIVE RISK CAPITAL TRUST
Offer to exchange its 8.675% Series B Capital Securities (Liquidation Amount
$1,000 per Capital Security) which have been registered under the Securities Act
of 1933 for any and all of its outstanding 8.675% Series A Capital Securities
(Liquidation Amount $1,000 per Capital Security) unconditionally guaranteed, to
the extent described herein, by
EXECUTIVE RISK INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1997, UNLESS EXTENDED.
------------------------
Executive Risk Capital Trust, a trust formed under the laws of the State of
Delaware (the "Trust"), hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying Letter
of Transmittal (which together constitute the "Exchange Offer"), to exchange up
to $125,000,000 aggregate Liquidation Amount of its 8.675% Series B Capital
Securities (the "New Capital Securities") which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (as defined herein) of which this Prospectus constitutes
a part, for a like Liquidation Amount of its outstanding 8.675% Series A Capital
Securities (the "Old Capital Securities"), of which $125,000,000 aggregate
Liquidation Amount is outstanding. Pursuant to the Exchange Offer, Executive
Risk Inc., a Delaware corporation (the "Company"), is also offering to exchange
(i) its guarantee of payments of cash distributions and payments on liquidation
of the Trust or redemption of the New Capital Securities (the "New Guarantee")
for a like guarantee in respect of the Old Capital Securities (the "Old
Guarantee") and (ii) all of its 8.675% Series B Junior Subordinated Deferrable
Interest Debentures due February 1, 2027 (the "New Junior Subordinated
Debentures") for a like aggregate principal amount of its 8.675% Series A Junior
Subordinated Deferrable Interest Debentures due February 1, 2027 (the "Old
Junior Subordinated Debentures"), which New Guarantee and New Junior
Subordinated Debentures also have been registered under the Securities Act. The
Old Capital Securities, the Old Guarantee and the Old Junior Subordinated
Debentures are collectively referred to herein as the "Old Securities" and the
New Capital Securities, the New Guarantee and the New Junior Subordinated
Debentures are collectively referred to herein as the "New Securities."
The terms of the New Securities are identical in all material respects to the
respective terms of the Old Securities, except that (i) the New Securities have
been registered under the Securities Act and therefore will not be subject to
certain restrictions on transfer applicable to the Old Securities, (ii) the New
Capital Securities will not contain the $100,000 minimum Liquidation Amount
transfer restriction, (iii) the New Capital Securities will not provide for any
increase in the Distribution (as defined herein) rate thereon, (iv) the New
Junior Subordinated Debentures will not contain the $100,000 minimum principal
amount transfer restriction and (v) the New Junior Subordinated Debentures will
not provide for any increase in the interest rate thereon. See "Description of
New Securities" and "Description of Old Securities." The New Capital Securities
are being offered for exchange in order to satisfy certain obligations of the
Company and the Trust under the Registration Rights Agreement dated as of
February 5, 1997 (the "Registration Rights Agreement") among the Company, the
Trust and the Initial Purchasers (as defined herein). In the event that the
Exchange Offer is consummated, any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer and the New Capital
Securities issued in the Exchange Offer will vote together as a single class for
purposes of determining whether holders of the requisite percentage in
outstanding Liquidation Amount thereof have taken certain actions or exercised
certain rights under the Declaration (as defined herein).
(Continued on the following page)
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING MAILED TO ALL
HOLDERS OF OLD CAPITAL SECURITIES ON APRIL , 1997.
SEE "RISK FACTORS" COMMENCING ON PAGE 10 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER OLD CAPITAL SECURITIES IN
THE EXCHANGE OFFER.
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.
THE DATE OF THIS PROSPECTUS IS APRIL , 1997.
<PAGE> 3
(Continued from the previous page)
The New Capital Securities and the Old Capital Securities (collectively,
the "Capital Securities") represent preferred undivided beneficial interests in
the assets of the Trust. The Company is the owner of all of the beneficial
interests represented by common securities of the Trust (the "Common
Securities," and together with the Capital Securities, the "Trust Securities").
The Chase Manhattan Bank is the Property Trustee of the Trust. The Trust exists
for the sole purpose of issuing the Trust Securities and investing the proceeds
thereof in the Junior Subordinated Debentures (as defined herein). The Junior
Subordinated Debentures will mature on February 1, 2027 (the "Stated Maturity
Date"). The Capital Securities will have a preference over the Common Securities
under certain circumstances with respect to cash distributions and amounts
payable on liquidation, redemption or otherwise. See "Description of New
Securities--Description of New Capital Securities-- Subordination of Common
Securities."
As used herein, the term "Indenture" means the Indenture, dated as of
February 5, 1997, as amended and supplemented from time to time, between the
Company and The Chase Manhattan Bank, as Debenture Trustee (the "Debenture
Trustee"), and the term "Declaration" means the Amended and Restated Declaration
of Trust relating to the Trust, dated as of February 5, 1997, among the Company,
as Sponsor, The Chase Manhattan Bank, as Property Trustee (the "Property
Trustee"), Chase Manhattan Bank Delaware, as Delaware Trustee (the "Delaware
Trustee"), and the Administrative Trustees named therein (collectively, with the
Property Trustee and Delaware Trustee, the "Issuer Trustees"). In addition, as
the context may require, unless otherwise expressly stated, the term "Junior
Subordinated Debentures" includes the Old Junior Subordinated Debentures and the
New Junior Subordinated Debentures and the term "Guarantee" includes the Old
Guarantee and the New Guarantee.
Except as described herein, the Capital Securities will be represented by
global Capital Securities in fully registered form, deposited with a custodian
for and registered in the name of a nominee of The Depository Trust Company
("DTC"). Beneficial interests in such Capital Securities will be shown on, and
transfers thereof will be effected through, records maintained by DTC and its
participants. Beneficial interests in such Capital Securities will trade in
DTC's Same-Day Funds Settlement System and secondary market trading activity in
such interests will therefore settle in immediately available funds.
Holders of the Trust Securities will be entitled to receive cumulative cash
distributions accumulating from February 5, 1997, and payable semiannually in
arrears on February 1 and August 1 of each year, commencing August 1, 1997, at
the annual rate of 8.675% of the Liquidation Amount of $1,000 per Trust Security
("Distributions"). So long as no Debenture Event of Default (as defined herein)
has occurred and is continuing, the Company will have the right to defer
payments of interest on the Junior Subordinated Debentures at any time and from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each deferral period (each, an "Extension Period"), provided that no
Extension Period may extend beyond the Stated Maturity Date. Upon the expiration
of any such Extension Period and the payment of all amounts then due, the
Company may elect to begin a new Extension Period, subject to the requirements
set forth in the Indenture. If and for so long as interest payments on the
Junior Subordinated Debentures are so deferred, Distributions on the Trust
Securities will also be deferred and the Company will not be permitted, subject
to certain exceptions described herein, to declare or pay any cash distributions
with respect to the Company's capital stock (which includes common and preferred
stock) or to make any payment with respect to debt securities of the Company
that rank pari passu with or junior to the Junior Subordinated Debentures.
During an Extension Period, interest on the Junior Subordinated Debentures will
continue to accrue (and the amount of Distributions to which holders of the
Trust Securities are entitled will continue to accumulate) at the rate of 8.675%
per annum, compounded semi-annually, and holders of Trust Securities will be
required to accrue interest income for United States federal income tax
purposes. See "Description of New Securities--Description of New Junior
Subordinated Debentures--Option to Extend Interest Payment Date" and "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount."
The Company will, through the Guarantee, the guarantee agreement of the
Company relating to the Common Securities (the "Common Guarantee"), the
Declaration, the Junior Subordinated Debentures and the Indenture, taken
together, fully, irrevocably and unconditionally guarantee all of the Trust's
obligations under the
ii
<PAGE> 4
(Continued from the previous page)
Trust Securities. See "Relationship Among the New Capital Securities, the New
Junior Subordinated Debentures and the New Guarantee--Full and Unconditional
Guarantee." The Old Guarantee, the Common Guarantee and the New Guarantee will
guarantee payments of Distributions and payments on liquidation of the Trust or
redemption of the Trust Securities, but in each case only to the extent that the
Trust holds funds on hand legally available therefor and has failed to make such
payments, as described herein. See "Description of New Securities--Description
of New Guarantee." If the Company fails to make a required payment on the Junior
Subordinated Debentures, the Trust will not have sufficient funds to make the
related payments, including Distributions, on the Trust Securities. The
Guarantee and the Common Guarantee will not cover any such payment when the
Trust does not have sufficient funds on hand legally available therefor. In such
event, a holder of Capital Securities may institute a legal proceeding directly
against the Company to enforce its rights in respect of such payment without
first instituting any legal proceeding against the Property Trustee or any other
person or entity. See "Description of New Securities--Description of New Junior
Subordinated Debentures--Enforcement of Certain Rights By Holders of New Capital
Securities." The obligations of the Company under the Guarantee, the Common
Guarantee and the Junior Subordinated Debentures will be unsecured and
subordinate and rank junior in right of payment to all Senior Indebtedness (as
defined in "Description of New Securities--Description of New Junior
Subordinated Debentures--Subordination"), which totaled approximately $70
million at December 31, 1996 and which amount was repaid by the Company with a
portion of the net proceeds from the sale of the Old Junior Subordinated
Debentures.
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated Maturity
Date upon repayment of the Junior Subordinated Debentures at a redemption price
equal to the principal amount of, plus accrued interest on, the Junior
Subordinated Debentures (the "Maturity Redemption Price"), (ii) in whole but not
in part, at any time prior to February 1, 2007, contemporaneously with the
optional prepayment of the Junior Subordinated Debentures, upon the occurrence
and continuation of a Special Event (as defined herein) at a redemption price
equal to the Special Event Prepayment Price (as defined below) (the "Special
Event Redemption Price"), and (iii) in whole or in part, on or after February 1,
2007, contemporaneously with the optional prepayment by the Company of the
Junior Subordinated Debentures, at a redemption price equal to the Optional
Prepayment Price (as defined below) (the "Optional Redemption Price"). Any of
the Maturity Redemption Price, the Special Event Redemption Price and the
Optional Redemption Price may be referred to herein as the "Redemption Price."
See "Description of New Securities--Description of New Capital
Securities--Redemption."
The Junior Subordinated Debentures will be prepayable prior to the Stated
Maturity Date at the option of the Company (i) on or after February 1, 2007, in
whole or in part, at a prepayment price (the "Optional Prepayment Price") equal
to 104.338% of the principal amount thereof on February 1, 2007, declining
ratably on each February 1 thereafter to 100% on or after February 1, 2017, plus
accrued interest thereon to the date of prepayment, or (ii) prior to February 1,
2007, in whole but not in part, upon the occurrence and continuation of a
Special Event, at a prepayment price (the "Special Event Prepayment Price")
equal to the greater of (a) 100% of the principal amount thereof or (b) the sum,
as determined by a Quotation Agent (as defined herein), of the present values of
the principal amount and premium payable with respect to an optional prepayment
of Junior Subordinated Debentures on February 1, 2007, together with scheduled
payments of interest on the Junior Subordinated Debentures from the prepayment
date to and including February 1, 2007, discounted to the prepayment date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined herein) plus, in either case, accrued
interest thereon to the date of prepayment. Either of the Optional Prepayment
Price or the Special Event Prepayment Price may be referred to herein as the
"Prepayment Price." See "Description of New Securities--Description of New
Junior Subordinated Debentures--Optional Prepayment" and "--Special Event
Prepayment."
The Company will have the right at any time to terminate the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, cause a Like Amount (as defined herein) of the Junior
Subordinated Debentures to be distributed to the holders of the Trust Securities
in liquidation of the Trust, subject to the Company having received an opinion
of counsel to the effect that such distribution will not be a taxable
iii
<PAGE> 5
(Continued from the previous page)
event to holders of the Capital Securities. Unless the Junior Subordinated
Debentures are distributed to the holders of the Trust Securities, in the event
of a liquidation of the Trust under certain circumstances described herein,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, the holders of the Trust Securities generally will be entitled
to receive a Liquidation Amount of $1,000 per Trust Security plus accumulated
and unpaid Distributions thereon to the date of payment. See "Description of New
Securities-- Description of New Capital Securities--Liquidation of the Trust and
Distribution of Junior Subordinated Debentures."
------------------------
The Trust is making the Exchange Offer of the New Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance of
the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither the Company nor the Trust has sought its own interpretive
letter and there can be no assurance that the staff of the Division of
Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the Division of
Corporation Finance of the Commission, and subject to the two immediately
following sentences, the Company and the Trust believe that New Capital
Securities issued pursuant to this Exchange Offer in exchange for Old Capital
Securities may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Capital Securities are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Capital Securities. However, any holder of Old Capital Securities who
is an "affiliate," as such term is defined in Rule 405 under the Securities Act
(an "Affiliate"), of the Company or the Trust or who intends to participate in
the Exchange Offer for the purpose of distributing New Capital Securities, or
any broker-dealer who purchased Old Capital Securities from the Trust for resale
pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other
available exemption under the Securities Act, (a) will not be able to rely on
the interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (b) will not
be permitted or entitled to tender such Old Capital Securities in the Exchange
Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Capital Securities unless such sale is made pursuant to an exemption
from such requirements. In addition, as described below, if any broker-dealer
holds Old Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Capital
Securities for New Capital Securities, then such broker-dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required to
represent that (i) it is not an Affiliate of the Company or the Trust, (ii) any
New Capital Securities to be received by it are being acquired in the ordinary
course of its business, (iii) it has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such New Capital Securities, and (iv) if such holder is not a
broker-dealer, such holder is not engaged in, and does not intend to engage in,
a distribution (within the meaning of the Securities Act) of such New Capital
Securities. In addition, the Company and the Trust may require such holder, as a
condition to such holder's eligibility to participate in the Exchange Offer, to
furnish to the Company and the Trust (or an agent thereof) in writing
information as to the number of "beneficial owners" (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended) on behalf of whom
such holder holds the Old Capital Securities to be exchanged in the Exchange
Offer. Each broker-dealer that receives New Capital Securities for its own
account pursuant to the Exchange Offer must acknowledge that it acquired the Old
Capital Securities for its own account as the result of market-making activities
or other trading activities and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Capital Securities. The Letter of Transmittal states that, by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based on
iv
<PAGE> 6
(Continued from the previous page)
the position taken by the staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to above, the Company and the
Trust believe that broker-dealers who acquired Old Capital Securities for their
own accounts, as a result of market-making activities or other trading
activities ("Participating Broker-Dealers"), may fulfill their prospectus
delivery requirements with respect to the New Capital Securities received upon
exchange of such Old Capital Securities (other than Old Capital Securities which
represent an unsold allotment from the original sale of the Old Capital
Securities) with a prospectus meeting the requirements of the Securities Act,
which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale of
such New Capital Securities. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Capital
Securities received in exchange for Old Capital Securities where such Old
Capital Securities were acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights Agreement, the Company
and the Trust have agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such New Capital Securities for a period ending 90
days after the Expiration Date (as defined herein) (subject to extension under
certain limited circumstances described below) or, if earlier, when all such New
Capital Securities have been disposed of by such Participating Broker-Dealer.
See "Plan of Distribution." However, a Participating Broker-Dealer who intends
to use this Prospectus in connection with the resale of New Capital Securities
received in exchange for Old Capital Securities pursuant to the Exchange Offer
must notify the Company or the Trust, or cause the Company or the Trust to be
notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at one of
the addresses set forth herein under "The Exchange Offer--Exchange Agent." Any
Participating Broker-Dealer who is an Affiliate of the Company or the Trust may
not rely on such interpretive letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. See "The Exchange Offer--Resales of New Capital Securities."
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal, that, upon receipt of notice from the
Company or the Trust of the occurrence of any event or the discovery of any fact
which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable) pursuant to
this Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer or
the Company or the Trust has given notice that the sale of the New Capital
Securities (or the New Guarantee or the New Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If the Company or the Trust
gives such notice to suspend the sale of the New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable), it shall
extend the 90-day period referred to above during which Participating Broker-
Dealers are entitled to use this Prospectus in connection with the resale of New
Capital Securities by the number of days during the period from and including
the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the New Capital
Securities or to and including the date on which the Company or the Trust has
given notice that the sale of New Capital Securities (or the New Guarantee or
the New Junior Subordinated Debentures, as applicable) may be resumed, as the
case may be.
------------------------
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Old Capital Securities. The New Capital Securities
will be a new issue of securities for which there currently is no market.
Although the Initial Purchasers have informed the Company and the Trust that
they each currently
v
<PAGE> 7
(Continued from the previous page)
intend to make a market in the New Capital Securities, they are not obligated to
do so, and any such market making may be discontinued at any time without
notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the New Capital Securities. The Company and the
Trust currently do not intend to apply for listing of the New Capital Securities
on any securities exchange or for inclusion in the NASDAQ Stock Market, the
Electronic Securities Market operated by the National Association of Securities
Dealers, Inc. ("NASDAQ").
Any Old Capital Securities not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Declaration (except
for those rights which terminate upon consummation of the Exchange Offer).
Following consummation of the Exchange Offer, the holders of Old Capital
Securities will continue to be subject to all of the existing restrictions upon
transfer thereof and neither the Company nor the Trust will have any further
obligation to such holders (other than under certain limited circumstances) to
provide for registration under the Securities Act of the Old Capital Securities
held by them. To the extent that Old Capital Securities are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered Old
Capital Securities could be adversely affected. See "Risk Factors--Consequences
of a Failure to Exchange Old Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS PROSPECTUS
AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO
TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on , 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is extended
by the Company or the Trust (in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offer is extended). Tenders of
Old Capital Securities may be withdrawn at any time on or prior to the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Old Capital Securities being tendered for exchange.
However, the Exchange Offer is subject to certain events and conditions which
may be waived by the Company or the Trust and to the terms and provisions of the
Registration Rights Agreement. Old Capital Securities may be tendered in whole
or in part having an aggregate Liquidation Amount of not less than $100,000 (100
Capital Securities) or any integral multiple of $1,000 Liquidation Amount (one
Capital Security) in excess thereof. The Company has agreed to pay all expenses
of the Exchange Offer. See "The Exchange Offer--Fees and Expenses." Holders of
the Old Capital Securities whose Old Capital Securities are accepted for
exchange will not receive Distributions on such Old Capital Securities and will
be deemed to have waived the right to receive any Distributions on such Old
Capital Securities accumulated from and including February 5, 1997. Accordingly,
holders of New Capital Securities as of the record date for the payment of
Distributions on August 1, 1997 will be entitled to receive Distributions
accumulated from and including February 5, 1997. See "The Exchange
Offer--Distributions on New Capital Securities."
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the New Capital Securities offered hereby. No dealer-manager is
being used in connection with this Exchange Offer. See "Use of Proceeds" and
"Plan of Distribution."
------------------------
FOR NORTH CAROLINA INVESTORS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR THE ADEQUACY OF
THIS DOCUMENT.
------------------------
vi
<PAGE> 8
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE TRUST. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE PURSUANT HERETO SHALL UNDER
ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR ANYONE TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Summary............................... 4
Risk Factors.......................... 10
Ratios of Earnings to Fixed Charges... 15
Use of Proceeds....................... 15
Capitalization........................ 16
Summary Financial Data................ 17
Executive Risk Capital Trust.......... 18
The Exchange Offer.................... 18
<CAPTION>
PAGE
----
<S> <C>
Description of New Securities......... 27
Description of Old Securities......... 50
Relationship Among the New Capital
Securities, the New Junior
Subordinated Debentures and the New
Guarantee........................... 50
Certain Federal Income Tax
Consequences........................ 52
ERISA Considerations.................. 56
Plan of Distribution.................. 57
Legal Matters......................... 58
Experts............................... 58
</TABLE>
vii
<PAGE> 9
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (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 of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. If available,
such reports and other information may also be accessed through the Commission's
electronic data gathering, analysis and retrieval system ("EDGAR") via
electronic means, including the Commission's web site on the Internet
(http://www.sec.gov). In addition, the Company's common stock, $.01 par value
per share ("Common Stock"), is listed on the New York Stock Exchange and such
material also is available for inspection at 20 Broad Street, New York, New York
10005.
No separate financial statements of the Trust have been included herein.
Neither the Company nor the Trust considers that such financial statements would
be material to holders of the Capital Securities 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 has no independent
operations and exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the Trust and investing the
proceeds thereof in Junior Subordinated Debentures issued by the Company, and
(iii) the Company's obligations described herein to provide certain indemnities
in respect of, and be responsible for, certain costs, expenses, debts and
liabilities of the Trust under the Indenture and any supplemental indenture
thereto and pursuant to the Declaration of the Trust, the guarantee issued with
respect to Capital Securities issued by the Trust, the Junior Subordinated
Debentures purchased by the Trust and the related Indenture, taken together,
constitute a full and unconditional guarantee of payments due on the Capital
Securities. See "Description of New Securities -- Description of Junior
Subordinated Debentures" and "Description of New Securities -- Description of
New Guarantee."
The Trust is not currently subject to the information reporting
requirements of the Exchange Act. The Trust expects to become subject to such
requirements upon the effectiveness of this Registration Statement, although it
intends to seek and expects to receive exemptions therefrom.
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Company and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company, the Trust
and the New Securities. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to Section 13 of the Exchange Act are incorporated into this Prospectus by
reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
and
(b) Current Report on Form 8-K filed on February 18, 1997.
Such incorporation by reference shall not be deemed to specifically
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the Exchange Offer shall be deemed to be
2
<PAGE> 10
incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such document. Any statement contained
herein or 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 statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document. The Company will provide
without charge to any person to whom this Prospectus is delivered, on the
written or oral request of such person, a copy of any or all of the foregoing
documents incorporated by reference herein (other than exhibits not specifically
incorporated by reference into the texts of such documents). Requests for such
documents should be directed to: Executive Risk Inc., 82 Hopmeadow Street,
Simsbury, Connecticut 06070-7683 Attention: Robert V. Deutsch. Telephone
requests may be directed to Robert V. Deutsch at (860) 408-2000.
3
<PAGE> 11
SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information and financial statements, including
the notes thereto, contained elsewhere in or incorporated by reference into this
Prospectus.
EXECUTIVE RISK INC.
The Company is a specialty insurance holding company incorporated under the
laws of the State of Delaware. Through its subsidiaries, the Company develops,
markets and underwrites specialty line insurance products primarily throughout
the United States. UAP Executive Partners ("UPEX"), which is a joint venture
between the Company and Union des Assurances de Paris--Incendie-Accidents
("UAP"), a subsidiary of AXA-UAP Group, a major European insurance group,
markets directors and officers liability insurance ("D&O") internationally. The
Company's core business lines, from which it derives virtually all of its
premium revenues, are D&O and professional liability insurance, also known as
errors and omissions insurance ("E&O"). The Company's subsidiaries also offer
fidelity bonds and fiduciary liability insurance for corporations, employment
practices liability insurance for corporations and their employees, technology
maintenance and repair coverage for hospitals and clinics and healthcare
stop-loss arrangements for medical professionals.
Both D&O and E&O are designed to protect insureds against lawsuits and
associated legal defense expenses. In connection with D&O coverage of for-profit
corporations, the most severe liabilities generally derive from lawsuits by
stockholders against directors and officers for alleged failures to discharge
duties to the corporation or violations of federal securities laws. In the case
of not-for-profit organizations, the Company's coverage is most often implicated
in employment practices litigation. E&O is offered to non-executive
professionals, such as attorneys, psychologists and insurance agents, among
others, where the principal source of potential claims is dissatisfied clients
alleging breaches of professional standards or ethical violations. Fiduciary
bond coverages are intended primarily to protect those who invest and administer
benefit plan trusts, and fidelity bond coverages (or crime coverage) insure
against losses associated with employee defalcations and dishonesty. Employment
practices liability coverage, which is available to cover both the employing
organization and its supervisors, insures against losses associated with
employee claims such as sexual harassment, wrongful termination and
discriminatory treatment. The Company's two non-liability related products are
Systems Rx, a service contract and cost management product for owners of
high-tech diagnostic equipment and related healthcare technology, and the
recently introduced stop-loss policy for doctors enrolled in managed care
organizations that use the so-called "capitation" method for capping treatment
costs.
EXECUTIVE RISK CAPITAL TRUST
The Trust is a statutory business trust created under Delaware law pursuant
to a declaration of trust and the filing of a certificate of trust with the
Delaware Secretary of State on January 24, 1997. The Trust is governed by the
Declaration executed by the Company, as Sponsor, The Chase Manhattan Bank, as
Property Trustee, Chase Manhattan Bank Delaware, as Delaware Trustee, and the
three individual Administrative Trustees named therein. The Trust's business and
affairs are conducted by the Issuer Trustees: the Property Trustee, the Delaware
Trustee, and the three individual Administrative Trustees who are employees or
officers of or affiliated with the Company. The Trust exists for the exclusive
purposes of (i) issuing and selling the Trust Securities, (ii) using the
proceeds from the sale of the Trust Securities to acquire the Junior
Subordinated Debentures issued by the Company and (iii) engaging in only those
other activities necessary, advisable or incidental thereto (such as registering
the transfer of the Trust Securities). 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
Securities are owned by the Company.
THE EXCHANGE OFFER
The Exchange Offer......... Up to $125,000,000 aggregate Liquidation Amount of
New Capital Securities are being offered in
exchange for a like aggregate Liquidation Amount
4
<PAGE> 12
of Old Capital Securities. Old Capital Securities
may be tendered for exchange in whole or in part in
a Liquidation Amount of $100,000 (100 Capital
Securities) or any integral multiple of $1,000 (one
Capital Security) in excess thereof. The Company
and the Trust are making the Exchange Offer in
order to satisfy their obligations under the
Registration Rights Agreement relating to the Old
Capital Securities. For a description of the
procedures for tendering Old Capital Securities,
see "The Exchange Offer--Procedures for Tendering
Old Capital Securities."
Expiration Date............ 5:00 p.m., New York City time, on , 1997,
unless the Exchange Offer is extended by the
Company or the Trust (in which case the Expiration
Date will be the latest date and time to which the
Exchange Offer is extended). See "The Exchange
Offer--Terms of the Exchange Offer."
Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain
conditions, which may be waived by the Company or
the Trust in its sole discretion. The Exchange
Offer is not conditioned upon any minimum
Liquidation Amount of Old Capital Securities being
tendered. See "The Exchange Offer--Conditions to
the Exchange Offer."
Terms of the
Exchange Offer........... The Company and the Trust reserve the right in
their sole and absolute discretion, subject to
applicable law, at any time and from time to time,
to (i) delay the acceptance of the Old Capital
Securities for exchange, (ii) terminate the
Exchange Offer if certain specified conditions have
not been satisfied, (iii) extend the Expiration
Date of the Exchange Offer and retain all Old
Capital Securities tendered pursuant to the
Exchange Offer, subject, however, to the right of
holders of Old Capital Securities to withdraw their
tendered Old Capital Securities, or (iv) waive any
condition or otherwise amend the terms of the
Exchange Offer in any respect. See "The Exchange
Offer--Terms of the Exchange Offer."
Withdrawal Rights.......... Tenders of Old Capital Securities may be withdrawn
at any time on or prior to the Expiration Date by
delivering a written notice of such withdrawal to
the Exchange Agent in conformity with certain
procedures set forth below under "The Exchange
Offer--Withdrawal Rights."
Procedures for Tendering
Old Capital Securities... Tendering holders of Old Capital Securities must
complete and sign a Letter of Transmittal in
accordance with the instructions contained therein
and forward the same by mail, facsimile or hand
delivery, together with any other required
documents, to the Exchange Agent, either with the
Old Capital Securities to be tendered or in
compliance with the specified procedures for
guaranteed delivery of Old Capital Securities.
Certain brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by book-entry transfer. Holders of Old
Capital Securities registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee are urged to contact such person
promptly if they wish to tender Old Capital
Securities pursuant to the Exchange Offer. See "The
Exchange Offer--Procedures for Tendering Old
Capital Securities."
5
<PAGE> 13
Letters of Transmittal and certificates
representing Old Capital Securities should not be
sent to the Company or the Trust. Such documents
should only be sent to the Exchange Agent.
Resales of New Capital
Securities............... The Company and the Trust are making the Exchange
Offer in reliance on the position of the staff of
the Division of Corporation Finance of the
Commission as set forth in certain interpretive
letters addressed to third parties in other
transactions. However, neither the Company nor the
Trust has sought its own interpretive letter and
there can be no assurance that the staff of the
Division of Corporation Finance of the Commission
would make a similar determination with respect to
the Exchange Offer as it has in such interpretive
letters to third parties. Based on these
interpretations by the staff of the Division of
Corporation Finance of the Commission, and subject
to the two immediately following sentences, the
Company and the Trust believe that New Capital
Securities issued pursuant to this Exchange Offer
in exchange for Old Capital Securities may be
offered for resale, resold and otherwise
transferred by a holder thereof (other than a
holder who is a broker-dealer) without further
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such New Capital Securities are
acquired in the ordinary course of such holder's
business and that such holder is not participating,
and has no arrangement or understanding with any
person to participate, in a distribution (within
the meaning of the Securities Act) of such New
Capital Securities. However, any holder of Old
Capital Securities who is an Affiliate of the
Company or the Trust or who intends to participate
in the Exchange Offer for the purpose of
distributing the New Capital Securities, or any
broker-dealer who purchased the Old Capital
Securities from the Trust for resale pursuant to
Rule 144A or any other available exemption under
the Securities Act, (a) will not be able to rely on
the interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in
the above-mentioned interpretive letters, (b) will
not be permitted or entitled to tender such Old
Capital Securities in the Exchange Offer and (c)
must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any sale or other transfer of such
Old Capital Securities unless such sale is made
pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer
holds Old Capital Securities acquired for its own
account as a result of market-making or other
trading activities and exchanges such Old Capital
Securities for New Capital Securities, then such
broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection
with any resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to
exchange Old Capital Securities for New Capital
Securities in the Exchange Offer will be required
to represent that (i) it is not an Affiliate of the
Company or the Trust, (ii) any New Capital
Securities to be received by it are being acquired
in the ordinary course of its business, (iii) it
has no arrangement or understanding with any person
to participate in a distribution (within the
meaning of the Securities Act) of such New Capital
Securities, and (iv) if such holder is not a
broker-dealer, such holder is not engaged in, and
does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such
New Capital Securities. Each broker-dealer that
receives New Capital Securities for its own account
pursuant to the Exchange Offer must
6
<PAGE> 14
acknowledge that it acquired the Old Capital
Securities for its own account as the result of
market-making activities or other trading
activities and must agree that it will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resale of
such New Capital Securities. The Letter of
Transmittal states that, by so acknowledging and by
delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. Based on
the position taken by the staff of the Division of
Corporation Finance of the Commission in the
interpretive letters referred to above, the Company
and the Trust believe that Participating
Broker-Dealers who acquired Old Capital Securities
for their own accounts as a result of market-making
activities or other trading activities may fulfill
their prospectus delivery requirements with respect
to the New Capital Securities received upon
exchange of such Old Capital Securities (other than
Old Capital Securities which represent an unsold
allotment from the original sale of the Old Capital
Securities) with a prospectus meeting the
requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so
long as it contains a description of the plan of
distribution with respect to the resale of such New
Capital Securities. Accordingly, this Prospectus,
as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer
in connection with resales of New Capital
Securities received in exchange for Old Capital
Securities where such Old Capital Securities were
acquired by such Participating Broker-Dealer for
its own account as a result of market-making or
other trading activities. Subject to certain
provisions set forth in the Registration Rights
Agreement and to the limitations described below
under "The Exchange Offer--Resales of New Capital
Securities," the Company and the Trust have agreed
that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with
resales of such New Capital Securities for a period
ending 90 days after the Expiration Date (subject
to extension under certain limited circumstances)
or, if earlier, when all such New Capital
Securities have been disposed of by such
Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer who
is an Affiliate of the Company or the Trust may not
rely on such interpretive letters and must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with any resale transaction. See "The Exchange
Offer--Resales of New Capital Securities."
Exchange Agent............. The exchange agent with respect to the Exchange
Offer is The Chase Manhattan Bank (the "Exchange
Agent"). The applicable addresses, and telephone
and facsimile numbers, of the Exchange Agent are
set forth in "The Exchange Offer--Exchange Agent"
and in the Letter of Transmittal.
Use of Proceeds............ Neither the Company nor the Trust will receive any
cash proceeds from the issuance of the New Capital
Securities offered hereby. See "Use of Proceeds."
Certain Federal Income Tax
Consequences............. Holders of Old Capital Securities should review the
information set forth under "Certain Federal Income
Tax Consequences" prior to tendering Old Capital
Securities in the Exchange Offer.
7
<PAGE> 15
Certain ERISA
Considerations............. Prospective holders of the New Capital Securities
should review the information set forth under
"ERISA Considerations" prior to acquiring an
interest in the New Capital Securities.
THE NEW CAPITAL SECURITIES
Securities Offered......... Up to $125,000,000 aggregate Liquidation Amount of
the New Capital Securities which have been
registered under the Securities Act (Liquidation
Amount of $1,000 per New Capital Security). The New
Capital Securities will be issued, and the Old
Capital Securities were issued, under the
Declaration. The New Capital Securities and any Old
Capital Securities which remain outstanding after
consummation of the Exchange Offer will vote
together as a single class for purposes of
determining whether holders of the requisite
percentage in outstanding Liquidation Amount
thereof have taken certain actions or exercised
certain rights under the Declaration. See
"Description of New Securities--Description of New
Capital Securities--Voting Rights; Amendment of the
Declaration." The terms of the New Capital
Securities are identical in all material respects
to the terms of the Old Capital Securities, except
that the New Capital Securities have been
registered under the Securities Act and will not be
subject to the $100,000 minimum Liquidation Amount
transfer restriction and certain other transfer
restrictions applicable to the Old Capital
Securities and will not provide for any increase in
the Distribution rate thereon. See "The Exchange
Offer--Purpose of the Exchange Offer," "Description
of New Securities" and "Description of Old
Securities."
Distribution Dates......... February 1 and August 1 of each year, commencing
August 1, 1997.
Extension Periods.......... So long as no Debenture Event of Default has
occurred and is continuing, distributions on the
New Capital Securities will be deferred for the
duration of any Extension Period elected by the
Company with respect to the payment of interest on
the New Junior Subordinated Debentures. No
Extension Period will exceed 10 consecutive
semi-annual periods or extend beyond the Stated
Maturity Date. See "Description of New
Securities--Description of New Junior Subordinated
Debentures--Option to Extend Interest Payment Date"
and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue
Discount."
Ranking.................... The New Capital Securities will rank pari passu,
and payments thereon will be made pro rata, with
the Old Capital Securities and the Common
Securities except, with respect to the Common
Securities, in certain circumstances described
under "Description of New Securities--Description
of New Capital Securities--Subordination of Common
Securities." The New Junior Subordinated Debentures
will rank pari passu with the Old Junior
Subordinated Debentures and all other junior
subordinated debentures issued by the Company
(collectively, the "Other Debentures") which will
be issued and sold (if at all) to other trusts to
be established by the Company (if any), in each
case similar to the Trust (the "Other Trusts"), and
will be unsecured and subordinate and junior in
right of payment to all Senior Indebtedness to the
extent and in the manner set forth in the
Indenture. See "Description of New
Securities--Description of New Junior Subordinated
Debentures." The New Guarantee will rank pari passu
with the Old Guarantee and all other guarantees (if
any) to be issued by the Company with respect to
capital securities (if any) issued by Other
8
<PAGE> 16
Trusts (collectively, the "Other Guarantees") and
will constitute an unsecured obligation of the
Company and will rank subordinate and junior in
right of payment to all Senior Indebtedness to the
extent and in the manner set forth in the Guarantee
Agreement and, in the event of bankruptcy or
insolvency proceedings involving the Company, will
rank subordinate and junior in right of payment to
all liabilities (other than Other Guarantees) of
the Company, but senior to any obligations in
respect of any class of capital stock of the
Company. See "Description of New
Securities--Description of New Guarantee."
Redemption................. The Trust Securities are subject to mandatory
redemption in a Like Amount, (i) in whole but not
in part, on the Stated Maturity Date upon repayment
of the Junior Subordinated Debentures, (ii) in
whole but not in part, at any time prior to
February 1, 2007 contemporaneously with the
optional prepayment of the Junior Subordinated
Debentures by the Company upon the occurrence and
continuation of a Special Event and (iii) in whole
or in part, at any time on or after February 1,
2007 contemporaneously with the optional prepayment
by the Company of the Junior Subordinated
Debentures, in each case at the applicable
Redemption Price. See "Description of New
Securities--Description of New Capital
Securities--Redemption."
Voting Rights.............. Holders of Capital Securities will have limited
voting rights relating generally to the
modification of the Capital Securities and the
Guarantee and the exercise of the Trust's rights as
the holder of the Junior Subordinated Debentures.
Holders of Capital Securities will not be entitled
to appoint, remove or replace the Administrative
Trustees at any time or the Property Trustee or the
Delaware Trustee except upon the occurrence of
certain events described herein. See "Description
of New Securities--Description of New Capital
Securities--Voting Rights; Amendment of the
Declaration" and "--Removal of Issuer Trustees."
Rating..................... The New Capital Securities are expected to be rated
"BBB" by Standard & Poor's, a division of the
McGraw-Hill Companies, Inc., and "baa3" by Moody's
Investors Service, Inc.
Absence of Market for the
New Capital Securities... The New Capital Securities will be a new issue of
securities for which there currently is no market.
Although J.P. Morgan Securities Inc., Chase
Securities Inc. and Donaldson Lufkin & Jenrette
(the "Initial Purchasers") have informed the
Company and the Trust that they currently intend to
make a market in the New Capital Securities, they
are not obligated to do so, and any such market
making may be discontinued at any time without
notice. Accordingly, there can be no assurance as
to the development or liquidity of any market for
the New Capital Securities. The Trust and the
Company do not intend to apply for listing of the
New Capital Securities on any securities exchange
or for inclusion in NASDAQ. See "Plan of
Distribution."
9
<PAGE> 17
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus and incorporated by reference herein,
the following factors in connection with the Exchange Offer and the New Capital
Securities offered hereby.
HOLDING COMPANY STRUCTURE; RESTRICTIONS ON DIVIDENDS
As a holding company, the Company's ability to meet debt service
obligations and pay operating expenses depends on receipt of sufficient funds
from its direct and indirect subsidiaries. The inability of the Company's
subsidiaries to pay dividends and other payments to the Company in an amount
sufficient to meet debt service obligations and pay operating expenses would
have a material adverse effect on the Company. The payment of dividends and the
making of other payments by the Company's insurance subsidiaries without prior
regulatory approval is subject to restrictions set forth in the insurance laws
and regulations of the states of domicile of those subsidiaries. The Company
currently does not expect such regulatory requirements to impair its ability to
meet interest payment obligations and to pay operating expenses in the future.
However, the Company can give no assurance that dividends will be declared or
paid by its subsidiaries or that the Company's insurance subsidiaries will be
able to obtain any regulatory approvals that may be required from time to time.
As of December 31, 1996, the Company's insurance subsidiaries had sufficient
capital and earnings to pay up to $13.8 million of dividends to the Company
during 1997 without prior regulatory approval.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee issued by it for the
benefit of the holders of Capital Securities and the Junior Subordinated
Debentures will be unsecured and subordinate and rank junior in right of payment
to all present and future Senior Indebtedness of the Company and rank pari passu
with obligations to or rights of the Company's other general unsecured
creditors. In addition, in the case of a bankruptcy or insolvency proceeding
involving the Company, the Company's obligations under the Guarantee will rank
subordinate and junior in right of payment to all liabilities (other than Other
Guarantees) of the Company, but senior to any obligation in respect of any class
of capital stock of the Company. No payment may be made of the principal of, or
premium, if any, or interest on the Junior Subordinated Debentures, or in
respect of any redemption, retirement, purchase or other acquisition of any of
the Junior Subordinated Debentures, at any time when (i) there is a default in
the payment of the principal of, or premium, if any, or interest on or otherwise
in respect of any Senior Indebtedness, whether at maturity or at a date fixed
for prepayment or by declaration or otherwise, or (ii) any event of default with
respect to any Senior Indebtedness has occurred and is continuing, or would
occur as a result of such payment on the Junior Subordinated Debentures or any
redemption, retirement, purchase or other acquisition of any of the Junior
Subordinated Debentures, permitting the holders of such Senior Indebtedness (or
a trustee on behalf of the holders thereof) to accelerate the maturity thereof.
At December 31, 1996, the aggregate principal amount of outstanding Senior
Indebtedness of the Company was approximately $70 million, which amount was
repaid by the Company with a portion of the net proceeds from the sale of the
Old Junior Subordinated Debentures. Because the Company is a holding company,
the right of the Company to participate in any distribution of assets of any
direct or indirect subsidiary upon such subsidiary's liquidation or
reorganization or otherwise (and thus the ability of holders of the Capital
Securities to benefit indirectly from such distribution) is subject to the prior
claims of creditors of that subsidiary, except to the extent that the Company
may itself be recognized as a creditor of that subsidiary. At December 31, 1996,
the direct and indirect subsidiaries of the Company had total liabilities
(excluding liabilities owed to the Company) of approximately $718.8 million. In
addition, because two of the Company's subsidiaries are insurance companies
subject to regulatory control by various state insurance departments, the
ability of such subsidiaries to pay dividends to the Company without prior
regulatory approval is limited by applicable laws and regulations. Accordingly,
the Junior Subordinated Debentures will be effectively subordinated to all
existing and future liabilities of the Company's subsidiaries, and holders of
Junior Subordinated Debentures should look only to the assets of the Company for
payments on the Junior Subordinated Debentures. None of the Indenture, the
Guarantee, the Common Guarantee or the Declaration places any limitation on the
amount of secured or unsecured debt, including Senior Indebtedness, or other
obligations, that may be incurred by the Company or any of its subsidiaries,
either in the
10
<PAGE> 18
event of a highly leveraged transaction or otherwise. See "Description of New
Securities--Description of New Guarantee--Status of New Guarantee" and
"--Description of New Junior Subordinated Debentures-- Subordination."
The ability of the Trust to pay amounts due on the Capital Securities is
solely dependent upon the Company's making payments on the Junior Subordinated
Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSIDERATIONS
So long as no Debenture Event of Default shall have occurred and be
continuing, the Company will have the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity Date. Upon any such deferral, semi-annual
Distributions on the Capital Securities by the Trust will be deferred (and the
amount of Distributions to which holders of the Capital Securities are entitled
will accumulate additional Distributions thereon at the rate of 8.675% per
annum, compounded semi-annually, but not exceeding the interest rate then
accruing on the Junior Subordinated Debentures) from the relevant payment date
for such Distributions during any such Extension Period.
The Company may extend any existing Extension Period, provided that such
extension does not cause such Extension Period to exceed 10 consecutive
semi-annual periods or to extend beyond the Stated Maturity Date. Upon the
expiration of any Extension Period and the payment of all interest then accrued
and unpaid on the Junior Subordinated Debentures (together with interest thereon
at the annual rate of 8.675%, compounded semi-annually, to the extent permitted
by applicable law), the Company may elect to begin a new Extension Period,
subject to the above requirements. There is no limitation on the number of times
that the Company may elect to begin an Extension Period. See "Description of New
Securities--Description of New Capital Securities-- Distributions" and
"--Description of New Junior Subordinated Debentures--Option to Extend Interest
Payment Date."
Should the Company exercise its right to defer payments of interest on the
Junior Subordinated Debentures, each holder of Trust Securities will be required
to accrue income (as original issue discount ("OID")) in respect of the deferred
stated interest allocable to its Trust Securities for United States federal
income tax purposes, which will be allocated but not distributed to holders of
Trust Securities. As a result, during an Extension Period, each holder of
Capital Securities 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 Capital Securities
prior to the record date for the payment of Distributions thereafter. See
"Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount" and "--Sales of Capital Securities."
Should the Company elect to exercise its right to defer payments of
interest on the Junior Subordinated Debentures, the then-current market price of
the Capital Securities is likely to be affected adversely. A holder that
disposes of its Capital Securities during an Extension Period, therefore, might
not receive the same return on its investment as a holder that continues to hold
its Capital Securities. In addition, the mere existence of the Company's right
to defer payments of interest on the Junior Subordinated Debentures may cause
the market price of the Capital Securities to be more volatile than the market
prices of other securities on which OID accrues and that are not subject to such
deferral rights.
CONDITIONAL RIGHT TO ADVANCE MATURITY AND SPECIAL EVENT REDEMPTION
If a Tax Event (as defined herein) occurs, then the Company will have the
right (i) prior to the termination of the Trust, to advance the Stated Maturity
Date of the Junior Subordinated Debentures to the minimum extent required in
order to allow for the payments of interest in respect of the Junior
Subordinated Debentures to continue to be tax deductible, but in no event shall
the resulting maturity of the Junior Subordinated Debentures be less than 20
years from the date of original issuance thereof, or (ii) to terminate the Trust
(if not previously terminated). In either case, such maturity date shall be
advanced only if, in the opinion of counsel to the Company experienced in such
matters, after advancing the maturity date, interest paid on the Junior
Subordinated
11
<PAGE> 19
Debentures will be deductible for United States federal income tax purposes (the
action referred to in either clause (i) or (ii) above being referred to herein
as a "Tax Event Maturity Advancement").
If a Tax Event occurs and in the opinion of counsel to the Company
experienced in such matters, there would in all cases, after effecting a Tax
Event Maturity Advancement, be more than an insubstantial risk that an Adverse
Tax Consequence (as defined herein) would continue to exist, or, if an
Investment Company Event (as defined herein) occurs, then the Company will have
the right, within 90 days following the occurrence of such Tax Event or
Investment Company Event, as the case may be, at any time prior to February 1,
2007, to redeem the Junior Subordinated Debentures in whole (but not in part) in
the manner set forth under "Description of New Securities--Description of New
Junior Subordinated Debentures--Conditional Right to Advance Maturity and
Special Event Prepayment," and therefore to cause a mandatory redemption of the
Capital Securities prior to the Stated Maturity Date (the circumstances under
which the Company has the right to so redeem the Junior Subordinated Debentures
in connection with a Tax Event being referred to herein as a "Conditional Tax
Redemption Event"). Each of a Conditional Tax Redemption Event or an Investment
Company Event are sometimes referred to herein as a "Special Event."
POSSIBLE DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
The Company will have the right at any time to terminate the Trust and,
after satisfaction of claims of creditors of the Trust as provided by applicable
law, to cause the Junior Subordinated Debentures to be distributed to the
holders of the Trust Securities. Under current United States federal income tax
law, a distribution of Junior Subordinated Debentures upon the dissolution of
the Trust would not be a taxable event to holders of the Capital Securities. If,
however, the Trust is characterized for United States federal income tax
purposes as an association taxable as a corporation at the time of dissolution
of the Trust, the distribution of the Junior Subordinated Debentures may
constitute a taxable event to holders of Capital Securities. Moreover, upon the
occurrence of a Special Event, a dissolution of the Trust in which holders of
the Capital Securities receive cash would be a taxable event to such holders.
See "Certain Federal Income Tax Consequences--Receipt of Junior Subordinated
Debentures or Cash Upon Liquidation of the Trust."
POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL SECURITIES
On February 6, 1997, as part of the Clinton Administration's Fiscal 1998
Budget Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate issuers
a deduction for interest in respect of debt obligations, such as the New Junior
Subordinated Debentures, issued on or after the date "of first committee
action," if such debt obligations have a maximum term in excess of 15 years and
are not shown as indebtedness on the issuer's applicable consolidated balance
sheet. If legislation similar to the Proposed Legislation were enacted, there
can be no assurance that it will not adversely affect the ability of the Company
to deduct the interest payable on the Junior Subordinated Debentures. Such a
change could give rise to a Tax Event, which would permit the Company to cause a
redemption of the Trust Securities at the Special Event Redemption Price by
electing to prepay the Junior Subordinated Debentures at the Special Event
Prepayment Price. See "Certain Federal Income Tax Consequences--Proposed Tax
Legislation."
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for New Capital
Securities or New Junior Subordinated Debentures distributed to the holders of
New Capital Securities if a termination of the Trust were to occur. Accordingly,
the New Capital Securities or the New Junior Subordinated Debentures may trade
at a discount from the price that the investor paid to purchase the Capital
Securities. Because holders of Capital Securities may receive Junior
Subordinated Debentures in liquidation of the Trust and because Distributions
are otherwise limited to payments on the Junior Subordinated Debentures,
prospective holders of New Capital Securities are also making an investment
decision with regard to the New Junior Subordinated Debentures and should
carefully review all the information regarding the New Junior Subordinated
Debentures contained herein. See "Description of New Securities--Description of
New Junior Subordinated Debentures."
12
<PAGE> 20
RIGHTS UNDER THE GUARANTEE
The Chase Manhattan Bank will act as Guarantee Trustee and will hold the
Guarantee for the benefit of the holders of the Capital Securities. The Chase
Manhattan Bank will also act as Property Trustee and as Debenture Trustee under
the Indenture. Chase Manhattan Bank Delaware will act as Delaware Trustee under
the Declaration. The Old Guarantee guarantees, and the New Guarantee will
guarantee, as the case may be, to the holders of the Capital Securities the
following payments, to the extent not paid by the Trust: (i) any accumulated and
unpaid Distributions required to be paid on the Capital Securities, to the
extent that the Trust has funds on hand legally available therefor at such time,
(ii) the applicable Redemption Price with respect to any Capital Securities
called for redemption, to the extent that the Trust has funds on hand at that
time legally available therefor, and (iii) upon a voluntary or involuntary
termination and liquidation of the Trust (unless the Junior Subordinated
Debentures are distributed to holders of the Capital Securities), the lesser of
(a) the aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions to the date of payment, to the extent that the Trust has funds on
hand at that time legally available therefor and (b) the amount of assets of the
Trust remaining available for distribution to holders of the Capital Securities.
The holders of a majority in Liquidation Amount of the Capital Securities will
have the right to 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 power conferred upon the Guarantee Trustee.
Any holder of the Capital Securities 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. If the Company defaults on its obligation to pay amounts
payable under the Junior Subordinated Debentures, the Trust will not have
sufficient funds for the payment of Distributions or amounts payable on
redemption of the Capital Securities or otherwise, and, in such event, holders
of the Capital Securities will not be able to rely upon the Guarantee for
payment of such amounts. Instead, in the event a Debenture Event of Default
shall have occurred and be continuing and such event is attributable to the
failure of the Company to pay principal of or premium, if any, or interest on
the Junior Subordinated Debentures on the payment date on which such payment is
due and payable, then a holder of Capital Securities may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of the principal of or premium, if any, or interest on such Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Capital Securities of such holder without first instituting any
legal proceeding against the Property Trustee or any other person or entity (a
"Direct Action"). Notwithstanding any payments made to a holder of Capital
Securities by the Company in connection with a Direct Action, the Company shall
remain obligated to pay the principal of and premium, if any, and interest on
the Junior Subordinated Debentures, and the Company shall be subrogated to the
rights of the holder of such Capital Securities with respect to payments on the
Capital Securities to the extent of any payments made by the Company to such
holder in any Direct Action. Except as described herein, holders of Capital
Securities 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 New Securities--Description of New Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of Capital Securities,"
"--Description of New Junior Subordinated Debentures--Debenture Events of
Default" and "--Description of New Guarantee." The Declaration provides that
each holder of Capital Securities by acceptance thereof agrees to the provisions
of the Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the terms of the Capital Securities, the
dissolution, termination or liquidation of the Trust, and the exercise of the
Trust's rights as holder of Junior Subordinated Debentures. Holders of Capital
Securities will not be entitled to vote to appoint, remove or replace the
Property Trustee or the Delaware Trustee, and such voting rights are vested
exclusively in the holder of the Common Securities except upon the occurrence of
certain events described herein. The Issuer Trustees and the Company may amend
the Declaration without the consent of holders of Capital Securities to ensure
that the Trust will be classified for United States federal income tax purposes
as a grantor trust even if such action adversely affects the interests of such
holders. See "Description of New Securities-- Description of New Capital
Securities--Voting Rights; Amendment of the Declaration" and "--Removal of
Issuer Trustees."
13
<PAGE> 21
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD CAPITAL SECURITIES
The Old Capital Securities have not been registered under the Securities
Act or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements of
the Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions. Old Capital
Securities which remain outstanding after consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on transfer. In
addition, upon consummation of the Exchange Offer, holders of Old Capital
Securities which remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to certain
limited exceptions). The Company and the Trust do not intend to register under
the Securities Act any Old Capital Securities which remain outstanding after
consummation of the Exchange Offer (subject to such limited exceptions, if
applicable). To the extent that Old Capital Securities are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered Old Capital
Securities could be adversely affected.
The New Capital Securities and any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer will vote together as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Declaration. See "Description of New
Securities--Description of New Capital Securities-- Voting Rights; Amendment of
the Declaration."
The Old Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed by June
30, 1997 and declared effective by August 4, 1997, the Distribution rate borne
by the Old Capital Securities, currently 8.675% per annum, commencing on August
5, 1997 will increase by 0.25% per annum until the Exchange Offer is
consummated. Upon consummation of the Exchange Offer, holders of Old Capital
Securities will not be entitled to any increase in the Distribution rate thereon
or any further registration rights under the Registration Rights Agreement,
except under limited circumstances. See "Description of Old Capital Securities."
ABSENCE OF PUBLIC MARKET
The Old Capital Securities were issued to, and the Company believes the Old
Capital Securities are currently owned by, a relatively small number of
beneficial owners. The Old Capital Securities have not been registered under the
Securities Act and will be subject to restrictions on transferability if they
are not exchanged for the New Capital Securities. Although the New Capital
Securities generally may be resold or otherwise transferred by the holders (who
are not Affiliates of the Company or the Trust) without compliance with the
registration requirements under the Securities Act, they will constitute a new
issue of securities with no established trading market. Old Capital Securities
may be transferred by the holders thereof only in blocks having a Liquidation
Amount of not less than $100,000 (100 Old Capital Securities). New Capital
Securities may be transferred by the holders thereof in blocks having a
Liquidation Amount of $1,000 (one New Capital Security) or integral multiples
thereof. The Company and the Trust have been advised by the Initial Purchasers
that the Initial Purchasers presently intend to make a market in the New Capital
Securities. However, the Initial Purchasers are not obligated to do so and any
market-making activity with respect to the New Capital Securities may be
discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer. Accordingly, no
assurance can be given that an active public or other market will develop for
the New Capital Securities or the Old Capital Securities or as to the liquidity
of or the trading market for the New Capital Securities or the Old Capital
Securities. If an active public market does not develop, the market price and
liquidity of the New Capital Securities may be adversely affected.
If a public trading market develops for the New Capital Securities, future
trading prices will depend on many factors, including, among other things,
prevailing interest rates, the Company's results and the market for similar
securities. Depending on prevailing interest rates, the market for similar
securities and other factors, including the financial condition of the Company,
the New Capital Securities may trade at a discount.
14
<PAGE> 22
Notwithstanding the registration of the New Capital Securities in the
Exchange Offer, holders who are Affiliates of the Company or the Trust may
publicly offer for sale or resell the New Capital Securities only in compliance
with the provisions of Rule 144 under the Securities Act or pursuant to another
effective registration statement.
Each broker-dealer that receives New Capital Securities for its own account
in exchange for Old Capital Securities, where such Old Capital Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Capital Securities. See "Plan of
Distribution."
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to
combined fixed charges of the Company for the respective periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.................... 9.1 17.6 15.1 12.9 12.7
Ratio of Earnings to Fixed Charges,
Excluding Net Realized Capital Gains (Losses)....... 8.9 16.7 15.4 11.5 12.1
</TABLE>
For purposes of computing the ratios of earnings to fixed charges for the
Company and its subsidiaries, earnings represent income before income taxes plus
fixed charges. Fixed charges have been calculated by adding gross interest
expense and that portion of rent expense deemed representative of the interest
factor in such rent expense. The Company's consolidated insurance company
subsidiaries are subject to certain regulatory restrictions on the payment of
dividends or advances to the Company. See "Risk Factors--Holding Company
Structure; Restrictions on Dividends."
USE OF PROCEEDS
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the New Capital Securities offered hereby. In consideration for
issuing the New Capital Securities in exchange for Old Capital Securities as
described in this Prospectus, the Trust will receive Old Capital Securities in
like Liquidation Amount. The Old Capital Securities surrendered in exchange for
the New Capital Securities will be retired and cancelled.
The proceeds to the Trust (without giving effect to expenses of the
offering payable by the Company) from the offering of the Old Capital Securities
were $125,000,000. All of the proceeds from the sale of Old Capital Securities
were invested by the Trust in the Junior Subordinated Debentures. The Company
used approximately $70 million of the net proceeds from the sale of the Old
Junior Subordinated Debentures to repay all amounts outstanding under the term
loan portion of its existing credit facility, including $18.4 million to The
Chase Manhattan Bank, which is acting as the Property Trustee, the Debenture
Trustee, the Common Guarantee Trustee and the Guarantee Trustee and is an
affiliate of the Delaware Trustee. The remaining net proceeds from the sale of
the Old Junior Subordinated Debentures were used (i) to make contributions to
the surplus of its insurance subsidiaries and (ii) for general corporate
purposes. As of December 31, 1996, the Company's insurance subsidiaries had
total adjusted capital in excess of the risk-based capital regulatory action
level. The application of the proceeds of the offering of the Old Capital
Securities caused the Company's insurance subsidiaries also to exceed the
risk-based capital company action level, which is a higher standard.
15
<PAGE> 23
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1996 and as adjusted to give effect to the consummation
of the offering of the Old Capital Securities and the application of the
proceeds thereof. The following data should be read in conjunction with the
financial information included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, which is incorporated herein by reference. See
"Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt................................................ $ 70,000 $ --
Corporation-Obligated Mandatory Redeemable Capital Securities
of Trust Holding Solely Junior Subordinated Debentures...... -- 125,000
Stockholders' equity
Common stock(1)............................................. 104 104
Additional paid in capital.................................. 93,651 93,651
Unrealized gains on investments, net of tax................. 18,382 18,382
Currency translation adjustments............................ (186) (186)
Retained earnings........................................... 65,384 65,384
Treasury stock at cost...................................... (32,560) (32,560)
-------- --------
Total stockholders' equity.......................... 144,775 144,775
-------- --------
Total capitalization.......................................... $214,775 $ 269,775
======== ========
</TABLE>
- ---------------
(1) Does not include (i) 1,465,294 shares of Common Stock issuable upon exercise
of employee stock options, (ii) 100,000 shares of Common Stock issuable upon
exercise of an option held by Aetna Inc. (the "Aetna Option"), (iii) 42,185
shares of Common Stock issuable upon exercise of options granted to
directors under the Company's Nonemployee Directors Option Plan, (iv) 40,100
shares of Common Stock issuable upon exercise of options granted to former
directors of the Company's wholly-owned subsidiary, Executive Re Inc., and
(v) any shares of Common Stock issuable pursuant to the Company's Stock
Incentive Plan and Performance Share Plan.
16
<PAGE> 24
SUMMARY FINANCIAL DATA
The summary below should be read in connection with the financial
information included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Gross premiums written................................................. $332,085 $210,640 $130,199 $ 84,255 $ 82,667
Net premiums written................................................... 210,376 145,121 108,285 70,519 74,605
Net premiums earned.................................................... 155,784 116,434 94,961 69,014 71,926
Net investment income.................................................. 32,646 26,706 22,497 20,475 19,702
Net realized capital gains(losses)..................................... 1,047 1,588 (455) 1,964 869
Equity in earnings of ERMA............................................. 0 0 0 2,707 2,736
Other income (loss).................................................... 166 83 82 (364) 0
-------- -------- -------- -------- --------
Total revenues....................................................... 189,643 144,811 117,085 93,796 95,233
Loss and loss adjustment expenses...................................... 105,335 78,530 64,171 46,640 51,427
Policy acquisition costs............................................... 27,803 21,931 18,723 18,613 18,535
General and administrative costs....................................... 17,068 10,730 8,890 8,749 6,409
Long-term incentive compensation....................................... 187 1,458 1,009 1,100 0
Interest expense....................................................... 4,511 2,022 1,519 1,421 1,420
-------- -------- -------- -------- --------
Total expenses....................................................... 154,904 114,671 94,312 76,523 77,791
-------- -------- -------- -------- --------
Income before income taxes............................................. 34,739 30,140 22,773 17,273 17,442
Income tax expense..................................................... 6,634 4,854 3,533 2,360 2,870
-------- -------- -------- -------- --------
Income before cumulative effect of change in accounting for income
taxes................................................................ 28,105 25,286 19,240 14,913 14,572
Cumulative effect of change in accounting for income taxes............. 0 0 0 0 1,387
-------- -------- -------- -------- --------
Net income............................................................. $ 28,105 $ 25,286 $ 19,240 $ 14,913 $ 15,959
======== ======== ======== ======== ========
Earnings per common and common equivalent share(1)..................... $ 2.67 $ 2.11 $ 1.80 $ 3.53 $ 3.44
======== ======== ======== ======== ========
Weighted average shares outstanding.................................... 10,509 11,956 10,108 3,128 3,120
Earnings per common share--assuming full dilution(1)................... $ 2.67 $ 2.11 $ 1.69 $ 1.69 $ 1.66
======== ======== ======== ======== ========
Weighted average shares outstanding--assuming full dilution............ 10,542 11,978 11,365 9,238 9,230
BALANCE SHEET DATA:
Cash and invested assets............................................... $690,975 $549,852 $431,849 $371,596 $319,773
Total assets(2)........................................................ 941,247 687,837 516,747 420,382 361,149
Long-term debt......................................................... 70,000 25,000 25,000 25,000 25,000
Stockholders' equity(2)................................................ 144,775 177,725 130,854 114,837 92,473
OTHER DATA:
Loss Ratio........................................................... 67.6% 67.4% 67.6% 67.6% 71.5%
Expense Ratio........................................................ 28.8 28.1 29.1 39.6 34.7
-------- -------- -------- -------- --------
Combined Ratio....................................................... 96.4% 95.5% 96.7% 107.2% 106.2%
======== ======== ======== ======== ========
Ratio of net premiums written to statutory surplus(3)(4)............... 1.5x 1.2x 1.0x 0.7x 0.8x
Statutory surplus(3) (at end of period)................................ $138,405 $121,465 $107,401 $ 94,445 $ 91,689
Operating Margin(5).................................................... 20.3% 21.3% 21.1% 19.3% 19.3%
Ratio of debt to total capitalization.................................. 32.6% 12.3% 16.0% 17.9% 21.3%
</TABLE>
- ---------------
(1) Per share information is based on income before cumulative effect of change
in accounting for income taxes. Earnings per common and common equivalent
share and earnings per common share--assuming full dilution based on net
income were $3.88 and $1.81, respectively, for the year ended December 31,
1992.
(2) For the years ended December 31, 1996, 1995, 1994 and 1993, respectively,
includes $11.7 million, $15.4 million, ($3.3) million and $12.4 million, net
of deferred taxes, in total assets and stockholders' equity from unrealized
gains (losses) pursuant to Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
(3) Statutory data has been derived from the financial statements of the
Insurance Subsidiaries prepared in accordance with Statutory Accounting
Practices.
(4) Ratios of net premiums written to statutory surplus are calculated on a
rolling twelve month basis.
(5) Consists of income before taxes, excluding interest expense, realized
capital gains (losses) and certain non-recurring expenses, divided by total
revenues, excluding realized capital gains (losses).
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EXECUTIVE RISK CAPITAL TRUST
The Trust is a statutory business trust created under Delaware law pursuant
to (i) a declaration of trust, dated as of January 24, 1997, executed by the
Company, as Sponsor, and the Delaware Trustee (the "Initial Declaration"), and
(ii) the filing of a certificate of trust with the Delaware Secretary of State
on January 24, 1997. The Initial Declaration was replaced by an Amended and
Restated Declaration of Trust (the "Declaration") executed on February 5, 1997
by the Company, as Sponsor, and the Issuer Trustees (as herein defined). The
Trust exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, which represent undivided beneficial interests in the assets of the
Trust, (ii) investing the gross proceeds of the Trust Securities in the Junior
Subordinated Debentures and (iii) engaging in only those other activities
necessary, advisable 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. All of the
Common Securities are owned by the Company. The Common Securities will rank pari
passu, and payments will be made thereon pro rata, with the Capital Securities,
except that upon the occurrence and during the continuance of an Event of
Default under the Declaration resulting from a Debenture Event of Default, the
rights of the Company as holder of the Common Securities to payments in respect
of Distributions and payments upon liquidation, redemption or otherwise will be
subordinated and rank junior to the rights of the holders of the Capital
Securities. See "Description of New Securities--Description of New Capital
Securities--Subordination of Common Securities." The Company has acquired Common
Securities in a Liquidation Amount equal to 3% of the total capital of the
Trust. The Trust has a term of 31 years, but may terminate earlier as provided
in the Declaration. The Trust's business and affairs will be conducted by the
Issuer Trustees appointed by the Company as the holder of the Common Securities.
The Issuer Trustees will be The Chase Manhattan Bank as the Property Trustee,
Chase Manhattan Bank Delaware as the Delaware Trustee, and three individual
trustees (the "Administrative Trustees"). The Chase Manhattan Bank, as Property
Trustee, will act as sole indenture trustee under the Declaration. The Chase
Manhattan Bank will also act as indenture trustee under the Guarantee and the
Indenture. See "Description of New Securities--Description of New Guarantee" and
"Description of New Securities-- Description of New Junior Subordinated
Debentures." The holder of the Common Securities of the Trust or, if an Event of
Default under the Declaration has occurred and is continuing, the holders of a
majority in Liquidation Amount of the Capital 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 Capital Securities have the right to vote to
appoint, remove or replace the Administrative Trustees; such voting rights will
be vested exclusively in the holder of the Common Securities. The duties and
obligations of each Issuer Trustee are governed by the Declaration. The Company
will pay, directly or indirectly, all fees, expenses, debts and obligations
(other than, except to the extent guaranteed by the Company with respect to
prepayments of principal, interest and premium, if any, the Trust Securities)
related to the Trust and the offering of the Capital Securities, including all
ongoing costs, expenses and liabilities of the Trust. The principal executive
office address and telephone number of the Trust are, respectively, c/o
Executive Risk Inc., 82 Hopmeadow Street, Simsbury, Connecticut 06070-7683 and
(860) 408-2000.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Capital Securities, the Company and
the Trust entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Company and the Trust agreed to file and to
use their reasonable best efforts to cause to become effective with the
Commission a registration statement with respect to the exchange of the Old
Capital Securities for New Capital Securities. A copy of the Registration Rights
Agreement has been filed as an Exhibit to the Registration Statement of which
this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Company and the Trust under the Registration Rights Agreement. The form and
terms of the New Capital Securities are the same as the form and terms of the
Old Capital Securities except that the New Capital Securities have been
registered under the Securities Act, will not be subject to the $100,000 minimum
Liquidation Amount transfer restriction and certain other restrictions on
transfer applicable to the Old Capital Securities, and will not provide for any
increase in the
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<PAGE> 26
Distribution rate thereon. In that regard, the Old Capital Securities provide,
among other things, that, if a registration statement relating to the Exchange
Offer has not been filed by June 30, 1997 and declared effective by August 4,
1997, the Distribution rate borne by the Old Capital Securities, currently
8.675% per annum, commencing on August 5, 1997 will increase by 0.25% per annum
until the Exchange Offer is consummated. Upon consummation of the Exchange
Offer, holders of Old Capital Securities will not be entitled to any increase in
the Distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See "Risk
Factors--Consequences of a Failure to Exchange Old Capital Securities" and
"Description of Old Capital Securities."
The Exchange Offer is not being made to, nor will the Trust accept tenders
for exchange from, holders of Old Capital Securities in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Old Capital Securities are
registered on the books of the Trust or any other person who has obtained a
properly completed bond power from such holder, or any person whose Old Capital
Securities are held of record by The Depository Trust Company ("DTC") who
desires to deliver such Old Capital Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Company will exchange promptly after
the Expiration Date (as defined herein) the Old Guarantee for the New Guarantee
and the Old Junior Subordinated Debentures, in an amount corresponding to the
aggregate Liquidation Amount of Old Capital Securities accepted for exchange,
for a like aggregate principal amount of the New Junior Subordinated Debentures.
The New Guarantee and New Junior Subordinated Debentures have been registered
under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $125,000,000 aggregate Liquidation Amount of New Capital
Securities for a like aggregate Liquidation Amount of Old Capital Securities
properly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with the procedures described below. The Trust will issue,
promptly after the Expiration Date, an aggregate Liquidation Amount of up to
$125,000,000 of New Capital Securities in exchange for a like aggregate
Liquidation Amount of outstanding Old Capital Securities tendered and accepted
in connection with the Exchange Offer. Holders may tender their Old Capital
Securities in whole or in part in a Liquidation Amount of not less than $100,000
(100 Capital Securities) or any integral multiple of $1,000 Liquidation Amount
(one Capital Security) in excess thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation Amount
of Old Capital Securities being tendered. As of the date of this Prospectus,
$125,000,000 aggregate Liquidation Amount of Old Capital Securities is
outstanding.
Holders of Old Capital Securities do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Old Capital Securities which are
not tendered for or are tendered but not accepted in connection with the
Exchange Offer will remain outstanding and be entitled to the benefits of the
Declaration, but will not be entitled to any further registration rights under
the Registration Rights Agreement, except under limited circumstances. See "Risk
Factors--Consequences of a Failure to Exchange Old Capital Securities" and
"Description of Old Securities."
If any tendered Old Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Old Capital Securities
will be returned, without expense, to the tendering holder thereof promptly
after the Expiration Date.
Holders who tender Old Capital Securities in connection with the Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Capital Securities in connection with the Exchange Offer.
The Company will pay all charges and expenses, other than certain applicable
taxes described below, in connection with the Exchange Offer. See "--Fees and
Expenses."
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NEITHER THE COMPANY, THE BOARD OF DIRECTORS OF THE COMPANY NOR ANY ISSUER
TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL
SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION
OF THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO
ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. EACH HOLDER OF OLD
CAPITAL SECURITIES MUST MAKE ITS OWN DECISION AS TO WHETHER TO TENDER PURSUANT
TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD CAPITAL SECURITIES
TO TENDER BASED ON SUCH HOLDER'S OWN FINANCIAL POSITION AND REQUIREMENTS.
The term "Expiration Date" means 5:00 p.m., New York City time, on
, 1997 unless the Exchange Offer is extended by the Company or the
Trust (in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended).
The Company and the Trust expressly reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from time to
time, to (i) delay the acceptance of the Old Capital Securities for exchange,
(ii) terminate the Exchange Offer (whether or not any Old Capital Securities
have theretofore been accepted for exchange) if the Trust determines, in its
sole and absolute discretion, that any of the events or conditions referred to
under "--Conditions to the Exchange Offer" have occurred or exist or have not
been satisfied, (iii) extend the Expiration Date of the Exchange Offer and
retain all Old Capital Securities tendered pursuant to the Exchange Offer,
subject, however, to the right of holders of Old Capital Securities to withdraw
their tendered Old Capital Securities as described under "--Withdrawal Rights,"
and (iv) waive any condition or otherwise amend the terms of the Exchange Offer
in any respect. If the Exchange Offer is amended in a manner determined by the
Company and the Trust to constitute a material change, or if the Company and the
Trust waive a material condition of the Exchange Offer, the Company and the
Trust will promptly disclose such amendment by means of a Prospectus supplement
that will be distributed to the holders of the Old Capital Securities, and the
Company and the Trust will extend the Exchange Offer to the extent required by
Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company and the Trust may choose to make any public
announcement and subject to applicable law, the Company and the Trust shall have
no obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, New Capital
Securities for Old Capital Securities validly tendered and not withdrawn
promptly after the Expiration Date.
In all cases, delivery of New Capital Securities in exchange for Old
Capital Securities tendered and accepted for exchange pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of (i) Old
Capital Securities or a book-entry confirmation of a book-entry transfer of Old
Capital Securities into the Exchange Agent's account at DTC, including an
Agent's Message (as defined below) if the tendering holder has not delivered a
Letter of Transmittal, (ii) the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees or,
in the case of a book-entry transfer, an Agent's Message in lieu of the Letter
of Transmittal, and (iii) any other documents required by the Letter of
Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Capital Securities into the Exchange Agent's account
at DTC. The term "Agent's Message" means a message, transmitted by DTC to and
received by the Exchange Agent and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgement from the DTC
participant, which acknowledge-
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ment states that such participant has received and agrees to be bound by the
Letter of Transmittal and that the Trust and the Company may enforce such Letter
of Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Trust will
be deemed to have accepted for exchange, and thereby exchanged, Old Capital
Securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the Exchange Agent of the Trust's acceptance of such
Old Capital Securities for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Trust for the purpose of receiving tenders of
Old Capital Securities, Letters of Transmittal and related documents, and as
agent for tendering holders for the purpose of receiving Old Capital Securities,
Letters of Transmittal and related documents and transmitting New Capital
Securities to validly tendering holders. Such exchange will be made promptly
after the Expiration Date. If for any reason whatsoever, acceptance for exchange
or the exchange of any Old Capital Securities tendered pursuant to the Exchange
Offer is delayed (whether before or after the Trust's acceptance for exchange of
Old Capital Securities) or the Trust extends the Exchange Offer or is unable to
accept for exchange or exchange Old Capital Securities tendered pursuant to the
Exchange Offer, then, without prejudice to the Trust's rights set forth herein,
the Exchange Agent may, nevertheless, on behalf of the Trust and subject to Rule
14e-1(c) under the Exchange Act, retain tendered Old Capital Securities and such
Old Capital Securities may not be withdrawn except to the extent tendering
holders are entitled to withdrawal rights as described under "--Withdrawal
Rights."
Pursuant to the Letter of Transmittal or Agent's Message in lieu thereof, a
holder of Old Capital Securities will warrant and agree in the Letter of
Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Old Capital Securities, that the Trust will acquire good,
marketable and unencumbered title to the tendered Old Capital Securities, free
and clear of all liens, restrictions, charges and encumbrances, and the Old
Capital Securities tendered for exchange are not subject to any adverse claims
or proxies. The holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Trust or the Exchange
Agent to be necessary or desirable to complete the exchange, sale, assignment,
and transfer of the Old Capital Securities tendered pursuant to the Exchange
Offer.
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
Valid Tender. Except as set forth below, in order for Old Capital
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message in lieu of the Letter of Transmittal, and any other required
documents, must be received by the Exchange Agent at one of its addresses set
forth under "--Exchange Agent," and either (i) tendered Old Capital Securities
must be received by the Exchange Agent, or (ii) such Old Capital Securities must
be tendered pursuant to the procedures for book-entry transfer set forth below
and a book-entry confirmation, including an Agent's Message if the tendering
holder has not delivered a Letter of Transmittal, must be received by the
Exchange Agent, in each case on or prior to the Expiration Date, or (iii) the
guaranteed delivery procedures set forth below must be complied with.
If less than all of the Old Capital Securities are tendered, a tendering
holder should fill in the amount of Old Capital Securities being tendered in the
appropriate box on the Letter of Transmittal. The entire amount of Old Capital
Securities delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER,
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Exchange Agent will establish an account with
respect to the Old Capital Securities at DTC for purposes of the Exchange Offer
within two business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry
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delivery of the Old Capital Securities by causing DTC to transfer such Old
Capital Securities into the Exchange Agent's account at DTC in accordance with
DTC's procedures for transfers. However, although delivery of Old Capital
Securities may be effected through book-entry transfer into the Exchange Agent's
account at DTC, the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message in lieu of the Letter of Transmittal, and any other required
documents, must in any case be delivered to and received by the Exchange Agent
at its address set forth under "--Exchange Agent" on or prior to the Expiration
Date, or the guaranteed delivery procedure set forth below must be complied
with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Certificates for the Old Capital Securities need not
be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (a) a certificate for the Old Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (b) such holder completes the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" in the Letter of Transmittal. In the case of (a)
or (b) above, such certificates for Old Capital Securities must be duly endorsed
or accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the Letter of Transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined therein):
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association (each of the foregoing, an "Eligible Institution"), unless
surrendered on behalf of such Eligible Institution. See Instruction 1 to the
Letter of Transmittal.
Guaranteed Delivery. If a holder desires to tender Old Capital Securities
pursuant to the Exchange Offer and the certificates for such Old Capital
Securities are not immediately available or time will not permit all required
documents to reach the Exchange Agent on or prior to the Expiration Date, or the
procedure for book-entry transfer cannot be completed on a timely basis, such
Old Capital Securities may nevertheless be tendered, provided that all of the
following guaranteed delivery procedures are complied with:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(c) the certificates (or a book-entry confirmation) representing all
tendered Old Capital Securities, in proper form for transfer, together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof or Agent's Message in lieu thereof), with any required signature
guarantees and any other documents required by the Letter of Transmittal,
are received by the Exchange Agent within three New York Stock Exchange
trading days after the date of execution of such Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Capital
Securities in exchange for Old Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a
book-entry confirmation with respect to such Old Capital Securities, and a
properly completed and duly executed Letter of Transmittal (or facsimile thereof
or Agent's Message in lieu thereof), together with any required signature
guarantees and any other documents required by the Letter of Transmittal.
Accordingly, the delivery of New Capital Securities might not be made to all
tendering holders at the same time, and will depend upon when Old Capital
Securities, book-entry confirmations with respect to Old Capital Securities and
other required documents are received by the Exchange Agent.
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The Trust's acceptance for exchange of Old Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and subject
to the conditions of the Exchange Offer.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Capital Securities will be determined by the Company and the
Trust, in their sole discretion, whose determination shall be final and binding
on all parties. The Company and the Trust reserve the absolute right, in their
sole and absolute discretion, to reject any and all tenders determined by them
not to be in proper form or the acceptance of which, or exchange for, may, in
the opinion of counsel to the Company and the Trust, be unlawful. No
alternative, conditional or contingent tenders will be accepted. The Company and
the Trust also reserve the absolute right, subject to applicable law, to waive
any of the conditions of the Exchange Offer as set forth under "--Conditions to
the Exchange Offer" or any condition or irregularity in any tender of Old
Capital Securities of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders.
The interpretation by the Company and the Trust of the terms and conditions
of the Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding. No tender of Old Capital Securities will be
deemed to have been validly made until all irregularities with respect to such
tender have been cured or waived. None of the Company, the Trust, any Affiliates
or assigns of the Company or the Trust, the Exchange Agent or any other person
shall be under any duty to give any notification of any irregularities in
tenders or incur any liability for failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company
and the Trust, proper evidence satisfactory to the Company and the Trust, in
their sole discretion, of such person's authority to so act must be submitted.
A beneficial owner of Old Capital Securities that are held by or registered
in the name of a broker, dealer, commercial bank, trust company or other nominee
or custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
RESALES OF NEW CAPITAL SECURITIES
The Trust is making the Exchange Offer for the New Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance of
the Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, neither the Company nor the Trust sought
its own interpretive letter and there can be no assurance that the staff of the
Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the staff of the
Division of Corporation Finance of the Commission, and subject to the two
immediately following sentences, the Company and the Trust believe that New
Capital Securities issued pursuant to this Exchange Offer in exchange for Old
Capital Securities may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Capital Securities are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Capital Securities. However, any holder of Old Capital Securities who
is an Affiliate of the Company or the Trust or who intends to participate in the
Exchange Offer for the purpose of distributing New Capital Securities, or any
broker-dealer who purchased Old Capital Securities from the Trust for resale
pursuant to Rule 144A or any other available exemption under the Securities Act,
(a) will not be able to rely on the interpretations of the staff of the Division
of Corporation Finance of the Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted or entitled to tender such Old
Capital Securities in the Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Capital Securities unless
such sale is made pursuant to an exemption from such requirements. In addition,
as
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described below, if any broker-dealer holds Old Capital Securities acquired for
its own account as a result of market-making or other trading activities and
exchanges such Old Capital Securities for New Capital Securities, then such
broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required to
represent that (i) it is not an Affiliate of the Company or the Trust, (ii) any
New Capital Securities to be received by it are being acquired in the ordinary
course of its business, (iii) it has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such New Capital Securities, and (iv) if such holder is not a
broker-dealer, such holder is not engaged in, and does not intend to engage in,
a distribution (within the meaning of the Securities Act) of such New Capital
Securities. In addition, the Company and the Trust may require such holder, as a
condition to such holder's eligibility to participate in the Exchange Offer, to
furnish to the Company and the Trust (or an agent thereof) in writing
information as to the number of "beneficial owners" (within the meaning of Rule
13d-3 under the Exchange Act) on behalf of whom such holder holds the Capital
Securities to be exchanged in the Exchange Offer. Each broker-dealer that
receives New Capital Securities for its own account pursuant to the Exchange
Offer must acknowledge that it acquired the Old Capital Securities for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Capital Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Based on the position
taken by the staff of the Division of Corporation Finance of the Commission in
the interpretive letters referred to above, the Company and the Trust believe
that Participating Broker-Dealers who acquired Old Capital Securities for their
own accounts as a result of market-making activities or other trading activities
may fulfill their prospectus delivery requirements with respect to the New
Capital Securities received upon exchange of such Old Capital Securities (other
than Old Capital Securities which represent an unsold allotment from the
original sale of the Old Capital Securities) with a prospectus meeting the
requirements of the Securities Act, which may be the prospectus prepared for an
exchange offer so long as it contains a description of the plan of distribution
with respect to the resale of such New Capital Securities. Accordingly, this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer during the period referred to below in
connection with resales of New Capital Securities received in exchange for Old
Capital Securities where such Old Capital Securities were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, the Company and the Trust have agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of such New Capital
Securities for a period ending 90 days after the Expiration Date (subject to
extension under certain limited circumstances described below) or, if earlier,
when all such New Capital Securities have been disposed of by such Participating
Broker-Dealer. See "Plan of Distribution." However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of New Capital Securities received in exchange for Old Capital Securities
pursuant to the Exchange Offer must notify the Company or the Trust, or cause
the Company or the Trust to be notified, on or prior to the Expiration Date,
that it is a Participating Broker-Dealer. Such notice may be given in the space
provided for that purpose in the Letter of Transmittal or may be delivered to
the Exchange Agent at one of the addresses set forth herein under "--Exchange
Agent." Any Participating Broker-Dealer who is an Affiliate of the Company or
the Trust may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each Participating Broker-Dealer who tenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal or delivery of an Agent's Message in lieu
thereof, that, upon receipt of notice from the Company or the Trust of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any material
respect or which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of New
Capital
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Securities (or the New Guarantee or the New Junior Subordinated Debentures, as
applicable) pursuant to this Prospectus until the Company or the Trust has
amended or supplemented this Prospectus to correct such misstatement or omission
and has furnished copies of the amended or supplemented Prospectus to such
Participating Broker-Dealer or the Company or the Trust has given notice that
the sale of the New Capital Securities (or the New Guarantee or the New Junior
Subordinated Debentures, as applicable) may be resumed, as the case may be. If
the Company or the Trust gives such notice to suspend the sale of the New
Capital Securities (or the New Guarantee or the New Junior Subordinated
Debentures, as applicable), it shall extend the 90-day period referred to above
during which Participating Broker-Dealers are entitled to use this Prospectus in
connection with the resale of New Capital Securities by the number of days
during the period from and including the date of the giving of such notice to
and including the date when Participating Broker-Dealers shall have received
copies of the amended or supplemented Prospectus necessary to permit resales of
the New Capital Securities or to and including the date on which the Company or
the Trust has given notice that the sale of New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable) may be
resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Capital Securities may
be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "--Exchange Agent" on
or prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Capital Securities to be withdrawn, the
aggregate Liquidation Amount of Old Capital Securities to be withdrawn, and (if
certificates for such Old Capital Securities have been tendered) the name of the
registered holder of the Old Capital Securities as set forth on the Old Capital
Securities, if different from that of the person who tendered such Old Capital
Securities. If Old Capital Securities have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such Old
Capital Securities, the tendering holder must submit the serial numbers shown on
the particular Old Capital Securities to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution, except in
the case of Old Capital Securities tendered for the account of an Eligible
Institution. If Old Capital Securities have been tendered pursuant to the
procedures for book-entry transfer set forth in "--Procedures for Tendering Old
Capital Securities," the notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawal of Old Capital
Securities, in which case a notice of withdrawal will be effective if delivered
to the Exchange Agent by written, telegraphic, telex or facsimile transmission.
Withdrawals of tenders of Old Capital Securities may not be rescinded. Old
Capital Securities properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but may be retendered at any subsequent time on
or prior to the Expiration Date by following any of the procedures described
above under "--Procedures for Tendering Old Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its sole
discretion, whose determination shall be final and binding on all parties.
Neither the Company, the Trust, any Affiliates or assigns of the Company or the
Trust, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Old Capital Securities
which have been tendered but which are withdrawn will be returned to the holder
thereof promptly after withdrawal.
DISTRIBUTIONS ON NEW CAPITAL SECURITIES
Holders of Old Capital Securities whose Old Capital Securities are accepted
for exchange will not receive Distributions on such Old Capital Securities and
will be deemed to have waived the right to receive any Distributions on such Old
Capital Securities accumulated from and including February 5, 1997. Holders of
New Capital Securities as of the record date for the payment of Distributions on
August 1, 1997 will be entitled to receive Distributions accumulated from and
including February 5, 1997.
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CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company and the Trust will not be required
to accept for exchange, or to exchange, any Old Capital Securities for any New
Capital Securities, and, as described below, may terminate the Exchange Offer
(whether or not any Old Capital Securities have theretofore been accepted for
exchange) or may waive any conditions to or amend the Exchange Offer, if any of
the following conditions has occurred or exists or has not been satisfied:
(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the New Capital Securities issued
pursuant to the Exchange Offer in exchange for Old Capital Securities to be
offered for resale, resold and otherwise transferred by holders thereof
(other than broker-dealers and any such holder which is an Affiliate of the
Company or the Trust) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Capital Securities are acquired in the ordinary course of such holders'
business and such holders have no arrangement or understanding with any
person to participate in the distribution of such New Capital Securities;
or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Company or the Trust, would
reasonably be expected to impair its ability to proceed with the Exchange
Offer; or
(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Company or the Trust, threatened for that purpose or any governmental
approval has not been obtained, which approval the Company or the Trust
shall, in its sole discretion, deem necessary for the consummation of the
Exchange Offer as contemplated hereby.
If the Company or the Trust determines in its sole and absolute discretion
that any of the foregoing events or conditions has occurred or exists or has not
been satisfied, it may, subject to applicable law, terminate the Exchange Offer
(whether or not any Old Capital Securities have theretofore been accepted for
exchange) or may waive any such condition or otherwise amend the terms of the
Exchange Offer in any respect. If such waiver or amendment constitutes a
material change to the Exchange Offer, the Company or the Trust will promptly
disclose such waiver or amendment by means of a Prospectus supplement that will
be distributed to the registered holders of the Old Capital Securities and will
extend the Exchange Offer to the extent required by Rule 14e-1 under the
Exchange Act.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery:
-------------------------------- ---------------------------------
The Chase Manhattan Bank The Chase Manhattan Bank
450 West 33rd Street, 15th Floor 450 West 33rd Street, 15th Floor
New York, New York 10001 New York, New York 10001
Attention: Global Trust Services Attention: Global Trust Services
Sheik Wiltshire, Sheik Wiltshire,
Second Vice President Second Vice President
</TABLE>
Confirm By Telephone:
(212) 946-3082
Facsimile Transmissions:
(ELIGIBLE INSTITUTIONS ONLY)
(212) 946-8161
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
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<PAGE> 34
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Old Capital Securities, and in handling or tendering
for their customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Capital Securities are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Capital Securities
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Capital Securities in connection with the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
Neither the Company nor the Trust will make any payment to brokers, dealers
or other nominees soliciting acceptances of the Exchange Offer.
DESCRIPTION OF NEW SECURITIES
DESCRIPTION OF NEW CAPITAL SECURITIES
Pursuant to the terms of the Declaration, the Trust has issued the Old
Capital Securities and the Common Securities and will issue the New Capital
Securities pursuant to the Exchange Offer. The New Capital Securities will
represent preferred undivided beneficial interests in the assets of the Trust
and the holders of the New Capital Securities and the Old Capital Securities
will be entitled to a preference over the Common 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
Securities." The Declaration has been qualified under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). This summary of certain provisions
of the New Capital Securities and the Declaration does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Declaration, including the definitions therein of
certain terms.
GENERAL
The Capital Securities (including the Old Capital Securities and the New
Capital Securities) will be limited to $125,000,000 aggregate Liquidation Amount
at any one time outstanding. The New Capital Securities will rank pari passu,
and payments will be made thereon pro rata, with the Old Capital Securities and
the Common Securities except as described under "--Subordination of Common
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
Capital Securities and the Common Securities. The New Guarantee will not
guarantee payment of Distributions or amounts payable on redemption of the New
Capital Securities or liquidation of the Trust when the Trust does not have
funds on hand legally available for such payments. See "--Description of New
Guarantee."
DISTRIBUTIONS
Distributions on the New Capital Securities will be cumulative, will
accumulate from February 5, 1997 and will be payable semi-annually in arrears on
February 1 and August 1 of each year, commencing August 1, 1997, at the annual
rate of 8.675% of the Liquidation Amount to the holders of the New Capital
Securities on the relevant record dates. The record dates will be the fifteenth
day prior to the relevant Distribution Date (as defined herein). The amount of
Distributions payable for any period will 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,
on the basis of the actual number of days elapsed in such month. In the event
that any date on which Distributions are payable on the New Capital
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<PAGE> 35
Securities is not a Business Day (as defined herein), 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 to any
such delay), in each case with the same force and effect as if made on such date
(each date on which Distributions are payable in accordance with the foregoing,
a "Distribution Date"). The term "Business Day" shall mean any day other than a
Saturday or a Sunday or a day on which banking institutions in New York, New
York or Wilmington, Delaware are authorized or required by law or executive
order to remain closed.
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 New Junior Subordinated Debentures at any
time or from time to time for a period not exceeding 10 consecutive semi-annual
periods with respect to each Extension Period, provided that no Extension Period
may extend beyond the Stated Maturity Date. Upon any such election, semi-annual
Distributions on the New Capital Securities will be deferred by the Trust during
such Extension Period. Distributions to which holders of the New Capital
Securities are entitled during any Extension Period will accumulate additional
Distributions thereon at the rate per annum of 8.675% thereof, compounded
semi-annually from the relevant Distribution Date, but not exceeding the
interest rate then accruing on the New Junior Subordinated Debentures. The term
"Distributions" as used herein shall include any such additional Distributions.
During any Extension Period, the Company may extend such Extension Period,
provided that such extension does not cause the Extension Period to exceed 10
consecutive semi-annual periods or to extend beyond the Stated Maturity Date.
Upon the expiration of any Extension Period and the payment of all amounts then
due, and subject to the foregoing limitations, the Company may elect to begin a
new Extension Period. The Company must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its election of any
Extension Period or any extension thereof at least five Business Days prior to
the earlier of (i) the date the Distributions on the New Capital Securities
would have been payable except for the election to begin or extend such
Extension Period and (ii) the date the Administrative Trustees are required to
give notice to any securities exchange or to holders of the New Capital
Securities of the record date or the date such Distributions are payable, but in
any event not less than five Business Days prior to such record date. There is
no limitation on the number of times that the Company may elect to begin an
Extension Period. See "--Description of New Junior Subordinated
Debentures--Option to Extend Interest Payment Period" and "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount."
During any Extension Period, the Company 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 Company's capital stock (which
includes common and preferred stock) or (ii) make any payment of principal of or
premium, if any, or interest on or repay, 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 Junior Subordinated Debentures or (iii)
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company (including Other Guarantees) if
such guarantee ranks pari passu with or junior in right of payment to the Junior
Subordinated Debentures (other than (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 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 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, (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,
(f) issuances of common stock of the Company upon exercise of the Aetna Option
and (g) purchases or issuances of common stock in connection with any of the
Company's stock option, stock purchase, stock loan or other benefit plans for
its directors, officers or employees or any of the Company's dividend
reinvestment plans, in each case as now existing or hereafter established or
amended).
Although the Company may in the future exercise its option to defer
payments of interest on the New Junior Subordinated Debentures, the Company has
no such current intention.
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<PAGE> 36
The revenue of the Trust available for distribution to holders of the
Capital Securities will be limited to payments under the Junior Subordinated
Debentures in which the Trust invested the proceeds from the issuance and sale
of the Trust Securities. See "--Description of New Junior Subordinated
Debentures--General." If the Company does not make interest payments on the New
Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the New Capital Securities. The payment of
Distributions on the New Capital Securities (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 New Guarantee."
CONDITIONAL RIGHT TO ADVANCE MATURITY AND SPECIAL EVENT REDEMPTION
If a Tax Event (as defined herein) occurs, then the Company will have the
right (i) prior to the termination of the Trust, to advance the Stated Maturity
Date of the New Junior Subordinated Debentures to the minimum extent required in
order to allow for payments of interest in respect of the New Junior
Subordinated Debentures to continue to be tax deductible, but in no event shall
the resulting maturity of the New Junior Subordinated Debentures be less than 20
years from the date of original issuance thereof, or (ii) to terminate the Trust
(if not previously terminated). In either case, such maturity date shall be
advanced only if, in the opinion of counsel to the Company experienced in such
matters, after advancing the maturity date, interest paid on the New Junior
Subordinated Debentures will be deductible for United States federal income tax
purposes (the action referred to in either clause (i) or (ii) above being
referred to herein as a "Tax Event Maturity Advancement").
If a Tax Event occurs and in the opinion of counsel to the Company
experienced in such matters, there would in all cases, after effecting a Tax
Event Maturity Advancement, be more than an insubstantial risk that an Adverse
Tax Consequence (as defined herein) would continue to exist, or, if an
Investment Company Event (as defined herein) occurs, then the Company will have
the right, within 90 days following the occurrence of such Tax Event or
Investment Company Event, as the case may be, at any time prior to February 1,
2007 to prepay the New Junior Subordinated Debentures in whole (but not in part)
in the manner set forth under "--Description of New Junior Subordinated
Debentures--Conditional Right to Advance Maturity and Special Event Prepayment,"
and therefore to cause a mandatory redemption of the New Capital Securities
prior to the Stated Maturity Date (the circumstances under which the Company has
the right to so redeem the New Junior Subordinated Debentures in connection with
a Tax Event being referred to herein as a "Conditional Tax Redemption Event").
Each of a Conditional Tax Redemption Event or an Investment Company Event are
sometimes referred to herein as a "Special Event."
REDEMPTION
Upon the repayment on the Stated Maturity Date or prepayment prior to the
Stated Maturity Date of the New Junior Subordinated Debentures, the proceeds
from such repayment or prepayment shall be applied by the Property Trustee to
redeem a Like Amount (as defined below) of the Trust Securities, upon not less
than 30 nor more than 60 days' notice of a date of redemption (the "Redemption
Date") at the applicable Redemption Price, which shall be equal to (i) in the
case of the repayment of the New Junior Subordinated Debentures on the Stated
Maturity Date, the Maturity Redemption Price (equal to the principal of and
accrued interest on the New Junior Subordinated Debentures), (ii) in the case of
the optional prepayment of the New Junior Subordinated Debentures prior to
February 1, 2007 upon the occurrence and continuation of a Special Event, the
Special Event Redemption Price (equal to the Special Event Prepayment Price in
respect of the New Junior Subordinated Debentures) and (iii) in the case of the
optional prepayment of the New Junior Subordinated Debentures on or after
February 1, 2007, the Optional Redemption Price (equal to the Optional
Prepayment Price in respect of the New Junior Subordinated Debentures). See
"--Description of New Junior Subordinated Debentures--Optional Prepayment" and
"--Special Event Prepayment."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a 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 Liquidation Amount of the Trust Securities of the
holder to whom such Junior Subordinated Debentures are distributed.
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<PAGE> 37
The Company will have the option to prepay the New Junior Subordinated
Debentures, (i) in whole or in part, on or after February 1, 2007, at the
applicable Optional Prepayment Price and (ii) in whole but not in part, at any
time prior to February 1, 2007, upon the occurrence of a Special Event, at the
Special Event Prepayment Price.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF NEW 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 New Junior Subordinated Debentures to be distributed
to the holders of the Trust Securities in liquidation of the Trust. Such right
is conditioned on the Administrative Trustees having received an opinion of
counsel to the effect that such distribution will not be a taxable event to
holders of New Capital Securities.
The Trust shall automatically dissolve and its affairs shall be wound up
upon the first to occur of: (i) certain events of bankruptcy, dissolution or
liquidation of the Company; (ii) 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, except as described above, wholly within
the discretion of the Company, as Sponsor) and provided that the distribution is
conditioned on the receipt of an opinion of counsel to the effect that the
holders of New Capital Securities will not recognize any gain or loss for United
States federal income tax purposes; (iii) redemption of all of the Trust
Securities as described under "--Redemption" above; (iv) expiration of the term
of the Trust; and (v) the entry of an order for the dissolution of the Trust by
a court of competent jurisdiction.
If a dissolution occurs as described in clause (i), (ii), (iv) or (v) of
the preceding paragraph, the Trust shall be liquidated by the Administrative
Trustees as expeditiously as the Administrative Trustees 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 Trust Securities a
Like Amount of the New Junior Subordinated 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 Amount plus accumulated and unpaid Distributions
thereon to the date of payment (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 Capital Securities and the Common Securities shall be paid on a pro
rata basis, except that if a Debenture Event of Default has occurred and is
continuing, the Capital Securities shall have a priority over the Common
Securities. See "--Subordination of Common Securities." If an early dissolution
occurs as described in clause (v) above, the New Junior Subordinated Debentures
will be subject to optional prepayment, in whole but not in part, on or after
February 1, 2007.
If the Company elects not to prepay the Junior Subordinated Debentures
prior to maturity in accordance with their terms and either elects not to or is
unable to liquidate the Trust and distribute the Junior Subordinated Debentures
to holders of the Trust Securities, the Trust Securities will remain outstanding
until the repayment of the Junior Subordinated Debentures on the Stated Maturity
Date.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) each holder of Trust
Securities will receive a registered certificate or certificates representing
the Junior Subordinated Debentures to be delivered upon such distribution and
(iii) Trust Securities will be deemed to represent Junior Subordinated
Debentures having a principal amount equal to the 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 Administrative Trustees 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.
There can be no assurance as to the market prices for the New Capital
Securities or the New Junior Subordinated Debentures that may be distributed in
exchange for the Trust Securities if a dissolution and
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<PAGE> 38
liquidation of the Trust were to occur. Accordingly, the New Capital Securities
that an investor may purchase, or the New Junior Subordinated Debentures that
the investor may receive on dissolution and liquidation of the Trust, may trade
at a discount to the price that the investor paid to purchase the New Capital
Securities.
REDEMPTION PROCEDURES
If applicable, Trust Securities shall be redeemed at the applicable
Redemption Price with the proceeds from the contemporaneous repayment or
prepayment of the New Junior Subordinated Debentures. Any redemption of Trust
Securities shall be made and the applicable Redemption Price shall be payable on
the Redemption Date only to the extent that the Trust has funds legally
available for the payment of such applicable Redemption Price. See also
"--Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the New Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are legally available, with respect to the New Capital
Securities held by The Depository Trust Company ("DTC") or its nominees, the
Property Trustee will pay or cause the Paying Agent to pay the applicable
Redemption Price to DTC. See "--Form, Denomination, Book-Entry Procedures and
Transfer." With respect to the New Capital Securities held in certificated form,
the Property Trustee, to the extent funds are legally available, will pay or
cause the Paying Agent to pay the applicable Redemption Price to the holders
thereof upon surrender of their certificates evidencing the New Capital
Securities. See "--Payment and Paying Agency" below. Distributions payable on or
prior to the Redemption Date shall be payable to the holders of such New Capital
Securities on the relevant record dates for the related Distribution Dates. If
notice of redemption shall have been given and funds irrevocably deposited with
the Property Trustee to pay the Redemption Price of the New Capital Securities
called for redemption, then upon the date of such deposit, all rights of the
holders of the New Capital Securities will cease, except the right of the
holders of the New Capital Securities to receive the applicable Redemption
Price, but without interest on such Redemption Price, and the New Capital
Securities will cease to be outstanding. In the event that any Redemption Date
is not a Business Day, then the applicable 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), except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of the applicable
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 New Guarantee," (i) Distributions on New Capital Securities
called for redemption will continue to accumulate at the then applicable rate,
from the Redemption Date originally established by the Trust to the date such
applicable Redemption Price is actually paid, and (ii) the actual payment date
will be the Redemption Date for purposes of calculating the applicable
Redemption Price.
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 Capital Securities by tender, in the open
market or by private agreement.
Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Company defaults in payment of the applicable
Prepayment Price on, or in the repayment of, the Junior Subordinated Debentures,
on and after the Redemption Date, Distributions will cease to accumulate on the
Trust Securities called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and the Common Securities, as applicable, shall be made pro rata
based on the Liquidation Amount of the Capital Securities and Common Securities;
provided, however, that if on any Distribution Date or Redemption Date a
Debenture Event of Default shall have occurred and be continuing, no payment of
any Distribution on, or applicable Redemption Price of, any of the Common
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of the Common Securities, shall be made unless payment in full
in cash of all accumulated and unpaid Distributions on all of the outstanding
Capital Securities for all Distribution periods terminating on or prior thereto
or, in the case of Capital Securities called for redemption on a Redemption Date
on or prior thereto, the
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full amount of the 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 Redemption Price of, the
Capital Securities then due and payable.
In the case of any Event of Default, the Company as holder of the Common
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 Capital Securities and not on behalf of the
Company as holder of the Common Securities, and only the holders of the Capital
Securities 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 New
Junior Subordinated Debentures--Debenture Events of Default") constitutes an
"Event of Default" under the Declaration.
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 Capital Securities, the
Administrative Trustees and the Company, as Sponsor, unless such Event of
Default shall have been cured or waived. The Company, as Sponsor, and the
Administrative Trustees 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.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described under
"--Liquidation of the Trust and Distribution of New Junior Subordinated
Debentures" and "--Subordination of Common Securities" above.
REMOVAL OF ISSUER TRUSTEES
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
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 Liquidation Amount of the outstanding Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Company as the holder of the Common
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 corporation into which the Property Trustee, the Delaware Trustee or
any Administrative Trustee that is not a natural person may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Issuer Trustee shall
be a party, or any corporation 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 corporation shall be
otherwise qualified and eligible.
MERGERS, 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 corporation or other Person,
except as described below and under "-- Liquidation of the Trust and
Distribution of New Junior Subordinated Debentures" above. The Trust may, at the
request of the Company, as Sponsor, with the consent of the Administrative
Trustees but without the consent of the Property Trustee, the Delaware Trustee
or holders of the Capital Securities, 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
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under the laws of any State; provided, that (i) such successor entity either (a)
expressly assumes all of the obligations of the Trust with respect to the
Capital Securities or (b) substitutes for the Capital Securities other
securities having substantially the same terms as the Capital Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Capital Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) 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, (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 Capital Securities are then listed, if any, (iv) such
merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Capital Securities (including any Successor
Securities) or, if so rated, the Junior Subordinated Debentures, to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Capital Securities (including any Successor
Securities) in any material respect (other than with respect to a dilution of
such holder's interest in the new entity), (vi) such successor entity has a
purpose identical to that of the Trust, (vii) 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 (a) such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Capital Securities (including any Successor Securities) in any material respect
(other than with respect to a dilution of such holder's interest in the new
entity), (b) 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
(c) following such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Trust (or any successor entity) will continue
to be classified as a grantor trust for United States federal income tax
purposes, and (viii) 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 not
to be classified as 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 New
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Declaration, the holders of the New Capital Securities will have no voting
rights.
The Declaration may be amended from time to time by the Company and the
Issuer Trustees, without the consent of the holders of the Trust Securities (i)
to cure any ambiguity, correct or supplement any provisions in the Declaration
that may be inconsistent with any other provision of the Declaration, or to add
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 (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
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 the case of clause (i), such
action shall not adversely affect in any material respect the interests of the
holders of the Trust Securities, and any amendments of the Declaration 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 (i) with the consent of holders representing a majority (based upon
Liquidation Amount) of the
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outstanding Trust Securities, and (ii) upon receipt by the Issuer Trustees 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
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
holder of Trust Securities, the Declaration may not be amended to (i) change the
amount or timing of any Distribution or other payment on or in respect of the
Trust Securities or otherwise adversely affect the amount of any Distribution or
other payment 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.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
execute any trust or power conferred on the Property Trustee with respect to the
Junior Subordinated Debentures, (ii) waive certain past defaults under the
Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Junior Subordinated
Debentures or (iv) 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
a majority in Liquidation Amount of all outstanding Capital Securities;
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 Capital Securities. The Issuer Trustees shall not revoke
any action previously authorized or approved by a vote of the holders of the
Capital Securities except by subsequent vote of such holders. The Property
Trustee shall notify each holder of Capital Securities of any notice of default
with respect to the Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of such holders of the Capital Securities, 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 for United States federal
income tax purposes on account of such action.
Any required approval of holders of New Capital Securities 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 New Capital Securities 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 New Capital Securities in the manner set forth in the
Declaration.
No vote or consent of the holders of New Capital Securities will be
required for the Trust to redeem and cancel the New Capital Securities in
accordance with the Declaration.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company, the Issuer Trustees or any affiliate
of the Company or any Issuer Trustees shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The New Capital Securities initially will be represented by one or more New
Capital Securities certificates in registered, global form (collectively, the
"Global New Capital Securities" and together with the Old Capital Securities in
registered global form, the "Global Capital Securities"). The Global New Capital
Securities will be deposited upon issuance with the Property Trustee as
custodian for DTC, in New York, New York, and registered in the name of DTC or
its nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Capital
Securities may not be exchanged for Capital Securities in certificated form
except in the limited circumstances described below.
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Depositary Procedures
DTC has advised the Trust and the Company that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to procedures
established by it, (i) upon deposit of the Global Capital Securities, DTC will
credit the accounts of Participants with portions of the Liquidation Amount of
the Global Capital Securities and (ii) ownership of such interests in the Global
Capital Securities will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interests in the Global Capital Securities).
Except as described below, owners of interests in the Global Capital
Securities will not have Capital Securities registered in their name, will not
receive physical delivery of Capital Securities in certificated form and will
not be considered the registered owners or holders thereof under the Declaration
for any purpose.
Payments in respect of the Global Capital Security registered in the name
of DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Declaration. Under the terms of the
Declaration, the Property Trustee will treat the persons in whose names the
Capital Securities, including the Global Capital Securities, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Property Trustee nor
any agent thereof has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in the
Global Capital Securities, or for maintaining, supervising or reviewing any of
DTC's records or any Participant's or Indirect Participant's records relating to
the beneficial interests in the Global Capital Securities or (ii) any other
matter relating to the actions and practices of DTC or any of its Participants
or Indirect Participants. DTC has advised the Trust and the Company that its
current practice, upon receipt of any payment in respect of securities such as
the Global New Capital Securities, is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in Liquidation Amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Global
Capital Securities will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the Property Trustee,
the Trust or the Company. Neither the Trust nor the Company nor the Property
Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the Global Capital Securities, and the
Trust or the Company and the Property Trustee may conclusively rely on and will
be protected in relying on instructions from DTC or its nominee for all
purposes.
Except for trades involving only Euroclear and Cedel participants,
interests in the Global Capital Securities will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
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Cross-market transfers between the Participants in DTC, on the one hand,
and Euroclear or Cedel participants, on the other hand, will be effected through
DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case
may be, by its respective depositary; however, such cross-market transactions
will require delivery of instructions to Euroclear or Cedel, as the case may be,
by the counterparts in such system in accordance with the rules and procedures
and within the established deadlines (Brussels time) of such system. Euroclear
or Cedel, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global New Capital Securities in DTC, and making or receiving
payment in accordance with normal procedures for same day funds settlement
applicable to DTC. Euroclear participants and Cedel participants may not deliver
instructions directly to the depositaries for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global New Capital Security from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of DTC. Cash received in Euroclear or
Cedel as a result of sales of interest in a Global New Capital Security by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of New Capital Securities only at the
direction of one or more Participants to whose account with DTC interests in the
Global Capital Securities are credited and only in respect of such portion of
the Liquidation Amount of the New Capital Securities as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Declaration, DTC reserves the right to exchange
the Global Capital Securities for New Capital Securities in certificated form
and to distribute such New Capital Securities to its Participants.
The information in this section concerning DTC , Euroclear and Cedel and
their book-entry systems has been obtained from sources that the Trust and the
Company believe to be reliable, but neither the Trust nor the Company takes
responsibility for the accuracy thereof.
Exchange of Global New Capital Securities for Certificated New Capital
Securities
A Global New Capital Security is exchangeable for New Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global New Capital
Security and the Trust thereupon fails to appoint a successor Depositary within
90 days or (y) has ceased to be a clearing agency registered under the Exchange
Act, (ii) the Company in its sole discretion elects to cause the issuance of the
New Capital Securities in certificated form or (iii) there shall have occurred
and be continuing an Event of Default or any event which after notice or lapse
of time or both would be an Event of Default under the Declaration. In addition,
beneficial interests in a Global New Capital Security may be exchanged for
certificated New Capital Securities upon request but only upon at least 20 days
prior written notice given to the Property Trustee by or on behalf of DTC in
accordance with customary procedures. In all cases, certificated New Capital
Securities delivered in exchange for any Global New Capital Security or
beneficial interests therein will be registered in the names, and issued in any
approved denominations, requested by or on behalf of the Depositary (in
accordance with its customary procedures), unless the Property Trustee
determines otherwise in compliance with applicable law.
PAYMENT AND PAYING AGENCY
Payments in respect of the New Capital Securities held in global form shall
be made to the Depositary, which shall credit the relevant accounts of holders
of New Capital Securities held at the Depositary on the applicable Distribution
Dates or in respect of the New Capital Securities 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 New Capital
Securities register. The paying agent (the "Paying Agent") shall initially be
the Property
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Trustee and any co-paying agent chosen by the Property Trustee and acceptable to
the Administrative Trustees and the Company. The Paying Agent shall be permitted
to resign as Paying Agent upon 30 days' written notice to the Property Trustee
and the Company. In the event that the Property Trustee shall no longer be the
Paying Agent, the Administrative Trustees shall appoint a successor (which shall
be a bank or trust company acceptable to the Administrative Trustees and the
Company) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the New
Capital Securities.
Registration of transfers of the New Capital Securities 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 the New Capital Securities 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 own 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.
Affiliates of the Property Trustee currently provide commercial banking and
other services to the Company. See "Plan of Distribution."
MISCELLANEOUS
The Administrative Trustees 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 of 1940, as amended, or classified as an association
taxable as a corporation 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 Administrative Trustees 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 Administrative Trustees 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 pre-emptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
DESCRIPTION OF NEW JUNIOR SUBORDINATED DEBENTURES
The Old Junior Subordinated Debentures were issued, and the New Junior
Subordinated Debentures will be issued, as separate series under the Indenture.
The Indenture has been qualified under the Trust Indenture Act. This summary of
certain terms and provisions of the New Junior Subordinated Debentures and the
Indenture does not purport to be complete, and where reference is made to
particular provisions of the Indenture, such provisions, including the
definitions of certain terms, some of which are not otherwise defined herein,
are qualified in their entirety by reference to all of the provisions of the
Indenture and those terms made a part of the Indenture by the Trust Indenture
Act.
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GENERAL
Concurrently with the issuance of the Old Capital Securities, the Trust
invested the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in Old Junior Subordinated Debentures issued
by the Company. Pursuant to the Exchange Offer, the Company will exchange the
Old Junior Subordinated Debentures, in an amount corresponding to the Old
Capital Securities accepted for exchange, for a like aggregate principal amount
of the New Junior Subordinated Debentures promptly after the Expiration Date.
The New Junior Subordinated Debentures will bear interest at the annual
rate of 8.675% of the principal amount thereof, payable semi-annually in arrears
on February 1 and August 1 of each year (each, an "Interest Payment Date"),
commencing August 1, 1997, to the person in whose name each New Junior
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the fifteenth day prior to the relevant payment date. It is
anticipated that, until the liquidation, if any, of the Trust, each New 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 and, for any period less than a full calendar month, on the basis
of the actual number of days elapsed in such month. In the event that any date
on which interest is payable on the New 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), with the same force and effect as
if made on the date such payment was originally payable. Accrued interest that
is not paid on the applicable Interest Payment Date will bear additional
interest on the amount thereof (to the extent permitted by law) at the rate per
annum of 8.675% thereof, compounded semi-annually. The term "interest", as used
herein, shall include semi-annual interest payments, interest on semi-annual
interest payments not paid on the applicable Interest Payment Date and
Additional Sums (as defined herein), as applicable.
The New Junior Subordinated Debentures will be issued in denominations of
$1,000 and integral multiples thereof. The New Junior Subordinated Debentures
will mature on February 1, 2027 (the "Stated Maturity Date"), except as
described below.
The New Junior Subordinated Debentures will rank pari passu with the Old
Junior Subordinated Debentures and all Other Debentures and 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. See
"--Subordination" below. The Company is a holding company and almost all of the
operating assets of the Company and its consolidated subsidiaries are owned by
such subsidiaries. The Company is a legal entity separate and distinct from its
subsidiaries. As a holding company, the Company's ability to meet debt service
obligations and pay operating expenses depends on receipt of sufficient funds in
the form of dividends, surplus debenture payments and tax sharing payments from
its direct and indirect subsidiaries. The inability of the Company's direct and
indirect subsidiaries to pay dividends and make other payments to the Company in
an amount sufficient to meet debt service obligations and pay operating expenses
would have a material adverse effect on the Company and the Trust. The payment
of dividends and the making of other payments by the Company's insurance
subsidiaries without prior regulatory approval is subject to restrictions set
forth in the insurance laws and regulations of the states of domicile of those
subsidiaries. The Company currently does not expect such regulatory requirements
to impair its ability to meet interest payment obligations and to pay operating
expenses in the future. However, the Company can give no assurance that
dividends will be declared or paid by its subsidiaries or that the Company's
insurance subsidiaries will be able to obtain any regulatory approvals that may
be required from time to time. As of December 31, 1996, the Company's direct and
indirect insurance subsidiaries had sufficient capital and earnings to pay up to
$13.8 million of dividends to the Company during 1997 without prior regulatory
approval. In addition, payment of dividends to the Company by the insurance
subsidiaries is subject to ongoing review by insurance regulators and is subject
to various statutory limitations and in certain circumstances requires approval
by insurance regulatory authorities. Because the Company is a holding company,
the right of the Company to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise is
subject to the prior claims of creditors of the subsidiary, except to the extent
the Company may itself be recognized as a creditor of that subsidiary.
Accordingly, the New Junior Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and holders of New Junior Subordinated Debentures should look only
to the assets of the Company for payments on the New Junior
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Subordinated Debentures. The Indenture does not limit the incurrence or issuance
of other secured or unsecured debt of the Company, including Senior
Indebtedness, or other obligations. See "--Subordination" below.
FORM, REGISTRATION AND TRANSFER
If the New Junior Subordinated Debentures are distributed to the holders of
the New Capital Securities, the New Junior Subordinated Debentures may be
represented by one or more global certificates registered in the name of Cede &
Co. as the nominee of DTC. The depositary arrangements for such New Junior
Subordinated Debentures are expected to be substantially similar to those in
effect for the New Capital Securities. For a description of DTC and the terms of
the depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "--Description of New
Capital Securities--Form, Denomination, Book-Entry Procedures and Transfer."
PAYMENT AND PAYING AGENTS
Payment of principal of and premium, if any, and any interest on New 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, except in the case of New Junior
Subordinated Debentures in global form, (i) by check mailed to the address of
the Person entitled thereto as such address shall appear in the register for New
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 New Junior Subordinated Debenture will be made to the Person
in whose name such New 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 New 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 New Junior Subordinated Debenture and
remaining unclaimed for two years after such principal and premium, if any, or
interest has become due and payable shall, at the request of the Company, be
repaid to the Company and the holder of such New Junior Subordinated Debenture
shall thereafter look, as a general unsecured creditor, only to the Company for
payment thereof.
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 New Junior Subordinated Debentures to defer the payment of interest at
any time or from time to time for a period not exceeding 10 consecutive,
semi-annual periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity Date. At the end of an
Extension Period, the Company must pay all interest then accrued and unpaid
(together with interest then accrued at the annual rate of 8.675%, compounded
semi-annually, to the extent permitted by applicable law). During an Extension
Period, interest will continue to accrue and holders of New Junior Subordinated
Debentures (and 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 Income and
Original Issue Discount."
During any Extension Period, the Company 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 Company's capital stock (which
includes common and preferred stock) or (ii) make any payment of principal,
interest or premium, if any, on or repay, 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 New Junior Subordinated Debentures or
(iii) make any guarantee payments with respect to any guarantee by the Company
of the debt securities of any subsidiary of the
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<PAGE> 47
Company (including any Other Guarantees) if such guarantee ranks pari passu with
or junior in right of payment to the New Junior Subordinated Debentures (other
than (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
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
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, (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, (f) issuances of common
stock of the Company upon exercise of the Aetna Option and (g) purchases or
issuances of common stock under any of the Company's stock option, stock
purchase, stock loan or other benefit plans for its directors, officers or
employees or any of the Company's dividend reinvestment plans, in each case as
now existing or hereafter established or amended).
Prior to the expiration of any Extension Period, the Company may further
extend such Extension Period, provided that such extension does not cause such
Extension Period to exceed 10 consecutive semi-annual periods or to extend
beyond the Stated Maturity Date. Upon the expiration of any 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 Administrative Trustees
and the Debenture Trustee notice of its election of any Extension Period (or an
extension thereof) at least five Business Days prior to the earlier of (i) the
date the Distributions on the Trust Securities would have been payable except
for the election to begin or extend such Extension Period or (ii) the date the
Administrative Trustees are required to give notice to any securities exchange
or to holders of New Capital Securities of the record date or the date such
Distributions are payable, but in any event not less than five Business Days
prior to such record date. The Debenture Trustee shall give notice of the
Company's election to begin or extend a new Extension Period to the holders of
the Capital Securities. There is no limitation on the number of times that the
Company may elect to begin an Extension Period.
OPTIONAL PREPAYMENT
The New Junior Subordinated Debentures will be prepayable, in whole or in
part, at the option of the Company on or after February 1, 2007 (the "Initial
Optional Prepayment Date"), at a prepayment price (the "Optional Prepayment
Price") equal to the percentage of the outstanding principal amount of the New
Junior Subordinated Debentures specified below, plus, in each case, accrued
interest thereon to the date of prepayment if prepaid during the 12-month period
beginning February 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
-------------------------------------------------- ----------
<S> <C>
2007.............................................. 104.338%
2008.............................................. 103.904%
2009.............................................. 103.470%
2010.............................................. 103.036%
2011.............................................. 102.603%
2012.............................................. 102.169%
2013.............................................. 101.735%
2014.............................................. 101.301%
2015.............................................. 100.868%
2016.............................................. 100.434%
---
2017 and thereafter............................... 100.000%
===
</TABLE>
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<PAGE> 48
CONDITIONAL RIGHT TO ADVANCE MATURITY AND SPECIAL EVENT PREPAYMENT
If a Tax Event (as defined herein) occurs, then the Company will have the
right (i) prior to the termination of the Trust, to advance the Stated Maturity
Date of the New Junior Subordinated Debentures to the minimum extent required in
order to allow for the payments of interest in respect of the New Junior
Subordinated Debentures to continue to be tax deductible, but in no event shall
the resulting maturity of the New Junior Subordinated Debentures be less than 20
years from the date of original issuance thereof, or (ii) to terminate the Trust
(if not previously terminated) and advance the Stated Maturity Date of the New
Junior Subordinated Debentures to the minimum extent required in order to allow
for the payments of interest to continue to be tax deductible. In either case,
such maturity date shall be advanced only if, in the opinion of counsel to the
Company experienced in such matters, after advancing the maturity date, interest
paid on the New Junior Subordinated Debentures will be deductible for United
States federal income tax purposes (the action referred to in either clause (i)
or (ii) above being referred to herein as a "Tax Event Maturity Advancement").
If a Special Event (as defined below) shall occur and be continuing, the
Company may, at its option, prepay the New Junior Subordinated Debentures in
whole (but not in part) at any time prior to the Initial Optional Prepayment
Date and within 90 days of the occurrence of such Special Event, at a prepayment
price (the "Special Event Prepayment Price") equal to the greater of (i) 100% of
the principal amount of such New Junior Subordinated Debentures to be prepaid or
(ii) the sum, as determined by a Quotation Agent, of the present values of the
principal amount and premium payable with respect to an optional prepayment of
New Junior Subordinated Debentures on February 1, 2007, together with scheduled
payments of interest on the New Junior Subordinated Debentures from the
prepayment date to and including the Initial Optional Prepayment Date discounted
to the prepayment date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in each
case, accrued but unpaid interest thereon to the date of prepayment.
"Special Event" means either a Conditional Tax Redemption Event (as defined
under "--Description of New Capital Securities--Conditional Right to Advance
Maturity and Special Event Redemption") or an Investment Company Event, as the
case may be.
"Tax Event" means the receipt by the Company and the Trust of an opinion,
requested by the Company, of 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 written decision or pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement or decision is made on or
after the Issue Date, 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) interest payable by the Company on
the Junior Subordinated Debentures is not, or within 90 days of the date of such
opinion will not be, deductible by the Company, in whole or in part, for United
States federal income tax purposes, or (iii) 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 (each of the circumstances
referred to in clauses (i), (ii) and (iii) being an "Adverse Tax Consequence").
"Investment Company Event" means that the Company and the Trust shall have
received an opinion, requested by the Company, of counsel experienced in
practice under the Investment Company Act to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in Investment Company Act Law"), there
is more than an insubstantial risk that the Trust is or will be considered an
"investment company" which is required to be registered under the Investment
Company Act, which Change in Investment Company Act Law becomes effective on or
after the Issue Date.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such prepayment date, in each case calculated on
the third Business Day preceding such prepayment
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<PAGE> 49
date, plus in each case (a) 1.25% if such prepayment date occurs on or prior to
February 5, 1997 and (b) .50% in all other cases.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term to the Stated Maturity Date of the New Junior Subordinated Debentures that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of the New Junior Subordinated
Debentures.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Debenture Trustee after consultation with the Company. "Reference Treasury
Dealer" means: (i) J.P. Morgan Securities Inc. and respective successors;
provided, however, that if the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company shall substitute therefor another Primary Treasury Dealer, and (ii) any
other Primary Treasury Dealer selected by the Debenture Trustee after
consultation with the Company.
"Comparable Treasury Price" means, with respect to any prepayment date, (i)
the rate per annum equal to 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 Board and which establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities," for the maturity corresponding
to the Initial Optional Prepayment Date (or if no maturity is within three
months before or after the maturity corresponding to the Initial Optional
Prepayment Date, yields for the two published maturities most closely
corresponding to the Initial Optional Prepayment Date shall be interpolated, and
the Adjusted Treasury Rate shall be interpolated or extrapolated from such
yields on a straight-line basis, rounding to the nearest month) or (ii) if such
release (or any successor release) is not published or does not contain such
prices on such Business Day, (A) the average of three Reference Treasury Dealer
Quotations for such prepayment date, after excluding the highest and lowest such
Reference Treasury Dealer Quotations, or (B) if the Debenture Trustee obtains
fewer than three such Reference Treasury Dealer Quotations, the average of all
such quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined by
the Debenture 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 Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such prepayment date.
"Additional Sums" means such additional amounts that may be necessary in
order that the amount of Distributions then due and payable by the Trust on the
outstanding Capital Securities and Common 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.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of New Junior Subordinated
Debentures to be prepaid at its registered address. Unless the Company defaults
in payment of the prepayment price, on and after the prepayment date interest
ceases to accrue on such New Junior Subordinated Debentures called for
prepayment.
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 New Junior Subordinated Debentures the Additional
Sums.
CERTAIN COVENANTS OF THE COMPANY
The Company will also covenant 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) or (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 New Junior Subordinated Debentures or (iii)
make any
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<PAGE> 50
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company (including under Other Guarantees)
if such guarantee ranks pari passu or junior in right of payment to the New
Junior Subordinated Debentures (other than (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 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 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, (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,
(f) issuances of common stock of the Company, upon exercise of the Aetna Option,
and (g) purchases or issuances of common stock in connection with any of the
Company's stock option, stock purchase, stock loan or other benefit plans for
its directors, officers or employees or any of the Company's dividend
reinvestment plans, in each case as now existing or hereafter established or
amended) if at such time (1) there shall have occurred any event of which the
Company has actual knowledge that (a) is, or with the giving of notice or the
lapse of time, or both, would be, a Debenture Event of Default and (b) in
respect of which the Company shall not have taken reasonable steps to cure, or
(2) if such New Junior Subordinated Debentures are held by the Trust, the
Company shall be in default with respect to its payment of any obligations under
the New Guarantee or (3) 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.
For so long as the Trust Securities remain outstanding, the Company will
covenant (i) to directly or indirectly maintain 100 percent ownership of the
Common Securities of the Trust; provided, however, that any permitted successor
of the Company under the Indenture may succeed to the Company's ownership of
such Common Securities, (ii) to use its reasonable efforts to cause the Trust
(a) 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, and (b) to continue not to be classified
as an association taxable as a corporation or a partnership for United States
federal income tax purposes and (iii) to use its reasonable efforts to cause
each holder of Trust Securities to be treated as owning an undivided beneficial
interest in 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) and qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting the Company and the Debenture Trustee, with the consent of the
holders of not less than a majority in principal amount of the Junior
Subordinated Debentures at the time outstanding, to modify the Indenture in a
manner affecting the rights of the holders of the Junior Subordinated
Debentures; provided that no such modification shall without the consent of the
holders of each outstanding Junior Subordinated Debenture so affected (i) change
the Stated Maturity Date, or reduce the principal amount thereof or any amount
payable upon prepayment thereof, or reduce the rate or extend the time of
payment of interest thereon, except pursuant to the Company's right under the
Indenture to defer the payment of interest as provided therein (see "--Option to
Extend Interest Payment Date"), or make the principal of, or interest or premium
on, the Junior Subordinated Debentures payable in any coin or currency other
than that provided in the Junior Subordinated Debentures, or impair or affect
the right of any holder of Junior Subordinated Debentures to institute suit for
the payment thereof or the right of prepayment, if any, at the option of the
holder, without the consent of the holder of each Security so affected, or (ii)
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.
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<PAGE> 51
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the New 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 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):
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures or any Other Debentures, when due (subject to the deferral of
any due date in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on the Junior
Subordinated Debentures or any Other Debentures when due whether at
maturity, upon redemption, by declaration of acceleration maturity or
otherwise; or
(iii) 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
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
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 of the Junior Subordinated Debentures 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.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures 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 of or premium, if any, on or interest (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
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 Junior Subordinated Debentures
(except a Debenture Event of Default in payment of principal of, or interest or
premium on, the 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 NEW CAPITAL SECURITIES
If a Debenture Event of Default shall have occurred and be continuing and
shall be attributable to the failure of the Company to pay principal of or
interest or premium, if any, on the New Junior Subordinated Debentures on the
due date, a holder of New Capital Securities may institute a Direct Action. 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 New
Capital Securities. Notwithstanding any payments made to a holder of New Capital
Securities by the Company in connection with a Direct Action, the Company shall
remain obligated to pay the principal of (or premium, if any) or interest on the
New Junior Subordinated Debentures, and the Company shall be subrogated to the
rights of the holder of such New Capital Securities with respect to payments on
the New Capital Securities to the extent of any payments made by the Company to
such holder in any Direct Action.
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<PAGE> 52
The holders of the New Capital Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the New Junior Subordinated Debentures unless there
shall have occurred an Event of Default under the Declaration. See
"--Description of New Capital Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, CONVERSION, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
or convert 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 or convert 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 or converts 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 New
Junior Subordinated Debentures protection in the event of a highly leveraged
transaction, a change of control of the Company or other transaction involving
the Company that may adversely affect holders of the New Junior Subordinated
Debentures.
SATISFACTION AND DISCHARGE
The Indenture generally provides that when, among other things, all New
Junior Subordinated Debentures not previously delivered to the Debenture Trustee
for cancellation (i) have become due and payable or (ii) 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 New Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation, for the principal and interest to the date of the deposit or to
the Stated Maturity Date, as the case may be, 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 officers' certificates and
opinions of counsel described therein), and the Company will be deemed to have
satisfied and discharged the Indenture.
DEFEASANCE AND DISCHARGE
The Indenture provides that the Company will be deemed to have been
discharged from its obligations with respect to all outstanding Junior
Subordinated Debentures ("defeasance") at any time prior to maturity, when the
Company has deposited or caused to be deposited with the trustee or Defeasance
Agent (as defined in the Indenture), as trust funds in trust, specifically
pledged as security for, and dedicated solely to the benefit of the holders of
Junior Subordinated Debentures, (i) U.S. dollars in an amount, or (ii) U.S.
Government obligations which through the payment of interest and principal in
accordance with their terms, will provide money, in an amount, or a combination
of (i) and (ii), sufficient to pay and discharge each installment of principal
of (and premium, if any) and interest on the outstanding Junior Subordinated
Debentures on the dates such installments of principal, premium and interest are
due in accordance with the terms of the Junior Subordinated Debentures. Such a
trust may be established with respect to the Junior Subordinated Debentures only
upon the satisfaction of certain conditions specified in the Indenture,
including without limitation, the delivery by the Company to the Trustee and
Defeasance Agent of an opinion of counsel with respect to certain U.S. federal
income tax matters as specified in the Indenture. Upon defeasance and discharge,
the Indenture will cease to be of further effect with respect to the Junior
Subordinated Debentures and the holders of the Junior Subordinated Debentures
shall look only to the deposited funds or obligations for payment.
Notwithstanding the foregoing, certain obligations and rights under the
Indenture with respect to registration of transfer and exchange of Junior
Subordinated Debentures, replacement of destroyed, lost or stolen Junior
Subordinated Debentures, compensation, reimbursement and indemnification of the
Trustee, return to the Company by the Trustee of unpaid money deposited with
45
<PAGE> 53
the Trustee or any paying agent, and certain other administrative provisions
will survive defeasance and discharge.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all 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 in respect of such Senior
Indebtedness before the holders of Junior Subordinated Debentures will be
entitled to receive or retain any payment in respect thereof.
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 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.
No payments on account of principal or premium, if any, or interest, if
any, in respect of the Junior Subordinated Debentures 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.
"Senior Indebtedness", means, with respect to the Company and its
Subsidiaries: (a) all liabilities, obligations and indebtedness for borrowed
money, whether or not evidenced by bonds, debentures, notes or other similar
instruments, (b) all obligations to pay the deferred purchase price of property
or services (other than trade payables due and arising in the ordinary course of
business), (c) all Capital Lease Obligations (as defined in the Indenture), (d)
all debt of any other Person (as defined in the Indenture) secured by a Lien (as
defined in the Indenture) on any asset of the Company or any of its
Subsidiaries, (e) all Contingent Obligations, (f) all obligations, contingent or
otherwise, relating to the face amount of letters of credit, whether or not
drawn, and banker's acceptances, but excluding any obligation relating to an
undrawn letter of credit if the undrawn letter of credit is issued in connection
with a liability for which a reserve has been established by the Company or the
applicable Subsidiary in accordance with United States generally accepted
accounting principles, and (g) all obligations incurred pursuant to Hedging
Agreements which are due and payable; provided, that the term Senior
Indebtedness shall not include the Junior Subordinated Debentures, the
Guarantees or other Qualified Debt Obligations.
"Contingent Obligation" means, with respect to the Company and its
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take or pay, or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose of assuring in any other manner the obligee of such debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Contingent
Obligation shall not include (i) obligations under insurance or reinsurance
policies, or (ii) endorsements for collection or deposit in the ordinary course
of business.
"Qualified Debt Obligations" means, without duplication, (a) debt
securities of the Company, provided that the terms of any such debt security (i)
permit the deferral of principal and interest payments for a period of up to
five years (but not beyond the maturity date), as elected by the Company, (ii)
have a maturity for payment of principal of not less than ten (10) years after
the date of issuance, and (iii) include provisions making the debt security
expressly subordinate to all other debt of the Company; (b) preferred securities
issued by a Subsidiary,
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<PAGE> 54
the sole purpose of which is to issue such preferred securities and invest the
proceeds thereof in debt securities of the type described in clause (a) above,
and which preferred securities are payable solely out of the proceeds of
payments on account of such debt securities; and (c) the obligations recorded on
the consolidated balance sheet of the Company and its Subsidiaries with respect
to debt securities of the type described in clause (a) above and preferred
securities of the type described in clause (b) above.
By reason of such subordination, in the event of an insolvency, creditors
of the Company who are holders of Senior Indebtedness, as well as certain
general creditors of the Company, may recover more, ratably, than the holders of
the New Junior Subordinated Debentures. Additionally, the Company currently
conducts substantially all of its operations through subsidiaries, and the
holders of New Junior Subordinated Debentures will be structurally subordinated
to the creditors of the Company's subsidiaries. See "Risk Factors--Ranking of
Subordinated Obligations Under the Guarantee and the Junior Subordinated
Debentures."
The Indenture places no limitation on the amount of additional secured or
unsecured debt, including Senior Indebtedness, or other obligations, that may be
incurred by the Company. The Company expects from time to time to incur
additional indebtedness and obligations, including Senior Indebtedness.
GOVERNING LAW
The Indenture and the New 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
Following the Exchange Offer and the qualification of the Indenture under
the Trust Indenture Act, the Debenture Trustee shall have and be subject to all
the duties and responsibilities specified with respect to an indenture trustee
under the Trust Indenture Act. 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 New 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.
The Debenture Trustee and its affiliates currently provide general
financing and banking and other services to the Company. See "Plan of
Distribution."
DESCRIPTION OF NEW GUARANTEE
The Old Guarantee was executed and delivered by the Company concurrently
with the issuance by the Trust of the Old Capital Securities for the benefit of
the holders from time to time of the Old Capital Securities. Promptly after the
Expiration Date, the New Guarantee will be issued by the Company for the benefit
of the holders from time to time of the New Capital Securities. The New
Guarantee has been qualified under the Trust Indenture Act. The Chase Manhattan
Bank will act as guarantee trustee ("Guarantee Trustee") under the New
Guarantee. This summary of certain provisions of the New Guarantee does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the New Guarantee, including the
definitions therein of certain terms, and the Trust Indenture Act. The Guarantee
Trustee will hold the New Guarantee for the benefit of the holders of the
Capital Securities.
GENERAL
The Company will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the New Capital Securities, 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
New Capital Securities, to the extent not paid by or on behalf of the Trust (the
"Guarantee Payments"), will be subject to the New Guarantee: (i) any accumulated
and unpaid Distributions required to be paid on New Capital Securities, to the
extent the Trust has funds on hand at
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such time legally available therefor, (ii) the Redemption Price with respect to
any New Capital Securities called for redemption, to the extent that the Trust
has funds on hand at such time legally available therefor, or (iii) upon a
voluntary or involuntary termination and liquidation of the Trust (unless the
New Junior Subordinated Debentures are distributed to holders of the New Capital
Securities), the lesser of (a) the Liquidation Distribution and (b) the amount
of assets of the Trust remaining available for distribution to holders of New
Capital Securities. 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 New Capital Securities or by causing the Trust to pay such
amounts to such holders.
The New Guarantee will rank subordinate and junior in right of payment to
all Senior Indebtedness to the extent provided therein and, in the event of
bankruptcy or insolvency proceedings involving the Company, will rank
subordinate and junior in right of payment to all liabilities (other than Other
Guarantees) of the Company, but senior to any obligations in respect of any
class of capital stock of the Company. See "--Status of New Guarantee" below.
Because the Company is a holding company, the right of the Company to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise is subject to the prior
claims of creditors of that subsidiary, except to the extent the Company may
itself be recognized as a creditor of that subsidiary. Accordingly, the
Company's obligations under the New Guarantee will be effectively subordinated
to all existing and future liabilities of the Company's direct and indirect
subsidiaries, and claimants should look only to the assets of the Company for
payments thereunder. See "--Description of New Junior Subordinated
Debentures--General." The New Guarantee does not limit the incurrence or
issuance of other secured or unsecured debt of the Company, including Senior
Indebtedness, whether under the Indenture, any other indenture that the Company
may enter into in the future or otherwise.
The Company will, through the New Guarantee, the Declaration, the New
Junior Subordinated Debentures and the Indenture, taken together, fully,
irrevocably and unconditionally guarantee all of the Trust's obligations under
the New Capital Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the New Capital Securities. See "Relationship Among
the New Capital Securities, the New Junior Subordinated Debentures and the New
Guarantee."
STATUS OF NEW GUARANTEE
The New Guarantee will constitute an unsecured obligation of the Company
and will rank subordinate and junior in right of payment to all Senior
Indebtedness in the same manner as New Junior Subordinated Debentures, except in
the event of bankruptcy or insolvency proceedings involving the Company, in
which case the New Guarantee will rank subordinate and junior in right of
payment to all liabilities (other than Other Guarantees) of the Company.
The New Guarantee will rank pari passu with the Old Guarantee and with all
Other Guarantees issued by the Company. The New 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 New Guarantee without first instituting a legal proceeding against any
other person or entity). The New Guarantee will be held for the benefit of the
holders of the New Capital Securities. The New Guarantee will not be discharged
except by payment of the Guarantee Payments in full to the extent not paid by
the Trust or upon distribution to the holders of the New Capital Securities of
the New Junior Subordinated Debentures. The New Guarantee places no limitation
on the amount of additional secured or unsecured debt, including Senior
Indebtedness, or other obligations, that may be incurred by the Company. The
Company expects from time to time to incur additional indebtedness and
obligations, including Senior Indebtedness.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the New Capital Securities (in which case no prior
approval will be required), the New Guarantee may not be amended without the
prior approval of the holders of a majority of the Liquidation Amount of such
outstanding New
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Capital Securities. The manner of obtaining any such approval will be as set
forth under "--Description of New Capital Securities--Voting Rights; Amendment
of the Declaration." All guarantees and agreements contained in the New
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the New Capital Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the New 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 Liquidation Amount of the New Capital Securities will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee in respect of the New
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the New Guarantee.
Any holder of the New Capital Securities may institute a legal proceeding
directly against the Company to enforce its rights under the New 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 New
Guarantee.
CERTAIN COVENANTS OF THE COMPANY
In the New Guarantee the Company will covenant that, so long as any New
Capital Securities remain outstanding, the Company 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 Company's capital stock (which
includes common and preferred stock) or (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 New Junior Subordinated Debentures or
(iii) make any guarantee payments with respect to any guarantee by the Company
of the debt securities of any subsidiary of the Company (including Other
Guarantees) if such guarantee ranks pari passu or junior in right of payment to
the New Junior Subordinated Debentures (other than (a) dividends or
distributions in shares of, or options, warrants, 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 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 New
Guarantee, (d) as a result of a reclassification 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, (f) issuances of common stock of the
Company upon exercise of the Aetna Option and (g) purchases or issuances of
common stock in connection with any of the Company's stock option, stock
purchase, stock loan or other benefit plans for its directors, officers or
employees or any of the Company's dividend reinvestment plans, in each case as
now existing or hereafter established or amended), if at such time (i) there
shall have occurred any event of which the Company has actual knowledge that (a)
is, or with the giving of notice or the lapse of time, or both, would be an
event of default under the New Guarantee and (b) in respect of which the Company
shall not have taken reasonable steps to cure, (ii) if such New Junior
Subordinated Debentures are held by the Property Trustee, the Company shall be
in default with respect to its payment of any obligations under the New
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 the
Indenture and any such extension shall be continuing.
TERMINATION OF THE NEW GUARANTEE
The New Guarantee will terminate and be of no further force and effect upon
full payment of the applicable Redemption Price of the New Capital Securities,
upon full payment of the Liquidation Amount payable upon liquidation of the
Trust or upon distribution of New Junior Subordinated Debentures to the holders
of the New
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Capital Securities. The New Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the New Capital
Securities must restore payment of any sums paid under the New Capital
Securities or the New Guarantee.
GOVERNING LAW
The New Guarantee will be governed by, and construed in accordance with,
the internal laws of the State of New York.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the continuance of a default with
respect to a New Guarantee, will undertake to perform only such duties as are
specifically set forth in such New Guarantee and, after default, must exercise
the same degree of care as a prudent individual would exercise in the conduct of
his or her own affairs. Subject to such provisions, the Guarantee Trustee is
under no obligation to exercise any of the powers vested in it by the New
Guarantee at the request of any holder of New Capital Securities, 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 Guarantee Trustee and its affiliates currently provide general
financing and banking and other services to the Company. See "Plan of
Distribution."
DESCRIPTION OF OLD SECURITIES
The terms of the Old Securities are identical in all material respects to
the New Securities, except that (i) the Old Securities have not been registered
under the Securities Act, are subject to certain restrictions on transfer and
are entitled to certain rights under the applicable Registration Rights
Agreement (which rights will terminate upon consummation of the Exchange Offer,
except under limited circumstances), (ii) the New Capital Securities will not
contain the $100,000 minimum Liquidation Amount transfer restriction and certain
other restrictions on transfer applicable to Old Capital Securities, (iii) the
New Capital Securities will not provide for any increase in the Distribution
rate thereon, (iv) the New Junior Subordinated Debentures will not contain the
$100,000 minimum principal amount transfer restriction and (v) the New Junior
Subordinated Debentures will not provide for any increase in the interest rate
thereon. The Old Securities provide that, in the event that a registration
statement relating to the Exchange Offer has not been filed by June 30, 1997 and
been declared effective by August 4, 1997 or, in certain limited circumstances,
in the event a shelf registration statement (the "Shelf Registration Statement")
with respect to the resale of the Old Capital Securities is not declared
effective by August 4, 1997, then interest will accrue (in addition to the
stated interest rate on the Old Junior Subordinated Debentures) at the rate of
0.25% per annum on the principal amount of the Old Junior Subordinated
Debentures and Distributions will accrue (in addition to the stated Distribution
rate on the Old Capital Securities) at the rate of 0.25% per annum on the
Liquidation Amount of the Old Capital Securities, for the period from the
occurrence of such event until such time as such required Exchange Offer is
consummated or any required Shelf Registration Statement is effective. The New
Securities are not, and upon consummation of the Exchange Offer the Old
Securities will not be, entitled to any such additional interest or
Distributions. Accordingly, holders of Old Capital Securities should review the
information set forth under "Risk Factors--Certain Consequences of a Failure to
Exchange Old Capital Securities" and "Description of New Securities."
RELATIONSHIP AMONG THE NEW CAPITAL SECURITIES, THE
NEW JUNIOR SUBORDINATED DEBENTURES AND THE NEW GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the New Capital
Securities (to the extent the Trust has funds on hand legally available for the
payment of such Distributions) will be irrevocably guaranteed by the
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Company as and to the extent set forth under "Description of New
Securities--Description of New Guarantee." Taken together, the Company's
obligations under the New Junior Subordinated Debentures, the Indenture, the
Declaration and the New Guarantee will provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of Distributions and other
amounts due on the New Capital Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the New Capital Securities. If and to the extent that
the Company does not make the required payments on the New Junior Subordinated
Debentures, the Trust will not have sufficient funds to make the related
payments, including Distributions, on the New Capital Securities. The New
Guarantee will not cover any such payment when the Trust does not have
sufficient funds on hand legally available therefor. In such event, the remedy
of a holder of New Capital Securities is to institute a Direct Action. The
obligations of the Company under the New Guarantee will be subordinate and
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
New Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the New Capital Securities, primarily
because: (i) the aggregate principal amount or Prepayment Price of the New
Junior Subordinated Debentures will be equal to the sum of the Liquidation
Amount or Redemption Price, as applicable, of the New Capital Securities and
Common Securities; (ii) the interest rate and interest and other payment dates
on the New Junior Subordinated Debentures will match the Distribution rate and
Distribution and other payment dates for the Trust Securities; (iii) the Company
shall pay for any and all costs, expenses and liabilities of the Trust except
the Trust's obligations to holders of Trust Securities under the Declaration;
and (iv) the Declaration provides that the Trust is not authorized to engage in
any activity that is not consistent with the limited purposes thereof.
ENFORCEMENT RIGHTS OF HOLDERS OF NEW CAPITAL SECURITIES
A holder of any New Capital Security may institute a legal proceeding
directly against the Company to enforce its rights under the New 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 provide that no payments may be made
in respect of the New 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 New Junior Subordinated
Debentures would constitute an Event of Default under the Declaration.
LIMITED PURPOSE OF THE TRUST
The New Capital Securities 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, advisable or incidental thereto. A
principal difference between the rights of a holder of a New Capital Security
and a holder of a New Junior Subordinated Debenture is that a holder of a New
Junior Subordinated Debenture will be entitled to receive from the Company the
principal amount of and premium, if any, and interest on New Junior Subordinated
Debentures held, while a holder of New Capital Securities is entitled to receive
Distributions from the Trust (or, in certain circumstances, from the Company
under the New Guarantee) if and to the extent the Trust has funds on hand
legally available for the payment of such Distributions.
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RIGHTS UPON TERMINATION
Unless the Junior Subordinated Debentures are distributed to holders of the
Trust Securities, upon any voluntary or involuntary termination and liquidation
of the Trust, the holders of the Trust Securities will be entitled to receive,
out of assets held by the Trust, the Liquidation Distribution in cash. See
"Description of New Securities--Description of New Capital
Securities--Liquidation of the Trust and Distribution of New Junior Subordinated
Debentures." Upon any voluntary or involuntary liquidation or bankruptcy of the
Company, the Property Trustee, as holder of the New 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 New 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 New Capital Securities and a holder of New 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 similar, although, in the event of bankruptcy or insolvency proceedings
involving the Company, the Company's obligations under the New Guarantee will
rank subordinate and junior in right of payment to all liabilities (other than
Other Guarantees) of the Company but senior to any obligations in respect of any
class of capital stock of the Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Dewey Ballantine, counsel to the Company and the Trust
("Tax Counsel"), the following is a summary of certain of the material United
States federal income tax consequences of the purchase, ownership and
disposition of Capital Securities held as capital assets. It does not deal with
special classes of holders such as banks, thrift institutions, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, tax-exempt investors, or persons that will hold the
Capital Securities as a position in a "straddle," as part of a "synthetic
security" or "hedge," as part of a "conversion transaction" or other integrated
investment, or as other than a capital asset. This summary also does not address
the tax consequences to persons that have a functional currency other than the
U.S. dollar or the tax consequences to shareholders, partners or beneficiaries
of a holder of Capital Securities. Further, it does not include any description
of any alternative minimum tax consequences or the tax laws of any state or
local government or of any foreign government that may be applicable to the
Capital Securities. This summary is based on the Internal Revenue Code of 1986,
as amended (the "Code"), Treasury regulations thereunder, the administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis. An opinion of counsel is not
binding on the Internal Revenue Service (the "IRS") or the courts. No rulings
have been or are expected to be sought from the IRS with respect to any of these
issues and no assurance can be given that the opinions expressed herein will not
be challenged by the IRS.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Old Capital Securities for New Capital Securities should
not be a taxable event to holders for United States federal income tax purposes.
The exchange of Old Capital Securities for New Capital Securities pursuant to
the Exchange Offer should not be treated as an "exchange" for United States
federal income tax purposes because the New Capital Securities should not be
considered to differ materially in kind or extent from the Old Capital
Securities and because the exchange will occur by operation of the terms of the
Old Capital Securities. If, however, the exchange of the Old Capital Securities
for the New Capital Securities were treated as an exchange for United States
federal income tax purposes, such exchange should constitute a recapitalization
for United States federal income tax purposes. Accordingly, the New Capital
Securities should have the same issue price as the Old Capital Securities, and a
holder should have the same adjusted tax basis and holding period in the New
Capital Securities as the holder had in the Old Capital Securities immediately
before the exchange.
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CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
Tax Counsel has rendered its opinion that, under current law and assuming
full compliance with the terms of the Indenture and certain other documents, and
based on certain facts and assumptions contained in such opinion, the Junior
Subordinated Debentures will be classified for United States federal income tax
purposes as indebtedness of the Company.
CLASSIFICATION OF THE TRUST
Tax Counsel has rendered its opinion that, under current law and assuming
full compliance with the terms of the Declaration and the Indenture and certain
other documents, and based on certain facts and assumptions contained in such
opinion, the Trust will be classified for United States federal income tax
purposes as a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of
Capital Securities will be considered the owner of an undivided interest in the
Junior Subordinated Debentures, and each holder will be required to include in
its gross income any interest or OID with respect to its allocable share of
those Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations applicable to debt instruments
issued on or after August 13, 1996, a "remote" contingency that stated interest
will not be timely paid will be ignored in determining whether a debt instrument
is issued with OID. The Company believes that the likelihood of its exercising
its option to defer payments of interest is "remote" since exercising that
option would prevent the Company from declaring dividends on any class of its
equity securities. Accordingly, the Company intends to take the position that
the Junior Subordinated Debentures will not be considered to be issued with OID
and that stated interest on the Junior Subordinated Debentures generally will be
taxable to a holder as ordinary income at the time it is paid or accrued in
accordance with such holder's method of accounting. If the option to defer the
payment of interest was determined not to be "remote", the Junior Subordinated
Debentures would be treated as having been originally issued with OID. In such
event, all of a holder's taxable interest income with respect to the Junior
Subordinated Debentures would be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting and actual distributions of
stated interest would not be reported as taxable income.
Under the regulations, if the Company were to exercise its option to defer
payments of interest, the Junior Subordinated Debentures would at that time be
treated as issued with OID, and all stated interest on the Junior Subordinated
Debentures would thereafter be treated as OID as long as the Junior Subordinated
Debentures remain outstanding. In such event, all of a holder's taxable interest
income with respect to the Junior Subordinated Debentures would thereafter be
accounted for on an economic accrual basis regardless of such holder's method of
tax accounting and actual distributions of stated interest would not be reported
as taxable income. Consequently, a holder of Capital Securities would be
required to include in gross income OID even though the Company would not make
actual cash payments during an Extension Period.
The regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to that of the Company.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Capital Securities.
MARKET DISCOUNT
The resale of a New Junior Subordinated Debenture may be affected by the
"market discount" provisions of the Code. For this purpose, the market discount
on a New Junior Subordinated Debenture will generally be equal to the amount, if
any, by which the stated redemption price at maturity of the New Junior
Subordinated Debenture immediately after its acquisition exceeds the holder's
tax basis in the debenture. Subject to a de minimis exception, these provisions
generally require a holder of a New Junior Subordinated Debenture acquired at a
market discount to treat as ordinary income any gain recognized on the
disposition of such New Junior
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Subordinated Debenture to the extent of the "accrued market discount" on such
New Junior Subordinated Debenture at the time of disposition. In general, market
discount on a New Junior Subordinated Debenture will be treated as accruing on a
straight-line basis over the term of such New Junior Subordinated Debenture, or,
at the election of the holder, under a constant yield method.
In addition, any holder of a New Junior Subordinated Debenture acquired at
a market discount may be required to defer the deduction of a portion of the
interest on any indebtedness incurred or maintained to purchase or carry the New
Junior Subordinated Debenture until the New Junior Subordinated Debenture is
disposed of in a taxable transaction. The foregoing rule will not apply if the
holder elects to include accrued market discount in income currently.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
The Company will have the right at any time to liquidate 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. Under current law, such a distribution, for
United States federal income tax purposes, would be treated as a nontaxable
event to each holder, and each holder would receive an aggregate tax basis in
the Junior Subordinated Debentures equal to such holder's aggregate tax basis in
its Capital Securities. A holder's holding period for the Junior Subordinated
Debentures so received in liquidation of the Trust would include the period
during which the Capital Securities were held by such holder. If, however, the
Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of its dissolution, the
distribution of the Junior Subordinated Debentures would constitute a taxable
event to holders of Capital Securities and a holder's holding period in Junior
Subordinated Debentures would begin on the date such Junior Subordinated
Debentures were received.
In certain circumstances described herein (see "Description of New
Securities -- Description of New Capital Securities"), the Junior Subordinated
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Capital Securities. Such a
redemption would, for United States federal income tax purposes, constitute a
taxable disposition of the redeemed Capital Securities, and a holder could
recognize gain or loss as if it sold such redeemed Capital Securities for cash.
See "--Sales of Capital Securities" below.
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities will recognize gain or loss equal to
the difference between the holder's adjusted tax basis in the Capital Securities
and the amount realized on the sale of such Capital Securities (other than with
respect to accrued and unpaid interest which has not yet been included in
income, which will be treated as ordinary income). A holder's adjusted tax basis
in the Capital Securities generally will be the initial purchase price increased
by any OID previously includable in such holder's gross income to the date of
disposition and decreased by any payments received on the Capital Securities in
respect of OID. Such gain or loss generally will be a capital gain or loss and
generally will be a long-term capital gain or loss if the Capital Securities
have been held for more than one year.
The Capital Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest or OID with respect to the
underlying Junior Subordinated Debentures. A holder who uses the accrual method
of accounting for tax purposes (and a cash method holder, if the Junior
Subordinated Debentures are deemed to have been issued with OID) who disposes of
such holder's Capital Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest or
OID on the Junior Subordinated Debentures through the date of disposition in
income as ordinary income and to add such amount to such holder's adjusted tax
basis in such holder's pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include all unpaid interest or OID
previously included in income), a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
54
<PAGE> 62
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of the Clinton Administration's Fiscal 1998
Budget Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate issuers
a deduction for interest in respect of debt obligations, such as the New Junior
Subordinated Debentures, issued on or after the date "of first committee
action," if such debt obligations have a maximum term in excess of 15 years and
are not shown as indebtedness on the issuer's applicable consolidated balance
sheet. If legislation similar to the Proposed Legislation were enacted, there
can be no assurance that it will not adversely affect the ability of the Company
to deduct the interest payable on the Junior Subordinated Debentures. Such a
change could give rise to a Tax Event, which would permit the Company to cause a
redemption of the Trust Securities at the Special Event Redemption Price by
electing to prepay the Junior Subordinated Debentures at the Special Event
Prepayment Price. See "Description of New Securities -- Description of New
Junior Subordinated Debentures -- Conditional Right to Advance Maturity and
Special Event Prepayment."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust (i) that is not a citizen
or individual resident of the United States for United States federal income tax
purposes or a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision thereof or (ii) that is a
foreign estate or a foreign trust as defined in the Code.
Under present United States federal income tax laws payments by the Trust
or any of its paying agents to any holder of a Capital Security that is a United
States Alien Holder will not be subject to United States federal withholding
tax; provided that, (a) the beneficial owner of the Capital Security does not
actually or constructively own 10 percent or more of the total combined voting
power of all classes of stock of the Company entitled to vote, (b) the
beneficial owner of the Capital Security is not a controlled foreign corporation
that is related to the Company through stock ownership, (c) the payments are not
received by a bank on an extension of credit made pursuant to a loan agreement
entered into in the ordinary course of its trade or business, and (d) either (A)
the beneficial owner of the Capital Security certifies to the Trust or its
agent, under penalties of perjury, that it is not a United States holder and
provides its name and address or (B) a securities organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "Financial Institution"), and holds the Capital
Security in such capacity, certifies to the Trust or its agent, under penalties
of perjury, that such statement has been received from the beneficial owner by
it or by a Financial Institution between it and the beneficial owner and
furnishes the Trust or its agent with a copy thereof. A United States Alien
Holder of a Capital Security will not be subject to United States federal
withholding tax on any gain realized upon the sale or other disposition of a
Capital Security.
As discussed above, changes in legislation affecting the United States
federal income tax treatment of the Junior Subordinated Debentures are possible,
and could adversely affect the ability of the Company to deduct interest payable
on the Junior Subordinated Debentures. Like the Proposed Legislation, it could
adversely affect United States Alien Holders by characterizing income derived
from the Junior Subordinated Debentures as dividends which generally would be
subject to withholding tax when paid to a United States Alien Holder, rather
than as interest which, as discussed above, is generally exempt from tax in the
hands of a United States Alien Holder.
On April 22, 1996, the IRS issued proposed regulations relating to
withholding on and reporting amounts paid to Non-United States Holders. The
regulations would unify current certification procedures and forms and clarify
reliance standards effective for payments made after December 31, 1997. The
proposed regulations are subject to change before adoption in final form.
A United States Alien Holder that holds Capital Securities in connection
with the active conduct of a United States trade or business will be subject to
income tax on all income and gains recognized with respect to the holder's
proportionate share of the Junior Subordinated Debentures.
55
<PAGE> 63
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders on
Form 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will be
allowed as a credit against the holder's United States federal income tax,
provided the required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (an "ERISA Plan") considering an acquisition of New Capital
Securities (or interest therein) from a holder of such New Capital Securities
should consider the fiduciary standards of ERISA in the context of the ERISA
Plan's particular circumstances before authorizing the investment in the New
Capital Securities. Among other factors, the fiduciary should consider whether
such an investment is in accordance with the documents governing the ERISA Plan
and whether the investment is appropriate for the ERISA Plan in view of its
overall investment policy and diversification of its portfolio.
Certain provisions of ERISA and the Code prohibit ERISA Plans, as well as
individual retirement accounts and Keogh plans subject to section 4975 of the
Code (collectively, "Plans"), from engaging in certain transactions involving
"plan assets" with parties that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the Plan. The U.S.
Department of Labor has issued a final regulation (the "Regulation") with regard
to whether the underlying assets of an entity in which employee benefit plans
acquire equity interests are deemed to be plan assets.
Under such Regulation, for purposes of ERISA and section 4975 of the Code,
the assets of the Trust would be deemed to be "plan assets" of a Plan whose
assets were used to purchase Capital Securities if the Capital Securities were
considered to be equity interests in the Trust and no exception to plan asset
status were applicable under the Regulation.
If the assets of the Trust were deemed to be plan assets of Plans that are
holders of the Capital Securities, a Plan's investment in the Capital Securities
might be deemed to constitute a delegation under ERISA of the duty to manage
plan assets by a fiduciary investing in Capital Securities. In addition, the
Company might be considered a "party in interest" or "disqualified person" with
respect to Plans whose assets were used to acquire Capital Securities. If this
were the case, an investment in Capital Securities by a Plan might constitute
or, in the course of the operation of the Trust, give rise to a prohibited
transaction under ERISA or the Code. In particular, it is likely that, under
such circumstances, a prohibited "extension of credit" to the Company would be
considered to occur under ERISA and the Code.
Because of the possibility that the assets of the Trust would be considered
plan assets of Plans whose assets were invested in the New Capital Securities,
and the likelihood that under such circumstances a prohibited extension of
credit would occur, the New Capital Securities may not be purchased or held by
any Plan or any person investing "plan assets" of any Plan, unless such
purchaser or holder is eligible for the exemptive relief available under
Prohibited Transaction Class Exemption ("PTCE") 96-23 (for certain transactions
determined by
56
<PAGE> 64
in-house asset managers), PTCE 95-60 (for certain transactions involving
insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain transactions
involving insurance company separate accounts) or PTCE 84-14 (for certain
transactions determined by independent qualified asset managers). The
certificates representing the New Capital Securities will bear a legend to the
effect that the holder of the New Capital Security or any interest therein
represents and acknowledges that (a) it is not a Plan and is not purchasing such
securities (or interest therein) on behalf of or with "plan assets" of any Plan
or (b) its purchase and holding of the Capital Securities (or interest therein)
is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38,
90-1 or 84-14.
Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is important that any person considering
the purchase of New Capital Securities (or interest therein) with Plan assets
consult with its counsel regarding the consequences under ERISA and the Code of
the acquisition and ownership of New Capital Securities (or interest therein)
and the availability of exemptive relief under the class exemptions listed
above. In John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings
Bank, 114 S.Ct. 517 (1993), the Supreme Court ruled that assets held in an
insurance company's general account may be deemed to be "plan assets" for ERISA
purposes under certain circumstances. Employee benefit plans which are
governmental plans (as defined in Section 3(32) of ERISA) and certain church
plans (as defined in Section 3(33) of ERISA) generally are not subject to
ERISA's requirements.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Capital Securities for its own account
in connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Capital Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by Participating Broker-Dealers during the period referred to below in
connection with resales of New Capital Securities received in exchange for Old
Capital Securities if such Old Capital Securities were acquired by such
Participating Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities. The Company and the Trust have agreed
that this Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in connection with resales of such
New Capital Securities for a period ending 90 days after the Expiration Date
(subject to extension under certain limited circumstances described herein) or,
if earlier, when all such New Capital Securities have been disposed of by such
Participating Broker-Dealer. However, a Participating Broker-Dealer who intends
to use this Prospectus in connection with the resale of New Capital Securities
received in exchange for Old Capital Securities pursuant to the Exchange Offer
must notify the Company or the Trust, or cause the Company or the Trust to be
notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at one of
the addresses set forth herein under "The Exchange Offer--Exchange Agent." See
"The Exchange Offer--Resales of New Capital Securities."
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the New Capital Securities offered hereby. New Capital Securities
received by broker-dealers for their own accounts in connection with the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Capital Securities or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such New Capital Securities.
Any broker-dealer that resells New Capital Securities that were received by
it for its own account in connection with the Exchange Offer and any broker or
dealer that participates in a distribution of such New Capital Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act, and any
profit on any such resale of New Capital Securities and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
57
<PAGE> 65
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The Chase Manhattan Bank (the Property Trustee, the Debenture Trustee, the
Common Guarantee Trustee, the Guarantee Trustee and an affiliate of the Delaware
Trustee, and referred to hereinafter as the "Bank") was a lender under the term
loan portion of the Company's credit facility and received $18.4 million from
the Company as the Bank's portion of the Company's repayment, using
approximately $70 million of the net proceeds from the sale of the Old Junior
Subordinated Debentures, of the outstanding term loan balance. The Bank and its
affiliates currently provide and may in the future provide general financing and
commercial banking and other services to the Company.
LEGAL MATTERS
The validity of the New Guarantee and the New Junior Subordinated
Debentures will be passed upon for the Company and the Trust by Dewey
Ballantine, New York, New York. James A. FitzPatrick, Jr., Secretary of the
Company, is a member of Dewey Ballantine. Certain matters relating to United
States federal income tax considerations will be passed upon for the Company and
the Trust by Dewey Ballantine, New York, New York. Certain matters of Delaware
law relating to the validity of the New Capital Securities will be passed upon
on behalf of the Trust by Richards, Layton & Finger, special Delaware counsel to
the Trust.
EXPERTS
The consolidated financial statements of the Company and subsidiaries
incorporated by reference in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, have been incorporated herein by reference
in reliance upon the reports set forth therein of Ernst & Young LLP, independent
auditors, and upon the authority of such firm as experts in accounting and
auditing.
58
<PAGE> 66
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of the State of Delaware authorizes
corporations to limit or eliminate the personal liability of directors to
corporations and their stockholders for monetary damages for breach of
directors' fiduciary duty of care. The Company's Amended and Restated
Certificate of Incorporation limits the liability of the Company's directors to
the Company or its stockholders to the fullest extent permitted by the Delaware
statute as in effect from time to time. Specifically, directors of the Company
will not be personally liable for monetary damages for breach of a director's
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in the Delaware law, or (iv) for any
transactions from which the director derived an improper personal benefit.
The Amended and Restated Certificate of Incorporation of the Company
provides that the Company shall indemnify its officers and directors and former
officers and directors to the fullest extent permitted by the General
Corporation Law of the State of Delaware. Pursuant to the provisions of Section
145 of the General Corporation Law of the State of Delaware, the Company has the
power to indemnify any person who was or is a party to, or is threatened to be
made a party to, any threatened, pending or completed action, suit or proceeding
(other than an action by or in the right of the Company) by reason of the fact
that he or she is or was a director, officer, employee, or agent of the Company,
against any and all expenses, judgments, fines and amounts paid in settlement,
actually and reasonably incurred in connection with such action, suit or
proceeding. The power to indemnify applies only if such person acted in good
faith and in a manner he or she reasonably believed to be in the best interest,
or not opposed to the best interest, of the Company and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
The power to indemnify applies to actions brought by or in the right of the
Company as well, but only to the extent of defense and settlement expenses and
not to any satisfaction of a judgment or settlement of the claim itself, and
with the further limitation that in such actions no indemnification shall be
made in the event of any adjudication of negligence or misconduct unless the
court, in its discretion, believes that in light of all the circumstances
indemnification should apply.
The statute further specifically provides that the indemnification
authorized thereby shall not be deemed exclusive of any other rights to which
any such officer or director may be entitled under any bylaws, agreements, vote
of stockholders or disinterested directors, or otherwise.
The Company's officers and directors are also covered by a directors and
officers liability insurance policy issued by a third party.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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 Act and will be governed by the final adjudication of
such issue.
II-1
<PAGE> 67
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <S>
4.1 Indenture of Executive Risk Inc. relating to the Junior Subordinated Debentures
4.2 Form of Certificate of New Junior Subordinated Debenture (included as Exhibit A to
Exhibit 4.1)
4.3 Certificate of Trust of Executive Risk Capital Trust
4.4 Declaration of Trust of Executive Risk Capital Trust
4.5 Amended and Restated Declaration of Trust for Executive Risk Capital Trust
4.6 Form of New Capital Security Certificate for Executive Risk Capital Trust (included
as Exhibit A-1 to Exhibit 4.5)
4.7 Form of New Guarantee of Executive Risk Inc. relating to the New Capital Securities
4.8 Registration Rights Agreement
5.1 Opinion and consent of Dewey Ballantine to Executive Risk Inc. as to legality of
the New Junior Subordinated Debentures and the New Guarantee to be issued by
Executive Risk Inc.*
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as to legality of
the New Capital Securities to be issued by Executive Risk Capital Trust*
8 Opinion of Dewey Ballantine, special tax counsel, as to certain federal income tax
matters*
12 Computation of ratio of earnings to fixed charges
23.1 Consent of Ernst & Young LLP
23.2 Consent of Dewey Ballantine (included in Exhibit 5.1)*
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2)*
23.4 Consent of Dewey Ballantine (included in Exhibit 8)*
24 Power of Attorney of certain officers and directors of Executive Risk Inc.
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee
under the Indenture
25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee
under the Amended and Restated Declaration of Trust of Executive Risk Capital Trust
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank under the New
Guarantee for the benefit of the holders of New Capital Securities of Executive
Risk Capital Trust
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of a Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of each
undersigned Registrant pursuant to the foregoing provisions, or otherwise, each
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by each undersigned Registrant
of expenses incurred or paid by a director, officer of controlling person of
each Registrant 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, each Registrant will, unless in the opinion of its
counsel the matter has been settled by
II-2
<PAGE> 68
the controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired or involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Executive Risk
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Simsbury and State of Connecticut, on the 8th day of
April, 1997.
EXECUTIVE RISK INC.
By /s/ ROBERT H. KULLAS
------------------------------------
Robert H. Kullas, Vice Chairman and
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------------- --------------
<C> <S> <C>
/s/ LEROY A. VANDER PUTTEN Chairman, Director and Chief April 8, 1997
- ------------------------------------------ Executive Officer (Principal
LeRoy A. Vander Putten Executive Officer)
/s/ ROBERT H. KULLAS Vice Chairman, Director and Chief April 8, 1997
- ------------------------------------------ Operating Officer
Robert H. Kullas
* President, Director and Chief April 8, 1997
- ------------------------------------------ Underwriting Officer
Stephen J. Sills
* Director April 8, 1997
- ------------------------------------------
Gary G. Benanav
* Director April 8, 1997
- ------------------------------------------
John G. Crosby
* Director April 8, 1997
- ------------------------------------------
Patrick A. Gerschel
* Director April 8, 1997
- ------------------------------------------
Peter Goldberg
* Director April 8, 1997
- ------------------------------------------
Barbara G. Cohen
* Director April 8, 1997
- ------------------------------------------
Michael D. Rice
* Director April 8, 1997
- ------------------------------------------
Joseph D. Sargent
</TABLE>
II-4
<PAGE> 70
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------------- --------------
<C> <S> <C>
/s/ ROBERT V. DEUTSCH Executive Vice President, Chief April 8, 1997
- ------------------------------------------ Financial Officer and Chief
Robert V. Deutsch Actuary (Principal Financial and
Accounting Officer)
(*) By: /s/ ROBERT H. KULLAS
- ------------------------------------------
Name: Robert H. Kullas
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 71
Pursuant to the requirements of the Securities Act of 1933, Executive Risk
Capital Trust certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Simsbury, and State of Connecticut, on the 8th
day of April, 1997.
EXECUTIVE RISK CAPITAL TRUST
By: /s/ ROBERT V. DEUTSCH
--------------------------------------
Robert V. Deutsch,
as Administrative Trustee
By: /s/ ROBERT H. KULLAS
--------------------------------------
Robert H. Kullas,
as Administrative Trustee
By: /s/ JEFFREY H. KOENIG
--------------------------------------
Jeffrey H. Koenig,
as Administrative Trustee
II-6
<PAGE> 72
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<S> <C>
4.1 Indenture of Executive Risk Inc. relating to the Junior Subordinated Debentures
4.2 Form of Certificate of New Junior Subordinated Debenture (included as Exhibit A to
Exhibit 4.1)
4.3 Certificate of Trust of Executive Risk Capital Trust
4.4 Declaration of Trust of Executive Risk Capital Trust
4.5 Amended and Restated Declaration of Trust for Executive Risk Capital Trust
4.6 Form of New Capital Security Certificate for Executive Risk Capital Trust (included
as Exhibit A-1 to Exhibit 4.5)
4.7 Form of New Guarantee of Executive Risk Inc. relating to the New Capital Securities
4.8 Registration Rights Agreement
5.1 Opinion and consent of Dewey Ballantine to Executive Risk Inc. as to legality of the
New Junior Subordinated Debentures and the New Guarantee to be issued by Executive
Risk Inc.*
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as to legality of the
New Capital Securities to be issued by Executive Risk Capital Trust*
8 Opinion of Dewey Ballantine, special tax counsel, as to certain federal income tax
matters*
12 Computation of ratio of earnings to fixed charges
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Dewey Ballantine (included in Exhibit 5.1)*
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2)*
23.4 Consent of Dewey Ballantine (included in Exhibit 8)*
24 Power of Attorney of certain officers and directors of Executive Risk Inc.
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under
the Indenture
25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under
the Amended and Restated Declaration of Trust of Executive Risk Capital Trust
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank under the New Guarantee
for the benefit of the holders of New Capital Securities of Executive Risk Capital
Trust
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 4.1
EXECUTIVE RISK INC.
INDENTURE
Dated as of February 5, 1997
THE CHASE MANHATTAN BANK
as Trustee
8.675% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
1
<PAGE> 2
Table of Contents
Page
ARTICLE I.
DEFINITIONS
SECTION 1.01. Definitions..................................... 1
Additional Sums.......................................... 2
Adjusted Treasury Rate .................................. 2
Adverse Tax Consequence.................................. 2
Aetna Option............................................. 2
Affiliate................................................ 2
Authenticating Agent..................................... 3
Bankruptcy Law........................................... 3
Board of Directors....................................... 3
Board Resolution......................................... 3
Business Day............................................. 3
Capital Leases Obligations............................... 3
Capital Securities....................................... 3
Capital Securities Guarantee............................. 3
Commission............................................... 4
Common Securities........................................ 4
Common Securities Guarantee.............................. 4
Common Stock............................................. 4
Company.................................................. 4
Company Request.......................................... 4
Comparable Treasury Issue................................ 4
Comparable Treasury Price................................ 4
Compounded Interest...................................... 5
Conditional Tax Redemption Event......................... 5
Contingent Obligation.................................... 5
Custodian................................................ 5
Declaration.............................................. 5
Default.................................................. 5
Deferred Interest........................................ 5
Definitive Securities.................................... 6
Depositary............................................... 6
Dissolution Event........................................ 6
Event of Default......................................... 6
Exchange Act............................................. 6
Exchange Offer........................................... 6
Executive Risk Capital Trust............................. 6
Extended Interest Payment Period......................... 6
GAAP ................................................... 6
Global Security.......................................... 6
Guarantees............................................... 7
Hedging Agreement........................................ 7
Indebtedness for Money Borrowed.......................... 7
Indenture................................................ 7
Initial Optional Prepayment Date......................... 7
Interest Payment Date.................................... 7
Investment Company Event................................. 7
i
<PAGE> 3
Table of Contents (cont'd)
Page
Issue Date............................................... 7
Lien ................................................... 7
Liquidated Damages....................................... 8
Maturity Date............................................ 8
Mortgage................................................. 8
Non Book-Entry Capital Securities........................ 8
Officers................................................. 8
Officers' Certificate.................................... 8
Opinion of Counsel....................................... 8
Optional Prepayment Price................................ 8
Other Debentures......................................... 8
Other Guarantees......................................... 8
outstanding,............................................. 8
Person................................................... 9
Predecessor Security..................................... 9
Prepayment Price......................................... 9
Principal office of the Trustee.......................... 9
Property Trustee......................................... 10
Purchase Agreement....................................... 10
Qualified Debt Obligations............................... 10
Quorum................................................... 10
Quotation Agent.......................................... 10
Reference Treasury Dealer................................ 10
Reference Treasury Dealer Quotations..................... 10
Registration Rights Agreement............................ 11
Responsible Officer...................................... 11
Restricted Security...................................... 11
Rule 144A................................................ 11
Securities............................................... 11
Securities Act........................................... 11
Securityholder........................................... 11
Security Register........................................ 11
Senior Indebtedness...................................... 12
Series A Securities...................................... 12
Series B Securities...................................... 12
Special Event............................................ 12
Special Event Prepayment Price........................... 12
Subsidiary............................................... 13
Tax Event................................................ 13
Tax Event Maturity Advancement........................... 13
Trustee.................................................. 13
Trust Indenture Act of 1939.............................. 14
Trust Securities......................................... 14
U.S. Government Obligations.............................. 14
ARTICLE II.
SECURITIES
SECTION 2.01. Forms Generally................................. 14
SECTION 2.02. Execution and Authentication.................... 15
ii
<PAGE> 4
Table of Contents (cont'd)
Page
SECTION 2.03. Form and Payment................................ 15
SECTION 2.04. Legends......................................... 15
SECTION 2.05. Global Security................................. 16
SECTION 2.06. Interest........................................ 18
SECTION 2.07. Transfer and Exchange........................... 19
SECTION 2.08. Replacement Securities.......................... 21
SECTION 2.09. Treasury Securities............................. 21
SECTION 2.10. Temporary Securities............................ 21
SECTION 2.11. Cancellation.................................... 22
SECTION 2.12. Defaulted Interest.............................. 22
SECTION 2.13. CUSIP Numbers................................... 23
ARTICLE III.
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal, Premium and
Interest..................................... 24
SECTION 3.02. Offices for Notices and Payments, etc........ 24
SECTION 3.03. Appointments to Fill Vacancies in
Trustee's Office............................. 25
SECTION 3.04. Provision as to Paying Agent................. 25
SECTION 3.05. Certificate to Trustee....................... 26
SECTION 3.06. Compliance with Consolidation
Provisions................................... 27
SECTION 3.07. Limitation on Dividends...................... 27
SECTION 3.08. Covenants as to Executive Risk Capital Trust. 28
SECTION 3.09. Payment of Expenses.......................... 28
SECTION 3.10. Payment Upon Resignation or Removal.......... 29
ARTICLE IV.
SECURITYHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 4.01. Securityholders' Lists.......................... 29
SECTION 4.02. Preservation and Disclosure of Lists............ 30
SECTION 4.03. Reports of the Company.......................... 32
SECTION 4.04. Reports by the Trustee.......................... 33
ARTICLE V.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 5.01. Events of Default............................... 34
SECTION 5.02. Payment of Securities on Default;
Suit Therefor................................... 36
iii
<PAGE> 5
Table of Contents (cont'd)
Page
SECTION 5.03. Application of Moneys Collected by
Trustee......................................... 38
SECTION 5.04. Proceedings by Securityholders.................. 39
SECTION 5.05. Proceedings by Trustee.......................... 40
SECTION 5.06. Remedies Cumulative and Continuing.............. 40
SECTION 5.07. Direction of Proceedings and Waiver
of Defaults by Majority of
Securityholders................................. 41
SECTION 5.08. Notice of Defaults.............................. 42
SECTION 5.09. Undertaking to Pay Costs........................ 42
ARTICLE VI.
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee.......... 43
SECTION 6.02. Reliance on Documents, Opinions, etc............ 44
SECTION 6.03. No Responsibility for Recitals, etc............. 46
SECTION 6.04. Trustee, Authenticating Agent,
Paying Agents, Transfer Agents or
Registrar May Own Securities.................... 46
SECTION 6.05. Moneys to be Held in Trust...................... 46
SECTION 6.06. Compensation and Expenses of Trustee............ 47
SECTION 6.07. Officers' Certificate as Evidence............... 47
SECTION 6.08. Conflicting Interest of Trustee................. 48
SECTION 6.09. Eligibility of Trustee.......................... 48
SECTION 6.10. Resignation or Removal of Trustee............... 49
SECTION 6.11. Acceptance by Successor Trustee................. 50
SECTION 6.12. Succession by Merger, etc....................... 51
SECTION 6.13. Limitation on Rights of Trustee as
a Creditor...................................... 52
SECTION 6.14. Authenticating Agents........................... 52
ARTICLE VII.
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders....................... 53
SECTION 7.02. Proof of Execution by Securityholders........... 54
SECTION 7.03. Who Are Deemed Absolute Owners.................. 55
SECTION 7.04. Securities Owned by Company Deemed
Not Outstanding................................. 55
SECTION 7.05. Revocation of Consents; Future
Holders Bound................................... 55
ARTICLE VIII.
SECURITYHOLDERS' MEETINGS
iv
<PAGE> 6
Table of Contents (cont'd)
Page
SECTION 8.01. Purposes of Meetings............................ 56
SECTION 8.02. Call of Meetings by Trustee..................... 57
SECTION 8.03. Call of Meetings by Company or
Securityholders................................. 57
SECTION 8.04. Qualifications for Voting....................... 57
SECTION 8.05. Regulations..................................... 57
SECTION 8.06. Voting.......................................... 58
ARTICLE IX.
AMENDMENTS
SECTION 9.01. Without Consent of Securityholders.............. 59
SECTION 9.02. With Consent of Securityholders................. 61
SECTION 9.03. Compliance with Trust Indenture
Act; Effect of Supplemental
Indentures...................................... 62
SECTION 9.04. Notation on Securities.......................... 62
SECTION 9.05. Evidence of Compliance of
Supplemental Indenture to be
Furnished Trustee............................... 62
ARTICLE X.
CONSOLIDATION, CONVERSION, MERGER, SALE,
CONVEYANCE AND LEASE
SECTION 10.01. Company May Consolidate, etc., on
Certain Terms................................... 63
SECTION 10.02. Successor Corporation to be
Substituted for Company......................... 63
SECTION 10.03. Opinion of Counsel to be Given
Trustee......................................... 64
ARTICLE XI.
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01. Discharge of Indenture.......................... 64
SECTION 11.02. Deposited Moneys and U.S.
Government Obligations to be Held in
Trust by Trustee................................ 65
SECTION 11.03. Paying Agent to Repay Moneys Held............... 66
SECTION 11.04. Return of Unclaimed Moneys...................... 66
SECTION 11.05. Defeasance Upon Deposit of Moneys or
U.S. Government Obligations..................... 66
SECTION 11.06. Reinstatement................................... 68
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
v
<PAGE> 7
Table of Contents (cont'd)
Page
SECTION 12.01. Indenture and Securities Solely
Corporate Obligations.......................... 69
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
SECTION 13.01. Successors..................................... 69
SECTION 13.02. Official Acts by Successor Corporation......... 69
SECTION 13.03. Surrender of Company Powers.................... 69
SECTION 13.04. Addresses for Notices, etc..................... 70
SECTION 13.05. Governing Law.................................. 70
SECTION 13.06. Evidence of Compliance with Conditions
Precedent...................................... 70
SECTION 13.07. Business Days.................................. 71
SECTION 13.08. Trust Indenture Act to Control................. 71
SECTION 13.09. Table of Contents, Headings, etc............... 71
SECTION 13.10. Execution in Counterparts...................... 71
SECTION 13.11. Separability................................... 72
SECTION 13.12. Assignment..................................... 72
SECTION 13.13. Acknowledgement of Rights...................... 72
ARTICLE XIV.
PREPAYMENT OF SECURITIES
SECTION 14.01. Special Event Prepayment....................... 73
SECTION 14.02. Optional Prepayment by Company................. 73
SECTION 14.03. No Sinking Fund................................ 74
SECTION 14.04. Notice of Prepayment; Selection of
Securities..................................... 74
SECTION 14.05. Payment of Securities Called for
Prepayment..................................... 75
SECTION 14.06. Conditional Right to Advance
Maturity....................................... 76
ARTICLE XV.
SUBORDINATION OF SECURITIES
SECTION 15.01. Agreement to Subordinate....................... 76
SECTION 15.02. Default on Senior Indebtedness................. 77
SECTION 15.03. Liquidation; Dissolution;
Bankruptcy..................................... 78
SECTION 15.04. Subrogation.................................... 79
SECTION 15.05. Trustee to Effectuate
Subordination.................................. 80
SECTION 15.06. Notice by the Company.......................... 81
SECTION 15.07. Rights of the Trustee; Holders of
Senior Indebtedness............................ 82
vi
<PAGE> 8
Table of Contents (cont'd)
Page
SECTION 15.08. Subordination May Not Be
Impaired....................................... 83
ARTICLE XVI.
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 16.01. Extension of Interest Payment
Period......................................... 83
SECTION 16.02. Notice of Extension............................ 84
vii
<PAGE> 9
TIE-SHEET
of provisions of Trust Indenture Act of 1939 with Indenture dated as of
February 5, 1997 between Executive Risk Inc. and The Chase Manhattan Bank,
Trustee:
ACT SECTION INDENTURE SECTION
310(a)(1)...........................................................6.09
(a)(2) ..........................................................6.09
310(a)(3)............................................................N/A
(a)(4)............................................................N/A
310(a)(5).....................................................6.10, 6.11
310(b)...............................................................N/A
310(c)..............................................................6.13
311(a) and (b).......................................................N/A
311(c).....................................................4.01, 4.02(a)
312(a)..............................................................4.02
312(b) and (c)......................................................4.04
313(a)..............................................................4.04
313(b)(1)...........................................................4.04
313(b)(2)...........................................................4.04
313(c)..............................................................4.04
313(d)..............................................................4.04
314(a)..............................................................4.03
314(b)...............................................................N/A
314(c)(1) and (2)...................................................6.07
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) .............................................................5.05
317(b) .............................................................6.05
318(a) ............................................................13.08
THIS TIE-SHEET IS NOT PART OF THE INDENTURE AS EXECUTED.
viii
<PAGE> 10
THIS INDENTURE, dated as of February 5, 1997, between Executive Risk
Inc. a Delaware corporation (hereinafter sometimes called the "Company"), and
The Chase Manhattan Bank, a New York banking corporation, as trustee
(hereinafter sometimes called the "Trustee").
W I T N E S E T H:
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, as amended (the "Trust Indenture Act"), 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 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) Depository; (iv) Capital Security
Certificate; (v) Property Trustee; (vi) Administrative Trustees; (vii) Direct
Action; (viii) Purchase Agreement; (ix) Series A Capital Securities; (x) Series
B Capital Securities; (xi) Series A Capital Securities Guarantee; (xi) Series B
Capital Securities Guarantee; and (xii) the Initial Purchasers. 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.
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<PAGE> 11
"Additional Sums" shall have the meaning set forth in Section
2.06(c).
"Adjusted Treasury Rate" shall mean, with respect to any prepayment
date, the rate per annum equal to the semi-annual equivalent yield to maturity
of the Comparable Treasury Issue, calculated using a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such prepayment date, in each case calculated on
the third Business Day preceding such prepayment date, plus in each case (a)
1.25% if such prepayment date occurs on or prior to the first anniversary of the
Issue Date and (b) .50% in all other cases.
"Adverse Tax Consequence" shall have the meaning set forth in the
definition of Tax Event.
"Aetna Option" means the option to purchase 100,000 shares of Common
Stock issued by the Company to Aetna Inc.
"Affiliate" shall mean, 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 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 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 officer, director or general partner.
"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
2
<PAGE> 12
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, with respect to any series of Securities,
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.
"Capital Lease Obligations" means, with respect to the Company and
its Subsidiaries, any lease of any property that should, in accordance with
GAAP, be classified and accounted for as a capital lease on a consolidated
balance sheet of the Company and its Subsidiaries.
"Capital Securities" shall mean undivided beneficial interests in
the assets of Executive Risk Capital Trust which rank pari passu with the Common
Securities issued by Executive Risk Capital Trust; provided, however, that if an
Event of Default has occurred and is continuing, no payments in respect of
Distributions on, or payments upon liquidation, prepayment or otherwise with
respect to, the Common Securities shall be made until the holders of the Capital
Securities shall be paid in full the Distributions and the liquidation,
prepayment and other payments to which they are entitled. References to "Capital
Securities" shall include collectively any Series A Capital Securities and
Series B Capital Securities.
"Capital Securities Guarantee" shall mean any guarantee that the
Company may enter into with Executive Risk Capital Trust or other Persons that
operates directly or indirectly for the benefit of holders of Capital Securities
of Executive Risk Capital Trust and shall include a Series A Capital Securities
Guarantee and a Series B Capital Securities Guarantee with respect to the Series
A Capital Securities and the Series B Capital Securities, respectively.
"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 Securities" shall mean undivided beneficial interests in the
assets of Executive Risk Capital Trust which rank pari passu with Capital
Securities issued by Executive Risk Capital Trust; provided, however, that if an
Event of Default has occurred and is continuing, no payments in respect of
Distributions on, or payments upon liquidation, prepayment or otherwise with
respect to, the
3
<PAGE> 13
Common Securities shall be made until the holders of the Capital Securities
shall be paid in full the Distributions and the liquidation, prepayment and
other payments to which they are entitled.
"Common 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 Securities of Executive Risk
Capital Trust.
"Common Stock" shall mean the Common Stock, par value $.01 per
share, of the Company or 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 Executive Risk Inc., 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 the Chairman, the Chief Executive
Officer, the President, a Vice Chairman, a Vice President, the Controller, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Comparable Treasury Issue" shall mean the United States Treasury
security selected by the Quotation Agent as having a maturity comparable to the
remaining term to the Stated Maturity Date of the Securities that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Securities.
"Comparable Treasury Price" shall mean, with respect to any
prepayment date pursuant to Section 14.01, (i) the rate per annum equal to 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 Board and which establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities," for the maturity corresponding to the Initial
Optional Prepayment Date (or if no maturity is within three months before or
after the maturity corresponding to the Initial Optional Prepayment Date, yields
for the two published maturities most closely corresponding to the Initial
Optional Prepayment Date shall be interpolated, and the Adjusted Treasury Rate
shall be
4
<PAGE> 14
interpolated or extrapolated from such yields on a straight-line basis, rounding
to the nearest month) or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of the three Reference Treasury Dealer Quotations for such prepayment date,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) 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.
"Conditional Tax Redemption Event" shall have the meaning set forth
in Section 14.06.
"Contingent Obligation" means, with respect to the Company and its
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take or pay, or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose of assuring in any other manner the obligee of such debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Contingent
Obligation shall not include (i) obligations under insurance or reinsurance
policies, or (ii) endorsements for collection or deposit in the ordinary course
of business.
"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 Executive Risk Capital Trust, dated as of February 5, 1997.
"Default" shall mean any event, act or condition that with notice or
lapse of time, or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in Section
16.01.
5
<PAGE> 15
"Definitive Securities" shall mean those securities issued in fully
registered certificated form not otherwise in global form.
"Depositary" shall mean, with respect to Securities of any series,
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).
"Dissolution Event" shall mean the liquidation of Executive Risk
Capital 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 the Executive Risk Capital Trust pro rata in accordance with the
Declaration.
"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.
"Exchange Offer" means the offer that may be made pursuant to the
Registration Rights Agreement (i) by the Company to exchange Series B Securities
for Series A Securities and to exchange a Series B Capital Securities Guarantee
for a Series A Capital Securities Guarantee and (ii) by Executive Risk Capital
Trust to exchange Series B Capital Securities for Series A Capital Securities.
"Executive Risk Capital Trust" shall mean Executive Risk Capital
Trust, a Delaware business trust created for the purpose of issuing its
undivided beneficial interests in connection with the issuance of Securities
under this Indenture.
"Extended Interest Payment Period" shall have the meaning set forth
in Section 16.01.
"GAAP" means generally accepted accounting principles, as recognized
by the American Institute of Certificated Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Company and its Subsidiaries throughout the period indicated and
consistent with the prior financial practice of the Company and its
Subsidiaries.
6
<PAGE> 16
"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 this
Indenture, which shall be registered in the name of the Depositary or its
nominee.
"Guarantees" shall mean, collectively, the Series A Capital
Securities Guarantee, the Series B Capital Securities Guarantee and the Common
Securities Guarantee.
"Hedging Agreement" means any agreement with respect to an interest
rate swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Company under the Term Loan Agreement
and the Revolving Credit Agreement, each dated as of March 26, 1996, as amended,
entered into with The Chase Manhattan Bank and any confirming letter executed
pursuant to such hedging agreement, all as amended or modified from time to
time.
"Indebtedness for Money Borrowed" shall mean any obligation of, or
any obligation guaranteed by, the Company for the repayment of borrowed money,
whether or not evidenced by bonds, debentures, notes or other written
instruments.
"Indenture" shall mean this instrument as originally executed or, if
amended as herein provided, as so amended.
"Initial Optional Prepayment Date" shall mean February 1, 2007.
"Interest Payment Date" shall have the meaning set forth in Section
2.06.
"Investment Company Event" shall mean that Executive Risk Capital
Trust and the Company shall have received an Opinion of Counsel, requested by
the Company, of counsel experienced in practice under the Investment Company Act
of 1940, as amended (the "1940 Act"), to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), there is more than
an insubstantial risk that Executive Risk Capital Trust is or will be considered
an "investment company" which is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after January 31, 1997.
"Issue Date" shall mean February 5, 1997.
7
<PAGE> 17
"Lien" means, with respect to any asset, any Mortgage, lien, pledge,
charge, security interest or encumbrance of any kind with respect to such asset.
For the purposes of this Indenture, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Liquidated Damages" shall have the meaning set forth in the
Registration Rights Agreement.
"Maturity Date" shall mean February 1, 2027, or such other date to
which the maturity of the Securities is changed pursuant to the right of the
Company to advance the maturity date pursuant to the provisions of Section
14.06.
"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 Capital Securities" 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, a Vice President (whether or not
designated by a number or a word or words added before or after each title), the
Controller, the Secretary or an Assistant Secretary, the Treasurer or an
Assistant Treasurer 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.
"Optional Prepayment Price" shall have the meaning set forth in
Section 14.02.
"Other Debentures" shall mean all junior subordinated debentures
issued by the Company from time to time and sold to trusts to be established by
the Company (if any), in each case similar to Executive Risk Capital Trust.
"Other Guarantees" shall mean all guarantees to be issued by the
Company with respect to capital securities (if any) and issued to other trusts
to be established by the Company (if any), in each case similar to the Executive
Risk 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
8
<PAGE> 18
authenticated and delivered by the Trustee or an Authenticating Agent under
this Indenture, except
(a) Securities theretofore cancelled by the Trustee or an
Authenticating Agent or delivered to the Trustee for
cancellation;
(b) Securities, or portions thereof, for the payment or prepayment
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); provided that, if such Securities,
or portions thereof, are to be prepaid prior to maturity
thereof, notice of such prepayment shall have been given as in
Article XIV provided or provision satisfactory to the Trustee
shall have been made for giving such notice; 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 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.
"Predecessor Security" of any particular Security shall mean every
previous Security evidencing all or a portion of the same debt 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.
"Prepayment Price" shall have the meaning set forth in Section
14.02.
"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 which at the time of
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execution of this Indenture is located at 450 West 33rd Street, 15th Floor, New
York, New York 10001.
"Property Trustee" shall have the same meaning as set forth in the
Declaration.
"Purchase Agreement" shall mean the Purchase Agreement, dated
January 31, 1997, among the Company, Executive Risk Capital Trust and the
Initial Purchasers named therein.
"Qualified Debt Obligations" means, without duplication, (a) debt
securities of the Company, provided that the terms of any such debt security (i)
permit the deferral of principal and interest payments for a period of up to
five years (but not beyond the maturity date), as elected by the Company, (ii)
have a maturity for payment of principal of not less than ten (10) years after
the date of issuance, and (iii) include provisions making the debt security
expressly subordinate to all other debt of the Company, (b) preferred securities
issued by a Subsidiary, the sole purpose of which is to issue such preferred
securities and invest the proceeds thereof in debt securities of the type
described in clause (a) above, and which preferred securities are payable solely
out of the proceeds of payments on account of such debt securities; and (c) the
obligations recorded on the consolidated balance sheet of the Company and its
Subsidiaries with respect to debt securities of the type described in clause (a)
above and preferred securities of the type described in clause (b) above.
"Quorum" shall mean a majority in principal amount of outstanding
Securities.
"Quotation Agent" shall mean the Reference Treasury Dealer appointed
by the Trustee after consultation with the Company.
"Reference Treasury Dealer" shall mean (i) J.P. Morgan Securities
Inc. and its successors; provided, however, that if the foregoing shall cease to
be a primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer"), the Company shall substitute therefor another Primary
Treasury Dealer, and (ii) any other Primary Treasury Dealer selected by the
Trustee after consultation with the Company.
"Reference Treasury Dealer Quotations" shall mean, with respect to
each Reference Treasury Dealer and any prepayment 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) at 5:00 p.m. New York
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City time on the third Business Day preceding such prepayment date, quoted in
writing to the Trustee by such Reference Treasury Dealer.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated as of February 5, 1997 by and among the Company, Executive Risk
Capital Trust and the Initial Purchasers named therein as such agreement may be
amended, modified or supplemented from time to time.
"Responsible Officer", when used with respect to the Trustee, shall
mean any officer of the Trustee including any vice-president, any assistant
vice-president, any secretary, any assistant secretary, the treasurer, any
assistant treasurer or any other officer within the Corporate Trust Office 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 matter, any other officer to whom such matter is referred because of
his knowledge of and familiarity with the particular subject.
"Restricted Security" shall mean Securities that bear or are
required to bear the legends set forth in Exhibit A hereto, other than those
legends to be set forth only on a Global Security.
"Rule 144A" shall mean Rule 144A under the Securities Act, as such
Rule may be amended from time to time, or under any similar rule or regulation
hereafter adopted by the Commission.
"Securities" shall mean, collectively, the Series A Securities and
the Series B Securities.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securityholder", "holder of Securities", "Holder," 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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"Senior Indebtedness" shall mean with respect to the Company and its
Subsidiaries: (a) all liabilities, obligations and indebtedness for borrowed
money, whether or not evidenced by bonds, debentures, notes or other similar
instruments, (b) all obligations to pay the deferred purchase price of property
or services (other than trade payables due and arising in the ordinary course of
business), (c) all Capital Lease Obligations, (d) all debt of any other Person
secured by a Lien on any asset of the Company or any of its Subsidiaries, (e)
all Contingent Obligations, (f) all obligations, contingent or otherwise,
relating to the face amount of letters of credit, whether or not drawn, and
banker's acceptances, but excluding any obligation relating to an undrawn letter
of credit if the undrawn letter of credit is issued in connection with a
liability for which a reserve has been established by the Company or the
applicable Subsidiary in accordance with GAAP, and (g) all obligations incurred
pursuant to Hedging Agreements which are due and payable; provided, that Senior
Indebtedness shall not include the Securities, the Guarantees or other Qualified
Debt Obligations.
"Series A Securities" means the Company's 8.675% Series A Junior
Subordinated Deferrable Interest Debentures due February 1, 2027, as
authenticated and issued under this Indenture.
"Series B Securities" means the Company's Series B 8.675% Junior
Subordinated Deferrable Interest Debentures due February 1, 2027, as
authenticated and issued under this Indenture.
"Special Event" means either a Conditional Tax Redemption Event or
an Investment Company Event.
"Special Event Prepayment Price" shall mean, with respect to any
prepayment of the Securities pursuant to Section 14.01 hereof, an amount in cash
equal to the greater of (i) 100% of the principal amount of the Securities to be
prepaid and (ii) the sum, as determined by a Quotation Agent, of the present
values of the principal amount and premium payable as part of the Optional
Prepayment Price with respect to an optional prepayment of such Securities
pursuant to Section 14.02 on the Initial Optional Prepayment Date together with
scheduled payments of interest on the Securities from the prepayment date to and
including the Initial Optional Prepayment Date discounted to the prepayment date
on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Adjusted Treasury Rate, plus, in each case, accrued and unpaid
interest thereon, including Compounded Interest and Additional Sums, if any, to
the date of such prepayment.
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"Subsidiary" shall mean with respect to any Person, (i) any
corporation at least a majority of whose outstanding voting stock of which 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.
"Tax Event" shall mean the receipt by Executive Risk Capital Trust
and the Company of an Opinion of Counsel, requested by the Company, of 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 written decision or pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after January
31, 1997, there is more than an insubstantial risk that (i) Executive Risk
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, (ii) interest payable by the Company on the Securities is
not, or within 90 days of the date of such opinion, will not be, deductible by
the Company, in whole or in part, for United States Federal income tax purposes,
or (iii) Executive Risk 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 (each of the circumstances referred to in clauses
(i), (ii) and (iii) being referred to herein as an "Adverse Tax Consequence").
"Tax Event Maturity Advancement" shall have the meaning specified in
Section 14.06.
"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.
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"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; provided, however, that, in the event the Trust Indenture Act
of 1939 is amended after such date, "Trust Indenture Act of 1939" shall mean, to
the extent required by any such amendment, the Trust Indenture Act of 1939 as so
amended.
"Trust Securities" shall mean the Capital Securities and the Common
Securities, collectively.
"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 denominations of $1,000 and
integral multiples thereof.
SECTION 2.02. Execution and Authentication.
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An Officer shall sign the Securities for the Company by manual or
facsimile signature. 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 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.
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, $128,866,000 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 and
premium, if any, and interest on 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 Trustee; 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
transfer to an account maintained by the Person entitled thereto, provided that
proper 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 and premium,
if any, and interest (including Compounded Interest and Additional Sums, if any)
on 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.
(a) Except as permitted by subsection (b) of this Section 2.04 or as
otherwise determined by the Company in accordance with applicable law, each
Security shall bear the applicable legends relating to restrictions on transfer
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pursuant to the securities laws in substantially the form set forth on Exhibit A
hereto.
(b) The Company shall issue and the Trustee shall authenticate
Series B Securities in exchange for Series A Securities accepted for exchange in
the Exchange Offer, which Series B Securities shall not bear the legends
required by subsection (a) above, in each case unless the Trustee is notified in
writing by the Company that the holder of such Series A Securities is either (A)
a broker-dealer who purchased such Series A Securities directly from the Company
for resale pursuant to Rule 144A or any other available exemption under the
Securities Act, (B) a Person participating in the distribution of the Series A
Securities or (C) a Person who is an affiliate (as defined in Rule 144 under the
Securities Act) of the Company.
SECTION 2.05. Global Security.
(a) In connection with a Dissolution Event,
(i) if any Capital Securities 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 a custodian therefor, 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
Administrative Trustees; 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
(ii) if any Capital Securities are held in certificated
form, the related Definitive Securities may be presented to the Trustee by
the Property Trustee and any Capital Security certificate which represents
Capital Securities other than Capital Securities in book-entry form ("Non
Book-Entry Capital Securities") 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 Capital Securities until such Capital
Security certificates are presented to the Security Registrar for transfer
or reissuance, at which time such Capital
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Security certificates will be cancelled and a Security, registered in the
name of the holder of the Capital Security 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 Capital Security 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
prepayments. 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 receipt of a 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, 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
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in an aggregate principal amount equal to the principal amount of the Global
Security in exchange for such Global Security. Upon the exchange of 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 8.675% per annum
(the "Coupon Rate") from the most recent date to which interest has been paid
or, if no interest has been paid, from February 5, 1997, until the principal
thereof becomes due and payable, and 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 at the Coupon Rate,
compounded semi-annually, payable (subject to the provisions of Article XVI)
semi-annually in arrears on August 1 and February 1 of each year (each, an
"Interest Payment Date") commencing on August 1, 1997 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 the date fifteen days prior to the relevant Interest Payment Date.
(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), with the same force and effect as if made on such date.
(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 Executive Risk 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 Executive Risk Capital Trust has become subject as a result of
a Tax Event ("Additional Sums").
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SECTION 2.07. Transfer and Exchange.
(a) Transfer Restrictions. The Series A Securities, and those Series
B Securities with respect to which any Person described in Section 2.04(b)(A),
(B) or (C) is the beneficial owner, may not be transferred except in compliance
with any legend contained in Exhibit A unless otherwise determined by the
Company in accordance with applicable law. Until the Securities are registered
under the Securities Act, 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 payments 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. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Definitive Securities and Global Securities. 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.
The Company shall not be required to (i) issue, register the
transfer of or exchange Securities during a period beginning at the opening of
business 15 days before the day of mailing of a notice of prepayment or any
notice of selection of Securities for prepayment under Article XIV hereof and
ending at the close of business on the day of such mailing; or (ii) register the
transfer of or exchange any Security so selected for prepayment in whole or in
part,
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except the unprepaid portion of any Security being prepaid in part.
Prior to due presentment for the registration of a transfer of any
Security, the Trustee, any agent and the Company may deem and treat the Person
in whose name any Security is registered as the absolute owner of such Security
for the purpose of receiving payment of principal of and premium, if any, and
interest on such Securities, and neither the Trustee, any agent nor the Company
shall be affected by notice to the contrary.
(c) Exchange of Series A Securities for Series B Securities. The
Series A Securities may be exchanged for Series B Securities pursuant to the
terms of the Exchange Offer. The Trustee shall make the exchange as follows:
The Company shall present the Trustee with an Officers' Certificate
certifying the following:
(A) the transactions contemplated by the Exchange Offer have been
consummated: and
(B) the principal amount of Series A Securities properly tendered
in the Exchange Offer that are represented by a Global
Security and the principal amount of Series A Securities
properly tendered in the Exchange Offer that are represented
by Definitive Securities, the name of each holder of such
Definitive Securities, the principal amount at maturity
properly tendered in the Exchange Offer by each such holder
and the name and address to which Definitive Securities for
Series B Securities shall be registered and sent for each such
holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel (x) to the effect that the Series B Securities have been
registered under Section 5 of the Securities Act and this Indenture has been
qualified under the Trust Indenture Act of 1939 and (y) with respect to the
matters set forth in Section 3(p) of the Registration Rights Agreement and (iii)
a Company Order, shall authenticate (A) a Global Security for Series B
Securities in aggregate principal amount equal to the aggregate principal amount
of Series A Securities represented by a Global Security indicated in such
Officers' Certificate as having been properly tendered and (B) Definitive
Securities representing Series B Securities registered in the names of, and in
the principal amounts indicated in, such Officers' Certificate.
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If the principal amount at maturity of the Global Security for the
Series B Securities is less than the principal amount at maturity of the Global
Security for the Series A Securities, the Trustee shall make an endorsement on
such Global Security for the Series A Securities indicating a reduction in the
principal amount at maturity represented thereby.
The Trustee shall deliver such Definitive Securities for Series B
Securities to the holders thereof as indicated in such Officers' Certificate.
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.
SECTION 2.09. Treasury Securities.
In determining whether the holders of the required principal amount
of Securities have concurred in any direction, waiver or consent, Securities
owned by the Company or any Affiliate of the Company shall be considered as
though not outstanding, except that for purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities that a Responsible Officer of the Trustee actually knows to be
so owned shall be so considered.
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, lithographed, 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,
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substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company shall cause
Definitive Securities to be prepared without unreasonable delay. The Definitive
Securities shall be printed, typewritten, lithographed 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 Holder. 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 destroy 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 prepaid or
paid or that have been delivered to the Trustee for cancellation. All cancelled
Securities not destroyed by the Trustee shall be delivered to the Company.
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
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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
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 prepayment 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 a prepayment and that reliance may be placed only on the other identification
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numbers printed on the Securities, and any such prepayment 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.
ARTICLE III.
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal, Premium and Interest.
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 the Securities at the place,
at the respective times and in the manner provided herein. The Company further
covenants to pay any and all amounts including, without limitation, Liquidated
Damages, if any, on the dates and in the manner required under the Registration
Rights Agreement.
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 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
office or agency of the Trustee in the Borough of Manhattan, The City of New
York. 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 corporate
trust 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
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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; provided, further,
that the Company shall at all times maintain a paying agent in each such office
or agency.
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 (whether such sums have been
paid to it by the Company or by any other obligor on the
Securities) 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 when the same shall be due
and payable; and
(3) that it will indemnify the Trustee and its officers,
directors, employees and agents against any loss, cost
or liability incurred by the Trustee or its officers,
directors employees or agents as a result of actions of
such paying agent.
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(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, 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 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 when the same shall become due and payable.
(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 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 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.
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SECTION 3.06. Compliance with Consolidation Provisions.
The Company will not, while any of the Securities remain
outstanding, consolidate with, or merge or convert into, or merge or convert
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) or (ii) make any payment of principal, interest or premium, if
any, with respect to 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 guarantee by the Company of the debt 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 (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 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 Capital
Securities Guarantee; (d) as a result of a reclassification 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; (f) the issuance of Common
Stock upon exercise of the Aetna Option; and (g) purchases or issuances of
Common Stock in connection with any of the Company's stock option, stock
purchase, stock loan or other benefit plans for its directors, officers or
employees or any of the Company's dividend reinvestment plans, in each case as
now existing or hereafter established or amended) if at such time (i) there
shall have occurred any event of which the Company has actual knowledge that (a)
is or with the giving of notice or the lapse of time, or both, would constitute
an Event of Default and (b) in respect of which the Company shall not have taken
reasonable steps to cure, (ii) if such Securities are held by the Property
Trustee, the Company shall be in default with respect to its payment obligations
under the Capital Securities Guarantee or (iii) the Company shall have
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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 Executive Risk Capital Trust.
In the event Securities are issued to Executive Risk Capital Trust
or a trustee of such trust in connection with the issuance of Trust Securities
by Executive Risk Capital Trust, for so long as such Trust Securities remain
outstanding, the Company will (i) directly or indirectly maintain 100% ownership
of the Common Securities of Executive Risk 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 Securities, (ii) use its reasonable
efforts to cause Executive Risk Capital Trust (a) to remain a business trust,
except in connection with a distribution of Securities, the prepayment of all
the Trust Securities in a liquidation of Executive Risk Capital Trust, the
redemption of all of the Trust Securities of Executive Risk Capital Trust or
certain mergers, consolidations or amalgamations, each as permitted by the
Declaration, and (b) to continue to be treated as a grantor trust and not as an
association taxable as a corporation or a partnership for United States federal
income tax purposes and (iii) to use its reasonable efforts to cause each holder
of Trust Securities to be treated as owning an undivided beneficial interest in
the Securities.
SECTION 3.09. Payment of Expenses.
In connection with the offering, sale and issuance of the Securities
to Executive Risk Capital Trust and in connection with the sale of the Trust
Securities by Executive Risk 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 commissions or other compensation to the
Initial Purchasers payable pursuant to the Purchase Agreement, fees and expenses
in connection with any exchange offer or other action to be taken pursuant to
the Registration Rights Agreement and compensation of the Trustee in accordance
with the provisions of Section 6.06;
(b) pay all costs and expenses of Executive Risk Capital Trust
(including, but not limited to, costs and expenses relating to the organization
of Executive Risk Capital Trust, the offering, sale and issuance of the Trust
Securities (including commissions to the Initial Purchasers payable pursuant to
the Purchase Agreement in connection therewith), the fees and expenses of the
Property Trustee
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and the Delaware Trustee, the costs and expenses relating to the operation of
the 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 the assets of Executive Risk
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 Executive Risk Capital Trust or its assets) and all
liabilities, costs and expenses with respect to such taxes of Executive Risk
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 Executive Risk 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.
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 semi-annual basis on each regular record date for the
Securities, a list, in such form
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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 Securities
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:
(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
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(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 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 all Securities 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.
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(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 accountable by reason of mailing any material pursuant to
a request made under said subsection (b).
SECTION 4.03. Reports of 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 and the Commission, in
accordance with rules and regulations prescribed from time to
time by the Commission, 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 regulations.
(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
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names and addresses of such holders appear upon the Security
Register, within 30 days after the filing thereof with the
Trustee, such 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).
(e) So long as is required for an offer or sale of the Securities
to qualify for an exemption under Rule 144A under the
Securities Act, the Company shall, upon request, provide the
information required by clause (d)(4) thereunder to each
holder of Restricted Securities and to each beneficial owner
and prospective purchaser of Securities identified by any
holder of Restricted Securities, unless such information is
furnished to the Commission pursuant to Section 13 or 15(d) of
the Exchange Act.
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 May 15
following the date of this Indenture, commencing May 15, 1997,
deliver to Securityholders a brief report, dated as of such
May 15, 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
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are listed, with the Commission and with the Company. The
Company will promptly notify the Trustee when and if the
Securities are listed on any stock exchange.
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 prepayment, by declaration of acceleration of
maturity or otherwise; or
(c) 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
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such notice is a "Notice of Default" hereunder; or
(d) 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 Law, 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
(e) the Company shall commence a voluntary case under any
applicable Bankruptcy Law, 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 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 which shall have
become due otherwise than by acceleration (with interest upon such principal and
premium, if any, 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
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in the Securities to the date of such payment or deposit) and (B) such amount as
shall be sufficient to pay to the Trustee and each predecessor Trustee all
amounts payable pursuant to Section 6.06, 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 as and when the same
shall have become due and payable, whether at maturity of the Securities or upon
prepayment or by declaration of acceleration of maturity 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, or
interest, or both, as the case may be, with interest upon the overdue principal
and premium, if any, and (to the extent that payment of such interest is
enforceable under applicable law and, if the Securities are held by Executive
Risk Capital Trust or a trustee of such trust, without duplication of any other
amounts paid by Executive Risk 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
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expenses of collection, including a reasonable compensation to the Trustee, its
agents, attorneys 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 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 all amounts payable pursuant to Section 6.06 to the
Trustee and each predecessor Trustee) 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
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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
pay to the Trustee and each predecessor Trustee all amounts payable pursuant to
Section 6.06.
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 all amounts due the Trustee under Section
6.06, including the 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;
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Third: In case the principal of the outstanding Securities in
respect of which moneys have been collected shall not have become due and be
unpaid, to the payment of the amounts then due and unpaid upon Securities for
principal of (and premium, if any) and interest on the Securities, 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) and interest, respectively; and
Fourth: To the Company.
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 whatever 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, 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
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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 Capital Securities 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.
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.
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,
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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.
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 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 any of the Securities 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
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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 known to a Responsible Officer of the Trustee,
mail to all Securityholders, as the names and addresses of such holders appear
upon the Security register, notice of all defaults known to a Responsible
Officer of 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)
and (e) 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
(c) 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 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(c) 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.
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 any Security against the Company on
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or after the date 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
(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 that by any provision
hereof are specifically required to be furnished to the
Trustee, the Trustee
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shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Indenture;
(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 and that 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 rely, in the absence of bad faith,
conclusively 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 any Board Resolution may
be evidenced to the Trustee by a copy thereof certified by
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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
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
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require reasonable indemnity against such expense or liability
as a condition to so proceeding; and
(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.
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 Sections 11.03 and 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
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written order of the Company, signed by the Chairman of the Board of Directors,
the President 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 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 and any predecessor Trustee (and its officers, agents,
directors and employees) for, and to hold each of them 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 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.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.01(d) or Section 5.01(e), 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 Law.
The provisions of this Section shall survive the resignation or
removal of the Trustee and the defeasance or other 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
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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, the Trustee and
the Company shall in all respects comply with the provisions of Section 310(b)
of the Trust Indenture Act.
The Declaration and the Guarantees shall be deemed to be
specifically described in the Indenture.
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.
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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 affected Securityholders, the resigning
Trustee may petition 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 prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(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
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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 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.
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
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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
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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 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, excluding any creditor relationship described in Section 311(b) of the
Trust Indenture Act. A Trustee who has resigned or been removed shall be subject
to Section 311(a) of the Trust Indenture Act 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 registration of 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
$50,000,000 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.
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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 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 Authenticating 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
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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, 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 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, 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.
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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 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 Executive Risk
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 waiver, only Securities which a
Responsible Officer of 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.
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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) 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;
(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.
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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
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appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, 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.
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
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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. The holders of the Series A Securities and the Series B
Securities shall vote for all purposes as a single class.
Any record so signed and verified shall be conclusive evidence of
the matters therein stated.
ARTICLE IX.
AMENDMENTS
SECTION 9.01. Without Consent of Securityholders.
The Company, when authorized by a Board Resolution, and the Trustee
may from time to time and at any time amend this Indenture, without the consent
of the Securityholders, for one or more of the following purposes:
(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
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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 restricted securities
legends, if any, to be placed on Securities, 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 Capital Securities in the
event of a distribution of Securities by Executive Risk
Capital Trust following a Dissolution Event;
(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.
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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 a majority in 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 prepayment 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, or (ii) 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 Executive Risk
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; 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; Effect of
Supplemental Indentures.
Any supplemental indenture executed pursuant to the provisions of
this Article IX shall comply with the Trust Indenture Act. 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.
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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.
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 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, CONVERSION, 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, conversion 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, conversions 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, conversion 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
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State thereof or the District of Columbia, and (b) upon any such consolidation,
conversion, merger, sale, conveyance, transfer or lease, the due and punctual
payment of the principal of (and premium, if any) and interest on the Securities
according to their tenor and the due and punctual performance and observance of
all the 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, and executed and delivered to the Trustee
by the Person formed by such consolidation, conversion or into which the
Company, as the case may be, shall have been merged, converted or by the Person
which shall have acquired such property, as the case may be and (c) after giving
effect to such consolidation, conversion merger, sale, conveyance, transfer or
lease, no Default or Event of Default shall have occurred and be continuing.
SECTION 10.02. Successor Corporation to be Substituted for Company.
In case of any such consolidation, conversion, 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 all of the Securities and the due and punctual performance
and observance of all of the 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 Executive Risk Inc., 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
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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 prepaid, paid or
replaced 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
due and payable within one year or are to be called for prepayment within one
year under arrangements satisfactory to the Trustee for the giving of notice of
prepayment, and the Company shall deposit or cause to be deposited with the
Trustee, in trust, funds sufficient to pay on the Maturity Date or upon
prepayment all of the Securities (other than any Securities which shall have
been destroyed, lost or stolen and which shall have been prepaid, replaced or
paid 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 or prepayment date, as the case may
be, 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
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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.
The indemnity provided for in this Section 11.02 shall survive the
satisfaction and discharge of this Indenture or the earlier resignation or
removal of the Trustee.
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
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Trustee, and thereupon such paying agent shall be released from all further
liability with respect to such moneys.
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 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 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 written demand;
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 applicable conditions set forth below have been satisfied with respect to
the Securities at any time after the applicable 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
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dates such installments of principal, premium or interest are
due;
(2) if the Securities are then listed on any national
securities exchange, the Company shall have delivered to the
Trustee and the Defeasance Agent, if any, an Opinion of
Counsel to the effect that the exercise of the option under
this Section 11.05 would not cause such Securities to be
delisted from such exchange;
(3) no Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date
of such deposit; and
(4) 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, and such opinion shall 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
(5) 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
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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 2.07, 2.08, 5.02 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 hereunder. 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; and
(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.
SECTION 11.06. Reinstatement.
If the Trustee or any Defeasance Agent is unable to apply any money
in accordance with Section 11.05 by reason of any legal proceeding or by reason
of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's obligations
under this Indenture and the Securities shall be revived and reinstated as
though no deposit had occurred pursuant to Section 11.05 until such time as the
Trustee or any Defeasance Agent is permitted to apply all such money in
accordance with Section 11.05.
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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 any Security, or for any claim based thereon or 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.
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SECTION 13.03. Surrender of Company Powers.
The Company by instrument in writing executed by authority of 2/3
(two-thirds) 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, 82 Hopmeadow Street, Simsbury, CT 06070-7683, Attention: Chief
Executive Officer and Chief Financial Officer with a copy to James A.
FitzPatrick, Dewey Ballantine, 1301 Avenue of the Americas, New York, New York
10019. Any notice, direction request or demand by any Securityholder to or upon
the Trustee shall be deemed to have been sufficiently given or made, for all
purposes, if given or made in writing at the office of the Trustee, 450 West
33rd Street, 15th Floor, New York, New York 10001, Attention: Global Trust
Services (unless another address is provided by the Trustee to the Company for
the purpose). All such notices shall be deemed to have been given when received
in person, telecopied with receipt confirmed, and 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.
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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 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 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 (and
without any interest or other payment in respect of any such delay), with the
same force and effect as if 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 to Control.
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If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with another provision included in this Indenture which
is required to be included in this Indenture by any of Sections 310 to 317,
inclusive, of the Trust Indenture Act of 1939, such required provision 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, as the case may be, will remain liable for all such
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.
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The Company acknowledges that, with respect to any Securities held
by Executive Risk 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 Executive Risk Capital Trust any
holder of Capital Securities may institute 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
the Securities when due, the Company acknowledges that a holder of Capital
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal of or premium, if any, or interest on the
Securities having a principal amount equal to the aggregate liquidation amount
of the Capital Securities of such holder on or after the respective due date
specified in the Securities.
ARTICLE XIV.
PREPAYMENT OF SECURITIES
SECTION 14.01. Special Event Prepayment.
If a Special Event has occurred and is continuing, then the Company
shall have the right at any time prior to the Initial Optional Prepayment Date,
notwithstanding Section 14.02(a) but subject to Section 14.02(b), and upon not
(i) less than 45 days written notice to the Trustee and (ii) less than 30 days
nor more than 60 days written notice to the Securityholders, to prepay the
Securities, in whole (but not in part), at any time prior to the Initial
Optional Prepayment Date and within 90 days following the occurrence of such
Special Event, at the Special Event Prepayment Price. Following a Special Event,
the Company shall take such action as is necessary to promptly determine the
Special Event Prepayment Price, including without limitation the appointment by
the Company of a Quotation Agent. The Special Event Prepayment Price shall be
paid prior to 12:00 noon, New York City time, on the date of such prepayment or
such earlier time as the Company determines, provided that the Company shall
deposit with the Trustee an amount sufficient to pay the Special Event
Prepayment Price by 10:00 a.m., New York City time, on the date such Special
Event Prepayment Price is to be paid.
SECTION 14.02. Optional Prepayment by Company.
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(a) Subject to the provisions of this Article XIV, the Company shall
have the right to prepay the Securities, in whole or in part, from time to time,
on or after the Initial Optional Prepayment Date, at the optional prepayment
prices set forth below (expressed as percentages of principal), plus, in each
case, accrued and unpaid interest thereon (including Additional Sums and
Compounded Interest, if any) to the applicable date of prepayment (the "Optional
Prepayment Price" and, collectively with the Special Event Prepayment Price, the
"Prepayment Price") if prepaid during the 12-month period beginning February 1
of the years indicated below.
Year Percentage
---- ----------
2007..........................................104.338%
2008..........................................103.904%
2009..........................................103.470%
2010..........................................103.036%
2011..........................................102.603%
2012..........................................102.169%
2013..........................................101.735%
2014..........................................101.301%
2015..........................................100.868%
2016..........................................100.434%
2017 and thereafter...........................100.000%
If the Securities are only partially prepaid pursuant to this
Section 14.02, the Securities will be prepaid pro rata or by lot or by any other
method utilized by the Trustee; provided that if at the time of prepayment, the
Securities are registered as a Global Security, the Depositary shall determine
in accordance with its procedures the principal amount of Securities held by
each holder of a Security to be prepaid. The Optional Prepayment Price shall be
paid prior to 12:00 noon, New York City time, on the date of such prepayment or
at such earlier time as the Company determines, provided that the Company shall
deposit with the Trustee an amount sufficient to pay the Optional Prepayment
Price by 10:00 a.m., New York City time, on the date such Optional Prepayment
Price is to be paid.
(b) Notwithstanding the first sentence of Section 14.02, upon the
entry of an order for dissolution of Executive Risk Capital Trust by a court of
competent jurisdiction, the Securities thereafter will be subject to optional
prepayment, in whole only, but not in part, on or after the Initial Optional
Prepayment Date, at the optional prepayment prices set forth in Section 14.02
and otherwise in accordance with this Article XIV.
SECTION 14.03. No Sinking Fund.
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The Securities are not entitled to the benefit of any sinking fund.
SECTION 14.04. Notice of Prepayment; Selection of Securities.
In case the Company shall desire to exercise the right to prepay
all, or, as the case may be, any part of the Securities in accordance with their
terms, it shall fix a date for prepayment and shall mail a notice of such
prepayment at least 30 and not more than 60 days prior to the date fixed for
prepayment to the holders of Securities so to be prepaid as a whole or in part
at their last addresses as the same appear on the Security Register. Such
mailing shall be by first class mail. The notice if mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the holder receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the holder of any Security designated for
prepayment as a whole or in part shall not affect the validity of the
proceedings for the prepayment of any other Security.
Each such notice of prepayment shall specify the CUSIP number of the
Securities to be prepaid, the date fixed for prepayment, the prepayment price at
which the Securities are to be prepaid (or the method by which such prepayment
price is to be calculated), the place or places of payment, that payment will be
made upon presentation and surrender of the Securities, that interest accrued to
the date fixed for prepayment will be paid as specified in said notice, and that
on and after said date interest thereon or on the portions thereof to be prepaid
will cease to accrue. If less than all the Securities are to be prepaid the
notice of prepayment shall specify the numbers of the Securities to be prepaid.
In case any Security is to be prepaid in part only, the notice of prepayment
shall state the portion of the principal amount thereof to be prepaid and shall
state that on and after the date fixed for prepayment, upon surrender of such
Security, a new Security or Securities in principal amount equal to the
unprepaid portion thereof will be issued.
Prior to 10:00 a.m., New York City time, on the prepayment date
specified in the notice of prepayment given as provided in this Section , the
Company will deposit with the Trustee or with one or more paying agents an
amount of money sufficient to prepay on the prepayment date all the Securities
so called for prepayment at the appropriate Prepayment Price, together with
accrued interest to the date fixed for prepayment.
The Company will give the Trustee notice not less than 45 days prior
to the prepayment date as to the aggregate
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principal amount of Securities to be prepaid and the Trustee shall select, in
such manner as in its sole discretion it shall deem appropriate and fair, the
Securities or portions thereof (in integral multiples of $1,000, except as
otherwise set forth in the applicable form of Security) to be prepaid.
SECTION 14.05. Payment of Securities Called for Prepayment.
If notice of prepayment has been given as provided in Section 14.04,
the Securities or portions of Securities with respect to which such notice has
been given shall become due and payable on the date and at the place or places
stated in such notice at the applicable Prepayment Price, together with interest
accrued to the date fixed for prepayment (subject to the rights of holders of
Securities on the close of business on a regular record date in respect of an
Interest Payment Date occurring on or prior to the prepayment date), and on and
after said date (unless the Company shall default in the payment of such
Securities at the Prepayment Price, together with interest accrued to said date)
interest on the Securities or portions of Securities so called for prepayment
shall cease to accrue. On presentation and surrender of such Securities at a
place of payment specified in said notice, the said Securities or the specified
portions thereof shall be paid and prepaid by the Company at the applicable
Prepayment Price, together with interest accrued thereon to the date fixed for
prepayment (subject to the rights of holders of Securities on the close of
business on a regular record date in respect of an Interest Payment Date
occurring on or prior to the prepayment date).
Upon presentation of any Security prepaid in part only, the Company
shall execute and the Trustee shall authenticate and make available for delivery
to the holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations, in principal amount equal to the
unprepaid portion of the Security so presented.
SECTION 14.06. Conditional Right to Advance Maturity.
If a Tax Event occurs, then the Company will have the right (i) prior to
the termination of Executive Risk Capital Trust, to advance the Maturity Date of
the Securities to the minimum extent required in order to allow for the payments
of interest in respect of the Securities to continue to be tax deductible, but
not to a date earlier than twenty years from January 31, 1997, or (ii) to
terminate Executive Risk Capital Trust (if not previously terminated) and
advance the Maturity Date of the Securities to the minimum extent required in
order to allow for the payments of interest in respect of the Securities to
continue to be tax
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deductible. In either case, such Maturity Date shall be advanced only if, in the
written Opinion of Counsel experienced in such matters delivered to the Company,
after advancing the Maturity Date, interest paid on the Securities shall be
deductible for federal income tax purposes (the action referred to in either
clause (i) of (ii) above being referred to herein as a "Tax Event Maturity
Advancement").
If a Tax Event occurs and in the written Opinion of Counsel to the Company
experienced in such matters there would in all cases, after effecting a Tax
Event Maturity Advancement, be more than an insubstantial risk that an Adverse
Tax Consequence would continue to exist, a Special Event shall be deemed to have
occurred and the Securities shall then be subject to prepayment in accordance
with the provisions of Section 14.01. The circumstances under which the Company
has the right to prepay the Securities in connection with a Tax Event is
referred to herein as a "Conditional Tax Redemption Event".
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 and premium, if any,
and interest on all Securities issued hereunder shall, to the extent and in the
manner hereinafter set forth, be 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 prevent the occurrence of any
Default or Event of Default hereunder.
SECTION 15.02. Default on Senior Indebtedness.
In the event and during the continuation of any default by the
Company in the payment of principal, premium, interest or any other payment due
on any Senior Indebtedness, or in the event that the maturity of any Senior
Indebtedness has been accelerated
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because of a default, then, in either case, no payment shall be made by the
Company with respect to the principal (including prepayments) of or premium, if
any, or interest on the Securities.
In the event of the acceleration of the maturity of the Securities,
then no payment shall be made by the Company with respect to the principal
(including prepayments) of or premium, if any, or interest on 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).
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 of
the amounts due in respect of such Senior Indebtedness and 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.
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 in bankruptcy, insolvency,
receivership or other proceedings, 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 with respect to the
Securities; 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,
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<PAGE> 89
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.
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,
and 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 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,
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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. Nothing in Section 15.02 or in this Section 15.03 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 6.06 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 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 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 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
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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.
Upon any payment or distribution of assets of the Company referred
to in this Article XV, the Trustee, subject to the provisions of Article VI of
this Indenture, and the Securityholders shall be entitled to conclusively rely
upon any order or decree made by any court of competent jurisdiction in which
such dissolution, winding-up, liquidation or reorganization proceedings are
pending, or a certificate of the receiver, trustee in bankruptcy, liquidation
trustee, agent or other Person making such payment or distribution, delivered to
the Trustee or to the Securityholders, for the purposes of ascertaining the
Persons entitled to participate in such distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, as the case may be, 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 15.05. 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 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
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shall not have received the notice provided for in this Section 15.06 at least
two Business Days prior to the date 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 any Security), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money 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, as the case may be (or a trustee on behalf of such
holder), to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee 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.
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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 of the Company,
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 such 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 such Senior Indebtedness and,
subject to the provisions of Article VI of this Indenture, the Trustee shall not
be liable to any holder of such 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 such 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
of the Company 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 of the Company 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
such 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
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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.
(a) 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 exceeding 10 consecutive
semi-annual periods, including the first such semi-annual period during such
extension period (the "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 Date or extend beyond the Maturity 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 semi-annually for each
semi-annual 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 and Compounded
Interest (together, "Deferred Interest"), but not including any Additional Sums,
that shall be payable to the holders of the Securities in whose names the
Securities are registered in the Security Register on the record date for the
Interest Payment Date on which such Extended Interest Payment Period ends.
(b) 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, together with all such previous and further
extensions within such Extended Interest Payment Period, shall not exceed 10
consecutive semi-annual periods, including the first such semi-annual period
during such Extended Interest Payment Period, or 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 elect to commence a
new Extended Interest Payment Period, subject to the foregoing requirements. No
interest shall be due and payable during an
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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 selects an Extended Interest Payment Period,
the Company shall give written notice to the Administrative Trustees, the
Property Trustee and the Trustee of its selection of such Extended Interest
Payment Period at least five Business Days before the earlier of (i) the next
succeeding date on which Distributions on the Trust Securities issued by
Executive Risk Capital Trust are payable, or (ii) the date the Administrative
Trustees are 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 Capital Securities issued by Executive Risk Capital Trust, but in any event
at least five Business Days before such record date.
(b) If the Property Trustee is not the only holder of the Securities
at the time the Company selects an Extended Interest Payment Period, the Company
shall give the holders of the Securities and the Trustee written notice of its
selection of 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) The semi-annual period in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 16.02 shall be counted as one of the 10
semi-annual periods permitted in the maximum Extended Interest Payment Period
permitted under Section 16.01. There is no limitation on the number of times
that the Company may elect to begin an Extended Interest Payment Period.
The Chase Manhattan Bank hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
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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.
EXECUTIVE RISK INC.
By/s/ LeRoy A. Vander Putten
---------------------------------
Name: LeRoy A. Vander Putten
Title: Chairman and CEO
The Chase Manhattan Bank,
as Trustee
By/s/ Kathleen Perry
---------------------------------
Name: Kathleen Perry
Title: Second Vice President
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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 THE 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.]
THIS 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. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL
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BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE
COMPANY PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D),
(E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS
AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, AND (ii) PURSUANT TO
CLAUSE (E), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THE REVERSE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO THE
COMPANY. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF REPRESENTS AND
ACKNOWLEDGES THAT IT EITHER (A) IS NOT A PLAN SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND IS NOT PURCHASING SUCH SECURITIES (OR ANY INTEREST
THEREIN) ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY SUCH PLAN OR (B) IS ELIGIBLE
FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR
84-14.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE.
2
<PAGE> 99
No. CUSIP No._____________
EXECUTIVE RISK INC.
8.675% SERIES A JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE February 1, 2027
Executive Risk Inc., 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 __________, or registered assigns,
the principal sum of $128,866,000 Dollars on February 1, 2027, or on such
earlier date as the Company shall determine pursuant to Section 14.06 of the
Indenture (the "Maturity Date"), unless previously prepaid, and to pay interest
on the outstanding principal amount hereof from February 5, 1997, 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, semi-annually (subject to
deferral as set forth herein) in arrears on August 1 and February 1 of each
year, commencing August 1, 1997, at the rate of 8.675% per annum until the
principal hereof shall have become due and payable, and on any overdue principal
and premium, if any, 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 semi-annually. 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 this Security
is payable is not a Business Day, then 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), with the same force and effect as
if made on such date.
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 the
date fifteen days prior to the relevant Interest Payment Date. 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
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<PAGE> 100
Securities not less than 10 days prior to such special record date, or may be
paid at 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 this Security
shall be payable at the office or agency of the Trustee in New York, New York
maintained for that purpose 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 written transfer instructions
have been received by the relevant record date; provided that if this Security
is in global form, 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 this Security will be made 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, subordinate and junior in right of payment to the
prior payment in full of 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.
This Security shall not be entitled to any benefit under the
Indenture hereinafter referred to, 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.
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<PAGE> 101
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated: February 5, 1997
EXECUTIVE RISK INC.
By:_________________________
Name: LeRoy A. Vander Putten
Title: Chairman and Chief Executive
Officer
Attest:
By:_______________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
The Chase Manhattan Bank,
as Trustee
By:_________________________
Authorized Officer
<PAGE> 102
(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 February
5, 1997 (the "Indenture"), duly executed and delivered between the Company and
The Chase Manhattan Bank, 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.
Upon the occurrence and continuation of a Special Event, the Company
shall have the right at any time prior to February 1, 2007 (the "Initial
Optional Prepayment Date"), to prepay this Security in whole (but not in part)
at the Special Event Prepayment Price. "Special Event Prepayment Price" shall
mean with respect to any prepayment of the Securities following a Special Event,
an amount in cash equal to the greater of (i) 100% of the principal amount of
the Securities to be prepaid and (ii) the sum, as determined by a Quotation
Agent, of the present values of the principal amount and premium payable with
respect to an optional prepayment of Securities plus the scheduled payments of
interest thereon on the Securities from the prepayment date to and including the
Initial Optional Prepayment Date discounted to the prepayment date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate, plus any accrued and unpaid interest thereon,
including Compounded Interest but excluding Additional Sums, if any, to the date
of such prepayment.
In addition, the Company shall have the right to prepay this
Security, in whole or in part, at any time on or after the Initial Optional
Prepayment Date (an "Optional Prepayment"), at the Optional Prepayment Prices
set forth below (expressed as percentages of the principal amount to be prepaid)
plus, in each case, accrued and unpaid interest thereon (including Additional
Interest and Compounded Interest, if any) to the applicable date of prepayment
(the "Optional Prepayment Price") if prepaid during the 12-month period
beginning February 1 of the years indicated below.
Year Percentage
2007..........................................104.338%
2008..........................................103.904%
2009..........................................103.470%
2010..........................................103.036%
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<PAGE> 103
2011..........................................102.603%
2012..........................................102.169%
2013..........................................101.735%
2014..........................................101.301%
2015..........................................100.868%
2016..........................................100.434%
2017 and thereafter...........................100.000%
The Optional Prepayment Price or the Special Event Prepayment Price,
as the case requires, shall be paid prior to 12:00 noon, New York City time, on
the date of such prepayment or such earlier time as the Company determines,
provided, that the Company shall deposit with the Trustee an amount sufficient
to pay the applicable Prepayment Price by 10:00 a.m., New York City time, on the
date such Prepayment Price is to be paid. Any prepayment pursuant to this
paragraph will be made upon not less than 30 days nor more than 60 days notice.
If the Securities are only partially prepaid by the Company pursuant to an
Optional Prepayment, the Securities will be prepaid pro rata or by lot or by any
other method utilized by the Trustee provided that if, at the time of
prepayment, the Securities are registered as a Global Security, the Depositary
shall determine the particular Security to be prepaid in accordance with its
procedures.
In the event of prepayment of this Security in part only, a new
Security or Securities for the unprepaid portion hereof will be issued in the
name of the holder hereof upon the cancellation hereof.
If a Tax Event occurs, then the Company will have the right (i)
prior to the termination of Executive Risk Capital Trust, to advance the
Maturity Date of this Security to the minimum extent required in order to allow
for the payments of interest in respect of the Securities to continue to be tax
deductible, but not to a date earlier than twenty years from January 31, 1997,
or (ii) to terminate Executive Risk Capital Trust (if not previously terminated)
and advance the Maturity Date of this Security to the minimum extent required in
order to allow for the payments of interest in respect of the Securities to
continue to be tax deductible. In either case, such Maturity Date shall be
advanced only if, in the written Opinion of Counsel experienced in such matters
delivered to the Company, after advancing the Maturity Date, interest paid on
the Securities shall be deductible for federal income tax purposes.
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
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<PAGE> 104
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 a majority in aggregate principal
amount of the Securities at the time outstanding, as defined in the Indenture,
to execute supplemental indentures 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 supplemental indenture 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 prepayment 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, or
(ii) 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 aggregate principal
amount of the Securities at the time outstanding affected thereby, 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 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 this Security at the time and place and at the
rate and in the money herein prescribed.
8
<PAGE> 105
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 exceeding 10
consecutive semi-annual periods, including the first such semi-annual period
during such extension period, and not to extend beyond the Maturity Date of the
Securities (an "Extended Interest Payment Period"), 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 exceed 10 consecutive semi-annual periods,
including the first semi-annual period during such Extended Interest Payment
Period, (ii) shall not end on any date other than an Interest Payment Date and
(iii) shall not extend beyond the Maturity Date of the Securities. 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) or (ii) make any payment of principal,
interest or premium, if any, with respect to or repay or repurchase or redeem
any debt securities of the Company 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 the debt securities or any Subsidiary of the
Company (including any Other Guarantees) if such guarantee ranks pari passu or
junior in right of payment to the Securities (other than (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 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 Capital
Securities Guarantee, (d) as a result of a reclassification 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
9
<PAGE> 106
or conversion of such capital stock or the security being exchanged or
converted, (f) issuances of Common Stock upon exercise of the Aetna Option, and
(g) purchases of Common Stock related to the issuance of Common Stock or rights
under any of the Company's benefit plans for its directors, officers or
employees or any of the Company's dividend reinvestment plans, in each case as
now existing or hereinafter established or amended) if at such time (i) there
shall have occurred any event of which the Company has actual knowledge that (a)
is, or with the giving of notice or the lapse of time, or both, would be, an
Event of Default and (b) in respect of which the Company shall not have taken
reasonable steps to cure, (ii) if the Securities are held by Executive Risk
Capital Trust, the Company shall be in default with respect to its payment
obligations under the Capital Securities 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 Company will have the right at any time to liquidate Executive
Risk Capital Trust and cause the Securities to be distributed to the holders of
the Trust Securities in liquidation of Executive Risk Capital Trust.
The Securities are issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof. 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 or the Trustee 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
registration of 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 the registrar may deem and treat the registered 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
10
<PAGE> 107
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 this Security, or for any claim based 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.
11
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF TRUST
OF
EXECUTIVE RISK CAPITAL TRUST
THIS Certificate of Trust of Executive Risk Capital Trust (the
"Trust"), dated as of January 24, 1997, has been duly executed and is being
filed by the undersigned, as trustee, to form a business trust under the
Delaware Business Trust Act (12 Del. C. Section 3801, et seq.).
1. Name. The name of the business trust formed hereby is Executive Risk
Capital Trust.
2. Delaware Trustee. The name and business address of the trustee of
the Trust with a principal place of business in the State of Delaware are Chase
Manhattan Bank Delaware, 1201 Market Street, Wilmington, Delaware 19801.
3. Effective Date. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned trustee of the Trust has
executed this Certificate of Trust as of the date first-above written.
CHASE MANHATTAN BANK DELAWARE,
not in its individual capacity but solely as
trustee of the Trust
By: /s/ John J. Cashin
-------------------------------
Name: John J. Cashin
Title: Senior Trust Officer
<PAGE> 1
EXHIBIT 4.4
DECLARATION OF TRUST
OF
EXECUTIVE RISK CAPITAL TRUST
THIS DECLARATION OF TRUST is made as of January 24, 1997 (this
"Declaration"), by and between Executive Risk Inc., a Delaware corporation, as
sponsor (the "Sponsor"), and Chase Manhattan Bank Delaware, a Delaware banking
corporation, as trustee (the "Trustee"). The Sponsor and
the Trustee hereby agree as follows:
1. The trust created hereby shall be known as "Executive Risk
Capital Trust" (the "Trust"), in which name the Trustee or the Sponsor, to the
extent provided herein, may conduct the business of the Trust, make and execute
contracts, and sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets over
to the Trust the sum of ten dollars ($10). Such amount shall constitute the
initial trust estate. It is the intention of the parties hereto that the Trust
created hereby constitute a business trust under Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. Section 3801, et seq. (the "Business Trust Act"), and
that this document constitute the governing instrument of the Trust. The Trustee
is hereby authorized and directed to execute and file a certificate of trust
with the Delaware Secretary of State in accordance with the provisions of the
Business Trust Act.
3. The Sponsor and the Trustee will enter into an amended and
restated Trust Agreement or Declaration satisfactory to each such party to
provide for the contemplated operation of the Trust created hereby and the
issuance of the Capital Securities (the "Capital Securities") and the Common
Securities (the "Common Securities") referred to in the Offering Memorandum (as
hereinafter defined). Prior to the execution and delivery of such amended and
restated Trust Agreement or Declaration, the Trustee shall not have any duty or
obligation hereunder or with respect of the trust estate, except as otherwise
required by applicable law or as may be necessary to obtain prior to such
execution and delivery any licenses, consents or approvals required by
applicable law or otherwise. Notwithstanding the foregoing, the Trustee may take
all actions deemed proper as are necessary to effect the transactions
contemplated herein.
<PAGE> 2
4. The Sponsor, as sponsor of the Trust, is hereby authorized, in
its discretion, (i) to prepare and distribute one or more offering memoranda in
preliminary and final form, including any necessary or desirable amendments,
relating to the offering and sale of Capital Securities of the Trust in a
transaction exempt from the registration requirements of the Securities Act of
1933, as amended (the "1933 Act"), and such other forms or filings as may be
required by the 1933 Act, the Securities Exchange Act of 1934, as amended, or
the Trust Indenture Act of 1939, as amended, in each case relating to the
Capital Securities of the Trust (the "Offering Memorandum"); (ii) to file and
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 that shall be necessary or desirable to register or
establish the exemption from registration of the Capital Securities of the Trust
under the securities or "Blue Sky" laws of such jurisdictions as the Sponsor, on
behalf of the Trust, may deem necessary or desirable; (iii) to execute and file
an application, and all other applications, statements, certificates, agreements
and other instruments that shall be necessary or desirable to cause the Capital
Securities to be listed on the Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") Market, with PORTAL, and, if and at such time as
determined by the Sponsor, with the New York Stock Exchange or any other
national stock exchange or the Nasdaq National Market for listing or quotation
of the Capital Securities of the Trust; (iv) to execute and deliver letters or
documents to, or instruments for filing with, a depository relating to the
Capital Securities of the Trust; (v) to execute, deliver and perform on behalf
of the Trust one or more underwriting or purchase agreements, registration
rights agreements, dealer manager agreements, escrow agreements, subscription
agreements and other similar or related agreements providing for or relating to
the sale of the Capital Securities of the Trust; and (vi) to execute on behalf
of the Trust any and all documents, papers and instruments as may be desirable
in connection with any of the foregoing.
In the event that any filing referred to in this Section 4 is
required by the rules and regulations of the Securities and Exchange Commission
(the "Commission"), PORTAL or state securities or Blue Sky laws to be executed
on behalf of the Trust by a Trustee, the Trustee or any trustee of the Trust
appointed pursuant to Section 6 hereof, in its capacity as trustee of the Trust,
is hereby authorized and directed to join in any such filing and to execute on
behalf of the Trust any and all of the foregoing, it being understood that any
such trustee of the Trust, in its capacity as trustee of the Trust, shall not be
required to join in any such filing or execute on behalf of the Trust
2
<PAGE> 3
any such document unless required by the rules and regulations of the
Commission, PORTAL or state securities or Blue Sky laws.
5. This Declaration may be executed in one or more counterparts.
6. The number of trustees of the Trust initially shall be one and
thereafter the number of trustees of the Trust shall be such number as shall be
fixed from time to time by a written instrument signed by the Sponsor which may
increase or decrease (but not below one) the number of trustees of the Trust;
provided, however, that to the extent required by the Business Trust Act, one
trustee of the Trust shall either be 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 and that otherwise meets the
requirements of applicable Delaware law. Subject to the foregoing, the Sponsor
is entitled to appoint or remove without cause any trustee of the Trust at any
time. Any trustee of the Trust may resign upon thirty days' prior notice to the
Sponsor.
7. This Declaration shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws principles).
IN WITNESS WHEREOF, the parties hereto have caused this
Declaration of Trust to be duly executed as of the day and year first above
written.
EXECUTIVE RISK INC.
as Sponsor
By:/s/ Robert H. Kullas
-------------------------------
Name: Robert H. Kullas
Title: Vice Chairman
CHASE MANHATTAN BANK DELAWARE,
not in its individual capacity
but solely as trustee of the
Trust
By:/s/ John J. Cashin
-------------------------------
Name: John J. Cashin
Title: Senior Trust Officer
3
<PAGE> 1
EXHIBIT 4.5
AMENDED AND RESTATED DECLARATION
OF TRUST
OF
EXECUTIVE RISK CAPITAL TRUST
February 5, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions............................................ 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application....................... 10
SECTION 2.2 Lists of Holders of Securities......................... 11
SECTION 2.3 Reports by the Property Trustee........................ 11
SECTION 2.4 Periodic Reports to Property Trustee................... 11
SECTION 2.5 Evidence of Compliance with Conditions
Precedent.............................................. 12
SECTION 2.6 Events of Default; Waiver.............................. 12
SECTION 2.7 Event of Default; Notice............................... 14
ARTICLE III
ORGANIZATION
SECTION 3.1 Name................................................... 15
SECTION 3.2 Office................................................. 15
SECTION 3.3 Purpose................................................ 15
SECTION 3.4 Authority.............................................. 15
SECTION 3.5 Title to Property of the Trust......................... 16
SECTION 3.6 Powers and Duties of the Administrative
Trustees............................................... 16
SECTION 3.7 Prohibition of Actions by the
Trust and the Trustees................................. 19
SECTION 3.8 Powers and Duties of the Property
Trustee................................................ 20
SECTION 3.9 Certain Duties and Responsibilities
of the Property Trustee................................ 23
SECTION 3.10 Certain Rights of the Property Trustee................. 25
SECTION 3.11 Delaware Trustee....................................... 27
SECTION 3.12 Execution of Documents................................. 27
SECTION 3.13 Not Responsible for Recitals or
Issuance of Securities................................. 28
SECTION 3.14 Duration of Trust...................................... 28
SECTION 3.15 Mergers................................................ 28
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities................ 31
SECTION 4.2 Responsibilities of the Sponsor........................ 31
SECTION 4.3 Right to Proceed....................................... 32
</TABLE>
i
<PAGE> 3
ARTICLE V
TRUSTEES
<TABLE>
<S> <C> <C>
SECTION 5.1 Number of Trustees: Appointment of
Co-Trustee............................................. 32
SECTION 5.2 Delaware Trustee....................................... 33
SECTION 5.3 Property Trustee; Eligibility.......................... 33
SECTION 5.4 Certain Qualifications of
Administrative Trustees and
Delaware Trustee Generally............................. 34
SECTION 5.5 Administrative Trustees................................ 34
SECTION 5.6 Initial Delaware Trustee............................... 35
SECTION 5.7 Appointment, Removal and Resignation
of Trustees............................................ 35
SECTION 5.8 Vacancies of Trustees.................................. 37
SECTION 5.9 Effect of Vacancies.................................... 37
SECTION 5.10 Meetings............................................... 37
SECTION 5.11 Delegation of Power.................................... 38
SECTION 5.12 Merger, Conversion, Consolidation or
Succession to Business................................. 38
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.......................................... 39
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding
Securities............................................. 39
SECTION 7.2 Execution and Authentication........................... 40
SECTION 7.3 Form and Dating........................................ 41
SECTION 7.4 Registrar, Paying Agent and
Exchange Agent......................................... 43
SECTION 7.5 Paying Agent to Hold Money in Trust.................... 44
SECTION 7.6 Replacement Securities................................. 44
SECTION 7.7 Outstanding Capital Securities......................... 44
SECTION 7.8 Capital Securities in Treasury......................... 45
SECTION 7.9 Temporary Securities................................... 45
SECTION 7.10 Cancellation........................................... 46
SECTION 7.11 CUSIP Numbers.......................................... 46
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust................................... 47
</TABLE>
ii
<PAGE> 4
ARTICLE IX
TRANSFER OF INTERESTS
<TABLE>
<S> <C> <C>
SECTION 9.1 Transfer of Securities................................. 48
SECTION 9.2 Transfer Procedures and Restrictions................... 49
SECTION 9.3 Deemed Security Holders................................ 59
SECTION 9.4 Book Entry Interests................................... 59
SECTION 9.5 Notices to Clearing Agency............................. 60
SECTION 9.6 Appointment of Successor
Clearing Agency........................................ 60
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.............................................. 61
SECTION 10.2 Exculpation............................................ 61
SECTION 10.3 Fiduciary Duty......................................... 62
SECTION 10.4 Indemnification........................................ 63
SECTION 10.5 Outside Businesses..................................... 66
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year............................................ 67
SECTION 11.2 Certain Accounting Matters............................. 67
SECTION 11.3 Banking................................................ 68
SECTION 11.4 Withholding............................................ 68
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments............................................. 69
SECTION 12.2 Meetings of the Holders; Action by
Written Consent........................................ 71
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of
Property Trustee....................................... 72
SECTION 13.2 Representations and Warranties of
Delaware Trustee....................................... 73
ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights Agreement.......................... 74
</TABLE>
iii
<PAGE> 5
ARTICLE XV
MISCELLANEOUS
<TABLE>
<S> <C> <C>
SECTION 15.1 Notices................................................ 74
SECTION 15.2 Governing Law.......................................... 76
SECTION 15.3 Intention of the Parties............................... 76
SECTION 15.4 Headings............................................... 76
SECTION 15.5 Successors and Assigns................................. 76
SECTION 15.6 Partial Enforceability................................. 76
SECTION 15.7 Counterparts........................................... 76
ANNEX I Terms of 8.675% Series A/Series B
Capital Securities and 8.675%
Common Securities......................................I-1
EXHIBIT A-1 Form of Capital Security
Certificate.........................................................A1-1
EXHIBIT A-2 Form of Common Security
Certificate.........................................................A2-1
EXHIBIT B Specimen of Debenture..................................B-1
EXHIBIT C Purchase Agreement.....................................C-1
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
EXECUTIVE RISK CAPITAL TRUST
February 5, 1997
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated
and effective as of February 5, 1997, by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the holders (as defined herein), from time to
time, of undivided beneficial interests in the assets of the Trust to be issued
pursuant to this Declaration;
WHEREAS, the Delaware Trustee and the Sponsor established
Executive Risk Capital Trust (the "Trust"), a business trust created under the
Delaware Business Trust Act pursuant to a Declaration of Trust dated as of
January 24, 1997 (the "Original Declaration"), and a Certificate of Trust filed
with the Secretary of State of the State of Delaware on January 24, 1997, 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) and engaging in only those activities necessary or
advisable or incidental thereto;
WHEREAS, prior to the date hereof, no Securities (as defined
herein) have been issued;
WHEREAS, all of the Trustees and the Sponsor, 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 (as defined herein), 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.
1
<PAGE> 7
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 or elsewhere herein have the respective meanings
assigned to them in this Section 1.1;
(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 (including Annexes and Exhibits) 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) 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.
"Administrative Trustee" has the meaning set forth in Section
5.1(b).
"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.
2
<PAGE> 8
"Book Entry Interest" means a beneficial interest in a Global
Certificate 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.
"Capital Security 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).
"Capital Securities" means, collectively, the Series A Capital
Securities and the Series B Capital Securities.
"Capital Securities Guarantee" means, collectively, the Series A
Capital Securities Guarantee and the Series B Capital Securities Guarantee.
"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 Capital Securities and in whose name or in the name of a nominee of that
organization shall be registered a Global Certificate and which shall undertake
to effect book entry transfers and pledges of the Capital Securities.
"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 "Closing Time" under the Purchase
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor legislation.
3
<PAGE> 9
"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 Securities" has the meaning specified in Section 7.1(a).
"Common Securities Guarantee" means the guarantee agreement dated
as of February 5, 1997 of the Sponsor in respect of the Common Securities.
"Company Indemnified Person" means (a) any Administrative
Trustee; (b) any Affiliate of any Administrative Trustee; (c) any officers,
directors, shareholders, members, partners, employees, representatives or agents
of any Administrative Trustee; 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 450 West 33rd Street, 15th Floor, New
York, New York 10001.
"Covered Person" means: (a) any officer, director, shareholder,
trustee, 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 Executive Risk Inc., 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 Trustee" means The Chase Manhattan Bank, a New York
banking corporation, as trustee under the Indenture until a successor is
appointed thereunder, and thereafter means such successor trustee.
"Debentures" means, collectively, the Series A Debentures and the
Series B Debentures.
"Default" means an event, act or condition that with notice or
lapse of time, or both, would constitute an Event of Default.
"Definitive Capital Securities" has the meaning set forth in
Section 7.3(c).
4
<PAGE> 10
"Delaware Trustee" has the meaning set forth in Section 5.2.
"Direct Action" has the meaning set forth in Section 3.8(e).
"Distribution" means a distribution payable to Holders of
Securities in accordance with Section 6.1.
"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.
"Exchange Agent" has the meaning set forth in Section 7.4.
"Exchange Offer" means the exchange offer (including any private
exchange offer) contemplated in Section 2(a) of the Registration Rights
Agreement.
"Fiduciary Indemnified Person" has the meaning set forth in
Section 10.4(b).
"Global Capital Securities" has the meaning set forth in Section
7.3(a).
"Guarantor" means Executive Risk Inc., a Delaware corporation, or
any successor entity resulting from any consolidation, amalgamation, merger or
other business combination in its capacity as guarantor under each of the
Securities Guarantees, as the case may be.
"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 February 5, 1997,
among the Debenture Issuer and the Debenture Trustee, as amended from time to
time.
"Initial Optional Redemption Date" has the meaning set forth in
Section 4(b) of Annex I hereto.
5
<PAGE> 11
"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).
"Liquidation Amount" with respect to any Security means the
amount designated as such with respect thereto as set forth in Annex I hereto.
"Majority in Liquidation Amount" means, with respect to the Trust
Securities, except as provided in the terms of the Capital Securities 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 Capital
Securities or Holders of outstanding Common 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,
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.
"Offering Memorandum" has the meaning set forth in Section
3.6(b).
"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, a Vice President (whether or not
designated by a number or a word or words added before or after such title), the
Controller or the Secretary or an Assistant Secretary, the Treasurer or an
Assistant Treasurer of such Person. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Declaration shall include:
(a) a statement that each officer signing the Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) 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
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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
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may
be an employee of the Sponsor.
"Paying Agent" has the meaning specified in Section 7.4.
"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).
"Purchase Agreement" means the Purchase Agreement for the initial
offering and sale of Capital Securities in the form of Exhibit C.
"QIBs" shall mean qualified institutional buyers as defined in
Rule 144A.
"Quorum" means a majority of the Administrative Trustees or, if
there are only two Administrative Trustees, both of them.
"Registrar" has the meaning set forth in Section 7.4.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of February 5, 1997, by and among the Trust, the Debenture
Issuer and the Initial Purchasers named therein, as amended from time to time.
"Registration Statement" has the meaning set forth
in the Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act, as
such regulation may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission.
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"Regulation S Global Capital Security" has the meaning set forth
in Section 7.3(a).
"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 officer within the Corporate Trust Office of the Property Trustee
including any vice-president, any assistant vice-president, any secretary, any
assistant secretary, the treasurer, any assistant treasurer or any other officer
within the Corporate Trust Office 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 matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Restricted Definitive Capital Securities" has the meaning set
forth in Section 7.3(c).
"Restricted Capital Security" means a Capital Security required
by Section 9.2 to contain a Restricted Securities Legend.
"Restricted Securities Legend" has the meaning set forth in
Section 9.2.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act, or
any successor rule or regulation.
"Rule 144" means Rule 144 under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Rule 144A" means Rule 144A under the Securities Act, as such
rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
"Rule 144A Global Capital Security" has the meaning set forth in
Section 7.3(a).
"Securities" or "Trust Securities" means the Common Securities
and the Capital Securities.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, or any successor legislation.
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"Securities Guarantees" means the Common Securities Guarantee and
the Capital Securities Guarantee.
"Series A Capital Securities" has the meaning specified in
Section 7.1(a).
"Series A Capital Securities Guarantee" means the guarantee
agreement dated as of February 5, 1997 of the Guarantor in respect of the Series
A Capital Securities.
"Series A Debentures" means the 8.675% Series A Junior
Subordinated Deferrable Interest Debentures due February 1, 2027 of the
Debenture Issuer issued pursuant to the Indenture.
"Series B Capital Securities" has the meaning specified in
Section 7.1(a).
"Series B Capital Securities Guarantee" means the guarantee
agreement to be entered in connection with the Exchange Offer by the Guarantor
in respect of the Series B Capital Securities.
"Series B Debentures" means the 8.675% Series B Junior
Subordinated Deferrable Interest Debentures due February 1, 2027 of the
Debenture Issuer issued pursuant to the Indenture.
"Special Event" has the meaning set forth in Section 4(c) of
Annex I hereto.
"Special Event Redemption Price" has the meaning set forth in
Section 4(c) of Annex I hereto.
"Sponsor" means Executive Risk Inc., 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.
"Successor Entity" has the meaning specified in Section 3.15(b).
"Successor Delaware Trustee" has the meaning specified in Section
5.7(b)(ii).
"Successor Property Trustee" has the meaning specified in Section
5.7(b)(i).
"Successor Securities" has the meaning specified in Section
3.15(b).
"Super Majority" has the meaning set forth in Section 2.6(a)(ii).
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"10% in Liquidation Amount" means, with respect to the Trust
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holders of outstanding Trust Securities voting together as
a single class or, as the context may require, Holders of outstanding Capital
Securities or Holders of outstanding Common 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 accumulated 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).
"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.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.
"Trust Property" means (a) the Debentures, (b) any cash on
deposit in, or owing to, the Property Trustee Account and (c) all proceeds and
rights in respect of the foregoing and any other property and assets for the
time being held or deemed to be held by the Property Trustee pursuant to this
Declaration.
"Unrestricted Global Capital Security" has the meaning set forth
in Section 9.2(b).
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 in order for this
Declaration to be a qualified indenture under the Trust Indenture Act and shall,
to the extent applicable, be governed by such provisions.
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(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 Administrative Trustees on behalf
of the Trust shall provide the Property Trustee, unless the Property Trustee is
Registrar for the Securities, (i) within 5 days after 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 of the Securities
("List of Holders") as of such record date, provided that neither the Sponsor
nor the Administrative Trustees on behalf of the Trust shall 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 given to the Property Trustee by the
Sponsor and the Administrative Trustees on behalf of the Trust, and (ii) at any
other time, within 30 days of receipt by the Trust of a written request for a
List of Holders as of a date no more than 14 days before such List of Holders is
given 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.
SECTION 2.3 Reports by the Property Trustee.
Within 60 days after January 31 of each year, commencing January
31, 1998, the Property Trustee shall provide to the Holders of the Capital
Securities such reports as are required by Section 313 of the Trust Indenture
Act, if any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Property Trustee shall also
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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 Administrative Trustees on behalf of
the Trust shall provide to the Property Trustee such documents, reports and
information as are 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.
SECTION 2.5 Evidence of Compliance with Conditions
Precedent.
Each of the Sponsor and the Administrative Trustees 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 the
Capital Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default in respect of the Capital Securities
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 this 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
this Declaration may only be waived by the vote of the Holders of at
least the proportion in aggregate Liquidation Amount of the Capital
Securities that the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding.
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,
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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 Capital
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 an Event of Default with respect to the Capital Securities
or impair any right consequent thereon. Any waiver by the Holders of the Capital
Securities of an Event of Default with respect to the Capital Securities shall
also be deemed to constitute a waiver by the Holders of the Common Securities of
any such Event of Default with respect to the Common Securities for all purposes
of this Declaration without any further act, vote, or consent of the Holders of
the Common Securities.
(b) The Holders of a Majority in Liquidation Amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
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 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 this 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 Securities are deemed to
have waived such Event of Default under this 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
in aggregate Liquidation Amount of the Common Securities that the
relevant Super Majority represents of the aggregate principal amount of
the Debentures outstanding;
provided further, that the Holder of the Common Securities will be deemed to
have waived any such Event of Default and all Events of Default with respect to
the Common Securities and its consequences if all Events of Default with respect
to the Capital Securities 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 Capital Securities and only the Holders of the Capital Securities 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
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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 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 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 Capital Securities,
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 a
Responsible Officer of the Property Trustee obtains knowledge of the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders, the Administrative Trustees and the Sponsor 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; 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 of the Securities.
(b) 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 Capital
Securities, the Administrative Trustees and the Sponsor, unless such Event of
Default shall have been cured or waived. The Sponsor and the Administrative
Trustees 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.
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(c) The Property Trustee shall not be deemed to have knowledge of
any Default or Event of Default except:
(i) Default under Sections 5.01(a) and 5.01(b) of the
Indenture; or
(ii) any Default or Event of Default as to which the Property
Trustee shall have received written notice or of which a Responsible
Officer charged with the administration of the Declaration shall have
actual knowledge.
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ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "Executive Risk Capital Trust" as such name
may be modified from time to time by the Administrative Trustees following
written notice to the Property Trustee, the Delaware Trustee and the Holders.
The Trust's activities may be conducted under the name of the Trust or any other
name deemed advisable by the Administrative Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is c/o Executive
Risk Inc., 82 Hopmeadow Street, Simsbury, CT 06070-7683. On ten Business Days
written notice to the Property Trustee, the Delaware Trustee and the Holders,
the Administrative Trustees may designate another principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to
issue and sell the Trust Securities, (b) to use the proceeds from the sale of
the Securities to acquire the Debentures, (c) to engage in the Exchange Offer,
or if applicable, to file a Shelf Registration Statement (as such term is
defined in the Registration Rights Agreement), and (d) except as otherwise
limited herein, to engage in only those other activities necessary, advisable 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 Administrative Trustees shall
have exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Administrative Trustees or any of them in accordance with
their powers shall constitute the act of and serve to bind the Trust and an
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.
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Persons dealing with the Trust are entitled to rely conclusively on the power
and authority of the Trustees as set forth in this Declaration.
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 Administrative
Trustees.
The Administrative Trustees 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 and the Common 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 Capital Securities and no more than one series of Common
Securities, (ii) there shall be no interests in the Trust other than the
Securities, and (iii) the issuance of Securities shall be limited (except as
contemplated by the Exchange Offer) to a simultaneous issuance of both Capital
Securities and Common Securities at any Closing Time;
(b) in connection with the issue and sale of the Capital
Securities and the consummation of the Exchange Offer, to:
(i) prepare and execute, if necessary, an offering
memorandum (the "Offering Memorandum") in preliminary and final form,
including any amendments or supplements thereto, prepared by the
Sponsor, in relation to the offering and sale of Series A Capital
Securities to qualified institutional buyers in reliance on Rule 144A
under the Securities Act, to institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and
outside the United States to non-U.S. persons in offshore transactions
in reliance on Regulation S under the Securities Act, and to execute and
file with the Commission, at such time as determined by the Sponsor, any
Registration Statement, including any amendments thereto, as
contemplated by the Registration Rights Agreement;
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(ii) execute and file any documents prepared by the Sponsor,
or take any acts as determined by the Sponsor to be necessary in order
to qualify or register all or part of the Capital Securities in any
State in which the Sponsor has determined to qualify or register such
Capital Securities for sale;
(iii) execute and file an application, prepared by the
Sponsor, to the New York Stock Exchange or any other national stock
exchange or the Nasdaq Stock Market's National Market for listing or
quotation of the Capital Securities;
(iv) execute and deliver letters, documents, or instruments
with DTC and other Clearing Agencies relating to the Capital Securities;
and
(v) if required, execute and file with the Commission a
registration statement on Form 8-A, including any amendments thereto,
prepared by the Sponsor, relating to the registration of the Capital
Securities under Section 12(b) of the Exchange Act.
(c) to acquire the Series A Debentures with the proceeds of the
sale of the Series A Capital Securities and the Common Securities and to
exchange, or to direct the Property Trustee in writing to exchange, the Series A
Debentures for a like principal amount of Series B Debentures, pursuant to the
Exchange Offer; provided, however, that the Administrative Trustees 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 of the Capital Securities and the Holders
of Common Securities;
(d) to give the Sponsor and the Property Trustee prompt written
notice of the occurrence of a Special Event;
(e) 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 Capital Securities and Holders of Common Securities as
to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be
required of the Administrative Trustees pursuant to the terms of the Securities;
(g) 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"),
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unless pursuant to Section 3.8(e), the Property Trustee has the exclusive power
to bring such Legal Action;
(h) 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;
(i) to cause the Trust to comply with the Trust's obligations
under the Trust Indenture Act;
(j) 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 Administrative Trustee;
(k) to incur expenses that are necessary or incidental to carry
out any of the purposes of the Trust;
(l) 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;
(m) to give prompt written notice to the Property Trustee and to
Holders of the Securities 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;
(n) 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;
(o) 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 Capital
Securities or to enable the Trust to effect the purposes for which the Trust was
created;
(p) to take any action, not inconsistent with this Declaration or
with applicable law, that the Administrative Trustees 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, including, but not limited to:
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(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 to be classified for United States
federal income tax purposes as a grantor trust; and
(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;
(q) to take all action necessary to consummate the Exchange Offer
or otherwise cause the Capital Securities to be registered pursuant to an
effective registration statement in accordance with the provisions of the
Registration Rights Agreement; and
(r) 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 Administrative Trustees, on
behalf of the Trust.
The Administrative Trustees 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 the Administrative Trustees shall not
take any action that is inconsistent with the purposes and functions of the
Trust set forth in Section 3.3.
Subject to this Section 3.6, the Administrative Trustees shall
have none of the powers or the authority of the Property Trustee set forth in
Section 3.8.
Any expenses incurred by the Administrative Trustees pursuant to
this Section 3.6 shall be reimbursed by the Sponsor.
SECTION 3.7 Prohibition of Actions by the Trust and the
Trustees.
The Trust shall not, and the Trustees (including the Property
Trustee) shall not cause the Trust to, engage in any activity other than as
required or authorized by this Declaration. The Trust shall not:
(a) invest any proceeds received by the Trust from holding
the Debentures, but shall distribute all such proceeds (except for
Additional Sums (as defined in the Indenture)) to Holders pursuant to
the terms of this Declaration and of the Securities;
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(b) acquire any assets other than as expressly provided
herein;
(c) possess Trust Property for other than a Trust purpose;
(d) make any loans or incur any indebtedness other than
loans represented by the Debentures;
(e) 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;
(f) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities; or
(g) other than as provided in this Declaration, (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 a nationally recognized
independent tax counsel experienced in such matters to the effect that
such amendment, modification or termination 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 of the Securities. The right, title and interest of the Property Trustee
to the Debentures shall vest automatically in each Person who 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
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Administrative Trustees 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
of the Securities 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, or cause the Paying
Agent to make, payments to the Holders 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 an account that is
maintained with a banking institution the rating on whose long-term
unsecured indebtedness is at least equal to the rating assigned to the
Capital Securities or, if the Debentures are so rated, the Debentures,
by a "nationally recognized statistical rating organization", as that
term is defined for purposes of Rule 436(g)(2) under the Securities Act;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the Capital
Securities and the Common Securities to the extent the Debentures are
prepaid or mature; and
(iii) upon written notice of distribution issued by the
Administrative Trustees 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 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 shall take
any Legal Action which arises out of or in connection with, an Event of Default
of which a Responsible Officer has actual knowledge, or the Property Trustee's
duties and obligations under this Declaration or the Trust Indenture Act and if
the Property Trustee shall have failed to take such Legal Action, the Holders of
the Capital Securities, to the fullest extent permitted by
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applicable law, may take such Legal Action, to the same extent as if such
Holders of Capital Securities held an aggregate principal amount of Debentures
equal to the aggregate Liquidation Amount of such Capital Securities, 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 payable (or in the case of prepayment,
on the prepayment date), then a Holder of Capital Securities may directly
institute a proceeding 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 Capital
Securities of such Holder (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 Securities will be subrogated to the rights
of such Holder of Capital Securities to the extent of any payment made by the
Debenture Issuer to such Holder of Capital Securities in such Direct Action.
Except as provided in the preceding sentences, the Holders of Capital Securities
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(b).
(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
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 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
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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 Administrative
Trustees set forth in Section 3.6.
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 the Property Trustee shall not take any
action that is inconsistent with the purposes and functions of the Trust set out
in Section 3.3.
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 or waiving 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 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
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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, unless it shall
be proved that the Property Trustee was negligent in ascertaining the
pertinent facts;
(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 Securities 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
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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. 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 Administrative Trustees or the Sponsor
with their respective duties under this Declaration, nor shall the
Property Trustee be liable for any default or misconduct of the
Administrative Trustees 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,
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 Sponsor or the
Administrative Trustees 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
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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
Administrative Trustees;
(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
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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;
(ix) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders, 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 (A) may request instructions from the
Holders of the Securities 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, (B) may
refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (C) shall be protected in
conclusively relying on or acting in or 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; and
(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.
(b) No provision of this Declaration shall be deemed to
impose any duty or obligation on the Property
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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 Administrative Trustees or the Property 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. In the event the Delaware Trustee shall at any time be required to take any
action or perform any duty hereunder, the Delaware Trustee shall be entitled to
the benefits of Section 3.9(b)(ii) through (vii) and Section 3.10. No implied
covenants or obligations shall be read into this Declaration against the
Delaware Trustee.
SECTION 3.12 Execution of Documents.
Except as otherwise required by the Business Trust Act, any
Administrative Trustee is authorized to execute on behalf of the Trust any
documents that the Administrative Trustees have the power and authority to
execute pursuant to Section 3.6; provided that, the registration statement
referred to in Section 3.6(b)(i), including any amendments thereto, shall be
signed by all of the Administrative Trustees.
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.
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The Trust, unless terminated pursuant to the provisions of
Article VIII hereof, shall have existence up to February 5, 2028.
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 substantially as an entirety to any Person, except as described in
Section 3.15(b) and (c). In the event of any termination of the Trust or the
Sponsor otherwise gives notice of its election to liquidate the Trust pursuant
to Section 8.1(a)(iii) of this Declaration, the Trust shall be liquidated by the
Administrative Trustees as expeditiously as the Administrative Trustees
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 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 a 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 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 as set forth in Section 8 of Annex I.
(b) The Trust may, at the request of the Sponsor, with the
consent of the Administrative Trustees or, if there are more than two, a
majority of the Administrative Trustees and without the consent of the Holders,
the Delaware Trustee or the Property Trustee, merge or convert with or into,
consolidate, amalgamate, or be replaced by, or convey,
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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 under 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 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 quoted, or any
Successor Securities will be listed or quoted upon notification of
issuance, on any national securities exchange or with another
organization on which the Capital Securities are then listed or quoted,
if any;
(iv) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Capital
Securities (including any Successor Securities) or, if so rated, the
Debentures to be downgraded by any nationally recognized statistical
rating organization;
(v) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the Holders of the 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:
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(A) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders of
the Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the
Holders' interest in the new entity); and
(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 under the Investment Company Act; 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;
and
(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 Capital Securities
Guarantee and the Common Securities Guarantee.
(c) Notwithstanding Section 3.15(b), the Trust shall not,
except with the consent of all Holders, 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 Person or permit any other Person 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 not to be classified as a grantor trust for United States
federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
At the Closing Time, the Sponsor will purchase all of the Common
Securities then issued by the Trust, in an amount at least equal to 3% of the
capital of the Trust, at the same time as the Series A Capital Securities are
issued and sold.
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SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Capital Securities,
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 the Offering Memorandum, including any amendments
or supplements thereto, and to prepare for filing by the Trust with the
Commission any Registration Statement, including any amendments thereto as
contemplated by the Registration Rights Agreement;
(b) to determine the States in which to take appropriate action
to qualify or register for sale all or part of the Capital Securities 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 in order to comply with the applicable laws of any such
States;
(c) if deemed necessary or advisable by the Sponsor, to prepare
for filing by the Trust an application to the New York Stock Exchange or any
other national stock exchange or the Nasdaq National Market for listing or
quotation of the Capital Securities;
(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the Capital
Securities under Section 12(b) of the Exchange Act, including any amendments
thereto; and
(e) to negotiate the terms of the Purchase Agreement and the
Registration Rights Agreement providing for the sale of the Capital Securities,
and to enter into and execute and deliver the Purchase Agreement and the
Registration Rights Agreement on behalf of the Trust.
SECTION 4.3 Right to Proceed.
The Sponsor acknowledges the rights of the Holders of Capital
Securities, in the event that a failure of the Trust to pay Distributions on the
Capital Securities is attributable to the failure of the Debenture Issuer to pay
interest or principal on the Debentures, to institute Direct Actions against the
Debenture Issuer for enforcement of its payment obligations on the Debentures.
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ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees: Appointment of
Co-Trustee.
The number of Trustees initially shall be five (5), 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
(b) after the issuance of any Securities, the number of Trustees
may be increased or decreased by vote of the Holders of a Majority in
Liquidation Amount of the Common Securities voting as a class at a meeting of
the Holders of the Common Securities; provided, however, that, the number of
Trustees shall in no event be less than two (2); provided, further, that (1) one
Trustee shall be the Delaware Trustee; (2) there shall be at least one Trustee
who is an employee or officer of, or is affiliated with the Sponsor (an
"Administrative Trustee"); and (3) one Trustee shall be the Property Trustee for
so long as this Declaration is required to qualify as an indenture under the
Trust Indenture Act, 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 the Trust Indenture Act or 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
Securities acting as a class at a meeting of the Holders of the Common
Securities, and the Administrative Trustees shall have 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:
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(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 to the Property Trustee in its capacity as Property
Trustee.
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee (the "Property
Trustee") which shall act as Property Trustee and which shall:
(i) not be an Affiliate of the Sponsor; 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 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 5.3(a)(ii), 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.
(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 Holder of the Common 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.
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(d) The Capital Securities Guarantee and the Indenture shall be
deemed to be specifically described in this Declaration for purposes of
Section 310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Global Trust Services
SECTION 5.4 Certain Qualifications of Administrative Trustees
and Delaware Trustee Generally.
Each Administrative Trustee 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 Administrative Trustees.
(a) The initial Administrative Trustees shall be:
Robert V. Deutsch
c/o Executive Risk Inc.
82 Hopmeadow Street
Simsbury, Connecticut 06070-7683
Robert H. Kullas
c/o Executive Risk Inc.
82 Hopmeadow Street
Simsbury, Connecticut 06070-7683
Jeffrey H. Koenig
c/o Executive Risk Inc.
82 Hopmeadow Street
Simsbury, Connecticut 06070-7683
(b) Except as expressly set forth in this Declaration and except
if a meeting of the Administrative Trustees is called with respect to any matter
over which the Administrative Trustees have power to act, any power of the
Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.
(c) Unless otherwise determined by the Administrative Trustees,
and except as otherwise required by the Business Trust Act or applicable law,
any Administrative Trustee is authorized to execute on behalf of the Trust any
documents which the Administrative Trustees have the power and authority to
cause the Trust to execute pursuant to Section 3.6, provided, that, the
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registration statement referred to in Section 3.6, including any amendments
thereto, shall be signed by all of the Administrative Trustees.
(d) An Administrative Trustee 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
Administrative Trustees have power and authority to cause the Trust to execute
pursuant to Section 3.6.
SECTION 5.6 Initial Delaware Trustee.
The initial Delaware Trustee shall be:
Chase Manhattan Bank Delaware
1201 Market Street
Wilmington, Delaware 19801
SECTION 5.7 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.7(b), any Trustee 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) in the case of Administrative Trustees, after the
issuance of any Securities, by vote of the Holders of a Majority in
Liquidation Amount of the Common Securities voting as a class at a
meeting of the Holders of the Common Securities;
(iii) in the case of the Property Trustee and the Delaware
Trustee, 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 Securities voting as a
class at a meeting of the Holders of the Common Securities; and
(iv) in the case of the Property Trustee and the Delaware
Trustee, if an Event of Default shall have occurred and be continuing
after the issuance of the Securities, by vote of Holders of a Majority
in Liquidation Amount of the Capital Securities voting as a class at a
meeting of Holders of the Capital Securities.
(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
possessing the qualifications to act as Property Trustee under Section 5.3 (a
"Successor Property Trustee") has been appointed and has accepted such
appointment by
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written instrument executed by such Successor Property Trustee and delivered to
the removed Property Trustee, the Administrative Trustees and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not be
removed in accordance with this 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 removed Delaware
Trustee, the Administrative Trustees 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 Administrative
Trustees, 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;
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
Administrative Trustees, the Sponsor and the resigning Delaware Trustee.
(d) The Holders of the Common 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
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Trustee or Delaware Trustee resigning or being removed, as applicable, may
petition 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.
(f) No Property Trustee or Delaware Trustee shall be liable for
the acts or omissions of any Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
SECTION 5.8 Vacancies of 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 Administrative Trustees or, if
there are more than two, a majority of the Administrative 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 Administrative Trustees shall occur, until such vacancy
is filled by the appointment of an Administrative Trustee in accordance with
Section 5.7, the Administrative Trustees in office, regardless of their number,
shall have all the powers granted to the Administrative Trustees and shall
discharge all the duties imposed upon the Administrative Trustees by this
Declaration.
SECTION 5.10 Meetings.
If there is more than one Administrative Trustee, meetings of the
Administrative Trustees shall be held from time to time upon the call of any
Administrative Trustee. Regular meetings of the Administrative Trustees may be
held at a time and place fixed by resolution of the Administrative Trustees.
Notice of any in-person meetings of the Administrative Trustees 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 Administrative Trustees 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
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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 Administrative Trustee at a meeting shall constitute a
waiver of notice of such meeting except where an Administrative Trustee 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
Administrative Trustees may be taken at a meeting by vote of a majority of the
Administrative Trustees 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 Administrative
Trustees. In the event there is only one Administrative Trustee, any and all
action of such Administrative Trustee shall be evidenced by a written consent of
such Administrative Trustee.
SECTION 5.11 Delegation of Power.
(a) Any Administrative Trustee 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, including any registration statement or amendment
thereto filed with the Commission, or making any other governmental filing; and
(b) the Administrative Trustees shall have power to delegate from
time to time to such of their number or to officers of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Administrative Trustees or otherwise as the
Administrative 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 corporation into which the Property Trustee or the Delaware
Trustee or any Administrative Trustee that is not a natural person, as the case
may be, may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which such
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of such Trustee, shall be the successor of such
Trustee 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.
ARTICLE VI
DISTRIBUTIONS
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SECTION 6.1 Distributions.
Each Holder shall receive Distributions 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) but not including Additional Sums (as defined in the
Indenture)), premium and/or principal or any other payments with respect to the
Debentures held by the Property Trustee or Liquidated Damages (as defined in the
Registration Rights Agreement) or any other payments pursuant to the
Registration Rights Agreement with respect to 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.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Administrative Trustees shall on behalf of the Trust
issue one class of capital securities representing undivided beneficial
interests in the assets of the Trust having such terms as are set forth in Annex
I (the "Series A Capital Securities") 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 Securities"). The
Administrative Trustees shall on behalf of the Trust issue one class of capital
securities representing undivided beneficial interests in the assets of the
Trust having such terms as set forth in Annex I (the "Series B Capital
Securities") in exchange for Series A Capital Securities accepted for exchange
in the Exchange Offer, which Series B Capital Securities shall not bear the
legends required by Section 9.2(i) unless the Holder of such Series A Capital
Securities is either (A) a broker-dealer who purchased such Series A Capital
Securities directly from the Trust for resale pursuant to Rule 144A or any other
available exemption under the Securities Act, (B) a Person participating in the
distribution of the Series A Capital Securities or (C) a Person who is an
affiliate (as defined in Rule 144A) of the Trust. The Trust shall issue no
securities or other interests in the assets of the Trust other than the Capital
Securities and the Common Securities.
(b) 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.
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(c) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and non-assessable.
(d) Every Person, by virtue of having become a Holder or a
Capital Security 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.
SECTION 7.2 Execution and Authentication.
The Securities shall be signed on behalf of the
Trust by an Administrative Trustee by manual or facsimile signature.
Typographical and other minor errors or defects in any reproduction of any such
signature shall not affect the validity of any Security. In case any
Administrative Trustee who shall have signed any of the Securities shall cease
to be such Administrative Trustee 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 Administrative
Trustee; 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
Administrative Trustees of the Trust, although at the date of the execution and
delivery of this Declaration any such Person was not such an Administrative
Trustee.
A Common Security shall be valid upon execution by an
Administrative Trustee without any act by the Property Trustee. A Capital
Security shall not be valid until authenticated by the manual signature of an
authorized officer of the Property Trustee. The signature shall be conclusive
evidence that the Capital Security has been authenticated under this
Declaration.
Upon a written order for authentication and delivery of the Trust
signed by one Administrative Trustee, the Property Trustee shall authenticate
and deliver the Capital Securities for original issue. The aggregate number of
Capital Securities 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.
The Property Trustee may appoint an authenticating agent
acceptable to the Trust to authenticate Capital Securities. An authenticating
agent may authenticate Capital Securities 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 to deal with the Sponsor or an Affiliate.
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SECTION 7.3 Form and Dating.
The Capital Securities and the Property Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 and the Common
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 Administrative Trustees, 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 Administration Trustees, as evidenced by their execution thereof). 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 Capital
Security 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. The Capital Securities offered and sold to
QIBs in reliance on Rule 144A or offered and sold outside the United States to
non-U.S. persons in offshore transactions in reliance on Regulation S, as
provided in the Purchase Agreement, shall be issued in the form of one or more,
permanent global Securities in definitive, fully registered form without
Distribution coupons with the appropriate global legends and the Restricted
Securities Legend set forth in Exhibit A-1 hereto (respectively, a "Rule 144A
Global Capital Security" or "Regulation S Global Capital Security" or,
collectively, "Global Capital Security"), which shall be deposited on behalf of
the purchasers of the Capital Securities represented thereby with the Property
Trustee or the Registrar at either of their respective New York offices, 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 an Administrative
Trustee on behalf of the Trust and authenticated by the Property Trustee as
hereinafter provided. The number of Capital Securities represented by the Rule
144A Global Capital Security and the Regulation S Global Capital 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.
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(b) Book-Entry Provisions. This Section 7.3(b) shall apply only
to the Rule 144A Global Capital Securities, the Regulation S Global Capital
Securities and such other Capital Securities in global form as may be authorized
by the Trust to be deposited with or on behalf of the Clearing Agency.
An Administrative Trustee shall execute on behalf of the Trust
and the Property Trustee shall, in accordance with this Section 7.3,
authenticate and make available for delivery initially one or more Rule 144A
Global Capital Securities and one or more Regulation S Global Capital 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 or the Registrar 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
Rule 144A Global Capital Security or any Regulation S Global Capital Security
held on their behalf by the Clearing Agency or by the Property Trustee or the
Registrar as the custodian of the Clearing Agency or under such Rule 144A Global
Capital Security or such Regulation S Global Capital 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 Rule 144A Global
Capital Security or such Regulation S Global Capital 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
Rule 144A Global Capital Security or any Regulation S Global Capital Security.
(c) Definitive Capital Securities. Except as provided in Section
7.9, owners of beneficial interests in a Rule 144A Global Capital Security or a
Regulation S Global Capital Security will not be entitled to receive physical
delivery of certificated Capital Securities ("Definitive Capital Securities").
Purchasers of Securities who are "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and did not purchase
Capital Securities in reliance on Regulation S will receive Capital Securities
in the form of individual certificates in definitive, fully registered form
without distribution coupons and with the Restricted Securities Legend set forth
in Exhibit A-1 hereto ("Restricted Definitive Capital Securities"); provided,
however, that upon registration of transfer of such Restricted Definitive
Capital Securities to a QIB, such Restricted Definitive Capital Securities will,
unless the Rule
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144A Global Capital Security has previously been exchanged, be exchanged for an
interest in a Rule 144A Global Capital Security pursuant to the provisions of
Section 9.2. Restricted Definitive Capital Securities will bear the Restricted
Securities Legend set forth on Exhibit A-1 unless removed in accordance with
this Section 7.3 or Section 9.2.
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 Capital Securities may be presented for
registration of transfer ("Registrar"), (ii) an office or agency where Capital
Securities may be presented for payment ("Paying Agent") and (iii) an office or
agency where Securities may be presented for exchange ("Exchange Agent"). The
Registrar shall keep a register of the Capital Securities and of their transfer.
The Trust may appoint the Registrar, the Paying Agent and the Exchange Agent and
may appoint one or more co-registrars, one or more additional paying agents and
one or more additional exchange agents in such other locations as it shall
determine. The term "Registrar" includes any additional registrar, "Paying
Agent" includes any additional paying agent and the term "Exchange Agent"
includes any additional exchange agent. The Trust may change any Paying Agent,
Registrar or Exchange Agent 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 and the Sponsor. The Trust shall notify the Property Trustee of
the name and address of any Agent not a party to this Declaration. If the Trust
fails to appoint or maintain another entity as Registrar, Paying Agent or
Exchange Agent, the Property Trustee shall act as such. The Trust or any of its
Affiliates may act as Paying Agent, Registrar, or Exchange Agent. The
Administrative Trustees shall act as Paying Agent, Registrar and Exchange Agent
for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar,
Paying Agent, and Exchange Agent for the Capital Securities.
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
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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 the Holder of a Security claims that the Security has been
lost, destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Capital Securities to the
Property Trustee, the Administrative Trustees shall execute and the Property
Trustee shall authenticate a replacement Security if the Property Trustee's and
the Administrative Trustees' requirements, as the case may be, are met. An
indemnity bond must be provided by the Holder which, in the judgment of the
Property Trustee, is sufficient to protect the Trustees, the Sponsor or any
authenticating agent from any loss which any of them may suffer if a Security is
replaced. The Trust may charge such Holder for its expenses in replacing a
Security.
Every replacement Security is an additional undivided beneficial
interest in the assets of the Trust.
SECTION 7.7 Outstanding Capital Securities.
The Capital Securities outstanding at any time are all the
Capital Securities 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 Capital Security is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Capital
Security is held by a bona fide purchaser.
If Capital Securities are considered paid in accordance with the
terms of this Declaration, they cease to be outstanding and Distributions on
them shall cease to accumulate.
Except as otherwise provided herein, a Capital Security does not
cease to be outstanding because one of the Trustees, the Sponsor or an Affiliate
of the Sponsor holds the Security.
SECTION 7.8 Capital Securities in Treasury.
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Capital
Securities owned by the Trust, the Sponsor or an
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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 Capital Securities which a Responsible Officer 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 Capital Securities, 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 Capital Securities, the
Property Trustee shall authenticate Definitive Securities in exchange for
temporary Securities.
(b) A Global Capital 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
certificated Capital Securities only if such transfer complies with Section 9.2
and (i) the Clearing Agency notifies the Company that it is unwilling or unable
to continue as Clearing Agency for such Global Capital 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 certificated Capital Securities.
(c) Any Global Capital Security that is transferable to the
beneficial owners thereof in the form of certificated Capital Securities
pursuant to this Section 7.9 shall be surrendered by the Clearing Agency to the
Property Trustee located in the Borough of Manhattan, The City of New York, 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 Capital Security, an equal
aggregate Liquidation Amount of Securities of authorized denominations in the
form of certificated Capital Securities. Any portion of a Global Capital
Security transferred pursuant to this Section shall be registered in such names
as the Clearing Agency shall direct. Any Capital Security in the form of
certificated Capital Securities delivered in exchange for an interest in the
Restricted Global Capital Security shall, except as otherwise provided by
Sections 7.3 and 9.1, bear the Restricted Securities Legend set forth in Exhibit
A-1 hereto.
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(d) Subject to the provisions of Section 7.9(c), the Holder of a
Global Capital 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.
(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 certificated Capital Securities in fully
registered form without Distribution coupons.
SECTION 7.10 Cancellation.
The Trust at any time may deliver Capital Securities to the
Property Trustee for cancellation. The Registrar, Paying Agent and Exchange
Agent shall forward to the Property Trustee any Capital Securities surrendered
to them for registration of transfer, redemption, exchange or payment. The
Property Trustee shall promptly cancel all Capital Securities surrendered for
registration of transfer, redemption, exchange, payment, replacement or
cancellation and shall dispose of canceled Capital Securities in accordance with
its customary procedures unless any Administrative Trustee otherwise directs the
Property Trustee in writing. The Trust may not issue new Capital Securities to
replace Capital Securities 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 Capital Securities may use "CUSIP"
numbers (if then generally in use), and, if so, the Property Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders of Capital
Securities; provided that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Capital
Securities or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Capital
Securities, and any such redemption 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.
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ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust.
(a) The Trust shall automatically be terminated and dissolved and its
affairs wound up upon the earliest to occur of the following events:
(i) upon the bankruptcy 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, and following the distribution of a
Like Amount of the Debentures to the Holders of the Securities, provided
that, the Property Trustee has received written notice from the Sponsor
directing the Property Trustee to terminate the Trust (which direction
is optional, and except as otherwise expressly provided below, within
the discretion of the Sponsor) and provided, further, that such
direction and such distribution is conditioned on the Administrative
Trustees' receipt of an opinion of an independent tax counsel
experienced in such matters, which opinion may rely on published rulings
of the Internal Revenue Service, to the effect that the Holders of the
Securities will not recognize any gain or loss for United States federal
income tax purposes as a result of the dissolution of the Trust and the
distribution of the Debentures;
(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;
or
(vi) 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 the completion of the winding up of the Trust and after
satisfaction of all liabilities of the Trust, the Administrative Trustees shall
file a certificate of cancellation with the Secretary of State of the State of
Delaware.
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(c) The provisions of Section 3.9 and Article X 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, Capital Securities may only be
transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Declaration. Any transfer or purported transfer of any
Security not made in accordance with this Declaration shall be null and void.
(c) Subject to applicable law, the Sponsor may not transfer the
Common Securities.
(d) The Administrative Trustees 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
Administrative Trustees 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 Administrative Trustees 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
Administrative Trustees duly executed by the Holder or such Holder's attorney
duly authorized in writing. Each Security surrendered for registration of
transfer shall be delivered to the Administrative Trustees and canceled in
accordance with Section 7.10. 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) General. Except as otherwise provided in Section 9.2(b),
if Capital Securities are issued upon the registration of transfer, exchange or
replacement of Capital Securities bearing the Restricted Securities Legend set
forth in Exhibit A-1 hereto, or if a request is made to remove such Restricted
Securities Legend on Capital Securities, the Capital Securities so issued shall
bear the Restricted Securities Legend, or the Restricted
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Securities Legend shall not be removed, as the case may be, unless there is
delivered to the Sponsor and the Property Trustee such satisfactory evidence,
which shall include an Opinion of Counsel licensed to practice law in the State
of New York, as may be reasonably required by the Sponsor and the Property
Trustee, that neither the legend nor the restrictions on transfer set forth
therein are required to ensure that transfers thereof are made pursuant to an
exception from the registration requirements of the Securities Act or, with
respect to Restricted Securities, that such Securities are not "restricted"
within the meaning of Rule 144. Upon provision of such satisfactory evidence,
the Property Trustee, at the written direction of the Sponsor, shall
authenticate and deliver Capital Securities that do not bear the legend.
(b) Transfers After Effectiveness of a Registration Statement.
After the effectiveness of a Registration Statement with respect to any Capital
Securities, all requirements pertaining to legends on such Capital Securities
will cease to apply, and beneficial interests in a Capital Security in global
form without legends will be available to transferees of such Capital
Securities, upon exchange of the transferring Holder's Restricted Definitive
Capital Security or directions to transfer such Holder's beneficial interest in
the Rule 144A Global Capital Security or the Regulation S Global Capital
Security, as the case may be. No such transfer or exchange of a Restricted
Definitive Capital Security or of an interest in the Rule 144A Global Capital
Security or the Regulation S Global Capital Security shall be effective unless
the transferor delivers to the Property Trustee a certificate in a form
substantially similar to that attached hereto as the "Form of Assignment" in
Exhibit A-1. Except as otherwise provided in Section 9.2(m), after the
effectiveness of a Registration Statement, the Trust shall issue and the
Property Trustee, upon a written order of the Trust signed by one Administrative
Trustee, shall authenticate a Capital Security in global form without the
Restricted Securities Legend (the "Unrestricted Global Capital Security") to
deposit with the Clearing Agency to evidence transfers of beneficial interests
from the (i) Rule 144A Global Capital Security or the Regulation S Global
Capital Security and (ii) Restricted Definitive Capital Securities.
(c) Transfer and Exchange of Definitive Capital Securities. When
Definitive Capital Securities are presented to the Registrar or co-Registrar:
(x) to register the transfer of such Definitive Capital
Securities, or
(y) to exchange such Definitive Capital Securities which became
mutilated, destroyed, defaced, stolen or lost, for an equal number of
Definitive Capital Securities,
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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 Capital Securities surrendered for
registration of transfer or exchange:
(i) 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; and
(ii) in the case of Definitive Capital Securities that are
Restricted Definitive Capital Securities:
(A) if such Restricted Capital Securities are being
delivered to the Registrar by a Holder for registration in the
name of such Holder, without transfer, a certification from such
Holder to that effect; or
(B) if such Restricted Capital Securities are being
transferred: (i) a certification from the transferor in a form
substantially similar to that attached hereto as the "Form of
Assignment" in Exhibit A-1, and (ii) if the Trust or the
Registrar so requests, evidence reasonably satisfactory to them
as to the compliance with the restrictions set forth in the
Restricted Securities Legend.
(d) Restrictions on Transfer of a Definitive Capital Security for
a Beneficial Interest in a Global Capital Security. A Definitive Capital
Security may not be exchanged for a beneficial interest in a Global Capital
Security except upon satisfaction of the requirements set forth below. Upon
receipt by the Property Trustee of a Definitive Capital Security, duly endorsed
or accompanied by appropriate instruments of transfer, in form satisfactory to
the Property Trustee, together with:
(i) if such Definitive Capital Security is a Restricted Capital
Security, certification from the transferor in a form substantially
similar to that attached hereto as the "Form of Assignment" in Exhibit
A-1; provided, however, that such Definitive Capital Security may only
be exchanged for an interest in a Regulation S Global Security where
such Definitive Capital Security is being transferred pursuant to
Regulation S or Rule 144 (if available); and
(ii) whether or not such Definitive Capital Security is a
Restricted Capital Security, 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
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Capital Security to reflect an increase in the number of the
Capital Securities represented by such Global Capital Security,
then the Property Trustee shall cancel such Definitive Capital Security and
cause, or direct the Clearing Agency to cause, the aggregate number of Capital
Securities represented by the appropriate Global Capital Security to be
increased accordingly. If no Global Capital Securities are then outstanding, the
Trust shall issue and the Property Trustee shall authenticate, upon written
order of any Administrative Trustee, an appropriate number of Capital Securities
in global form.
(e) Transfer and Exchange of Global Capital Securities. Subject
to Section 9.2(f), the transfer and exchange of Global Capital Securities or
beneficial interests therein shall be effected 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.
(f) Transfer of a Beneficial Interest in a Global
Capital Security for a Definitive Capital Security.
(i) Any Person having a beneficial interest in a Global
Capital 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 Capital
Security representing the same number of Capital Securities. 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 Capital
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 Restricted
Capital Security 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 Capital
Securities represented by Global Capital 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 Capital Security;
(ii) Definitive Capital Securities issued in exchange for a
beneficial interest in a Global Capital Security pursuant to this
Section 9.2(f) 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
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instruct the Property Trustee in writing. The Property Trustee shall
deliver such Capital Securities to the Persons in whose names such
Capital Securities are so registered in accordance with such
instructions of the Clearing Agency.
(g) Restrictions on Transfer and Exchange of Global Capital
Securities. Notwithstanding any other provisions of this Declaration (other than
the provisions set forth in subsection (h) of this Section 9.2), a Global
Capital 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.
Prior to the expiration of the restricted period, as contemplated
by Regulation S, beneficial interests in the Regulation S Global Capital
Security may be exchanged for beneficial interests in the Rule 144A Global
Capital Security only if such exchange occurs in connection with a transfer of
the Capital Securities pursuant to Rule 144A and the transferor first delivers
to the Property Trustee a written certificate (in a form substantially similar
to that attached hereto as the "Form of Assignment" in Exhibit A-1) to the
effect that the Capital Securities are being transferred to a person who the
transferor reasonably believes is a QIB, purchasing for its own account or the
account of a QIB in a transaction meeting the requirements of Rule 144A and in
accordance with all applicable securities laws of the states of the United
States and other jurisdictions.
Beneficial interests in the Rule 144A Global Capital Security may
be transferred to a person who takes delivery in the form of an interest in the
Regulation S Global Capital Security, whether before or after the expiration of
such restricted period, as contemplated by Regulation S, only if the transferor
first delivers to the Property Trustee a written certificate (in a form
substantially similar to that attached hereto as the "Form of Assignments" in
Exhibit A-1) to the effect that such transfer is being made in accordance with
Rule 903 or 904 of Regulation S or Rule 144 (if available) and that, if such
transfer occurs prior to the expiration of such restricted period, the interest
transferred will be held immediately thereafter through the Euroclear System
("Euroclear") or Cedel Bank, societe anonyme ("Cedel").
(h) Authentication of Definitive Capital Securities. If at any
time Global Capital Securities are outstanding:
(i) there occurs a Default or an Event of Default which is
continuing, or
(ii) the Trust, in its sole discretion, notifies the Property
Trustee in writing that it elects to cause the
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issuance of Definitive Capital Securities under this Declaration,
then the Trust will execute, and the Property Trustee, upon receipt of a written
order of the Trust signed by one Administrative Trustee requesting the
authentication and delivery of Definitive Capital Securities to the Persons
designated by the Trust, will authenticate and make available for delivery
Definitive Capital Securities, equal in number to the number of Capital
Securities represented by the Global Capital Securities, in exchange for such
Global Capital Securities.
(i) Legend.
(i) Except as permitted by the following paragraph (ii),
each Capital Security certificate evidencing the Global Capital
Securities and the Definitive Capital Securities (and all Capital
Securities issued in exchange therefor or substitution thereof) shall
bear a legend (the "Restricted Securities Legend") in substantially the
following form:
THIS CAPITAL 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.
NEITHER THIS CAPITAL SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION
DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR
ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS CAPITAL
SECURITY (OR ANY PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG
AS THIS CAPITAL SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A) THAT PURCHASES FOR
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ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 OF REGULATION D
UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT, SUBJECT TO THE RIGHT OF THE TRUST AND THE COMPANY
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND (ii) PURSUANT TO CLAUSE (E), TO REQUIRE THAT THE
TRANSFEROR DELIVER TO THE TRUST A LETTER FROM THE TRANSFEREE
SUBSTANTIALLY IN THE FORM OF ANNEX A TO THE OFFERING MEMORANDUM
DATED JANUARY 31, 1997. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF REPRESENTS AND ACKNOWLEDGES THAT IT EITHER (A)
IS NOT A PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND IS NOT PURCHASING SUCH SECURITIES
(OR INTEREST THEREIN) ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY
SUCH PLAN OR (B) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14. SUCH HOLDER
FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
and in the case of the Regulation S Global Capital Security the
following additional legend:
THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
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PERSONS UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT IS AVAILABLE.
(ii) Upon any sale or transfer of a Restricted Capital
Security (including any Restricted Capital Security represented by a
Global Capital Security) pursuant to an effective registration statement
under the Securities Act or pursuant to Rule 144 under the Securities
Act after such registration statement ceases to be effective:
(A) in the case of any Restricted Capital Security that is
a Definitive Capital Security, the Registrar shall permit the
Holder thereof to exchange such Restricted Capital Security for a
Definitive Capital Security that does not bear the Restricted
Securities Legend and rescind any restriction on the transfer of
such Restricted Capital Security; and
(B) in the case of any Restricted Capital Security that is
represented by a Global Capital Security, the Registrar shall
permit the Holder of such Global Capital Security to exchange
such Global Capital Security for another Global Capital Security
that does not bear the Restricted Securities Legend.
(j) Cancellation or Adjustment of Global Capital Security.
Notwithstanding any other provision hereof, at such time as all beneficial
interests in a Global Capital Security have either been exchanged for Definitive
Capital Securities to the extent permitted by this Declaration or redeemed,
repurchased or canceled in accordance with the terms of this Declaration, such
Global Capital Security shall be canceled by the Property Trustee. At any time
prior to such cancellation, if any beneficial interest in a Global Capital
Security is exchanged for Definitive Capital Securities, Capital Securities
represented by such Global Capital 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 Capital Security) with respect to such Global
Capital Security, by the Property Trustee or the Securities custodian, to
reflect such reduction.
(k) Obligations with Respect to Transfers and Exchanges of
Capital Securities.
(i) To permit registrations of transfers and exchanges, the
Trust shall execute and the Property Trustee shall authenticate
Definitive Capital Securities and Global Capital Securities at the
Registrar's or co-Registrar's request in accordance with the terms of
this Declaration.
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(ii) Registrations of transfers or exchanges will be effected
without charge, but only upon payment (with such indemnity as the Trust,
the Property Trustee 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 (a) Capital Securities during a
period beginning at the opening of business 15 days before the day of
mailing of a notice of redemption or any notice of selection of Capital
Securities for redemption and ending at the close of business on the day
of such mailing; or (b) any Capital Security so selected for redemption
in whole or in part, except the unredeemed portion of any Capital
Security being redeemed in part.
(iv) All Capital Securities issued upon any registration of
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 Capital Securities surrendered upon such
registration of transfer or exchange.
(l) No Obligation of the Property Trustee.
(i) The Property Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Capital 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
Capital Securities 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 Capital Securities. All notices
and communications to be given to the Holders and all payments to be
made to Holders under the Capital Securities 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 Capital
Security). The rights of beneficial owners in any Global Capital
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
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transfer of any interest in any Capital Security (including any
transfers between or among Clearing Agency Participants or beneficial
owners in any Global Capital 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.
(m) Exchange of Series A Capital Securities for Series B Capital
Securities. The Series A Capital Securities may be exchanged for Series B
Capital Securities pursuant to the terms of the Exchange Offer. The Property
Trustee shall make the exchange as follows:
The Sponsor shall present the Property Trustee with an Officers'
Certificate certifying the following:
(A) upon issuance of the Series B Capital Securities, the
transactions contemplated by the Exchange Offer have been
consummated; and
(B) the number of Series A Capital Securities properly
tendered in the Exchange Offer that are represented by a Global
Capital Security and the number of Series A Capital Securities
properly tendered in the Exchange Offer that are represented by
Definitive Capital Securities, the name of each Holder of such
Definitive Capital Securities, the liquidation amount of Capital
Securities properly tendered in the Exchange Offer by each such
Holder and the name and address to which Definitive Capital
Securities for Series B Capital Securities shall be registered
and sent for each such Holder.
The Property Trustee, upon receipt of (i) such Officers'
Certificate, (ii) an Opinion of Counsel (x) to the effect that the Series B
Capital Securities have been registered under Section 5 of the Securities Act
and the Indenture has been qualified under the Trust Indenture Act and (y) with
respect to the matters set forth in Section 3(p) of the Registration Rights
Agreement and (iii) a Company Order, shall authenticate (A) a Global Capital
Security for Series B Capital Securities in aggregate liquidation amount equal
to the aggregate liquidation amount of Series A Capital Securities represented
by a Global Capital Security indicated in such Officers' Certificate as having
been properly tendered and (B) Definitive Capital Securities representing Series
B Capital Securities registered in the names of, and in the liquidation amounts
indicated in such Officers' Certificate.
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If, upon consummation of the Exchange Offer, less than all the
outstanding Series A Capital Securities shall have been properly tendered and
not withdrawn, the Property Trustee shall make an endorsement on the Global
Capital Security for Series A Capital Securities indicating the reduction in the
number and aggregate liquidation amount represented thereby as a result of the
Exchange Offer.
The Trust shall deliver such Definitive Capital Securities for
Series B Capital Securities to the Holders thereof as indicated in such
Officers' Certificate.
(n) Minimum Transfers. Series A Capital Securities may only be
transferred in minimum blocks of $100,000 aggregate Liquidation Amount until
such Series A Capital Securities are registered pursuant to an effective
registration statement filed under the Securities Act or become "unrestricted"
pursuant to Rule 144 under the Securities Act.
(o) ERISA. Securities may not be acquired by any Person who is,
or who, in acquiring such Securities is using the assets of, an employee benefit
plan subject to the Employee Retirement Income Security Act of 1974, as amended,
or a plan subject to Section 4975 of the Code ("ERISA Plan"), unless the
acquisition and holding by such plan of such Securities is eligible for the
exemptive relief available under one of the following class exemptions: (i)
Prohibited Transaction Class Exemption 90-1 ("PTCE 90-1"), regarding investments
by insurance company pooled separate accounts, (ii) Prohibited Transaction Class
Exemption 91-38 ("PTCE 91-38") regarding investments by bank collective
investment funds, (iii) Prohibited Transaction Class Exemption 84-14 ("PTCE
84-14"), regarding transactions effected by qualified professional asset
managers, (iv) Prohibited Transaction Class Exemption 96-23 ("PTCE 96-23"),
regarding transactions effected by in-house asset managers, or (v) Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60"), regarding investments by
insurance company general accounts.
Each certificate representing Capital Securities or Exchange Capital
Securities, as the case may be, shall bear the legend set forth in Section
9.2(i) hereof.
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 Trustees shall have actual or other notice thereof.
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SECTION 9.4 Book Entry Interests.
Global Capital 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 Capital Security Beneficial Owner will receive a
definitive capital security certificate (a "Capital Security Certificate")
representing such Capital Security Beneficial Owner's interests in such Global
Capital Securities, except as provided in Section 9.2. Unless and until
definitive, fully registered Capital Securities certificates have been issued to
the Capital Security Beneficial Owners pursuant to Section 9.2:
(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 Capital Securities and receiving approvals, votes or
consents hereunder) as the Holder of the Capital Securities and the sole holder
of the Global Certificates and shall have no obligation to the Capital Security
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 Capital Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Capital Security Beneficial
Owners and the Clearing Agency and/or the Clearing Agency Participants.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the Capital Security
Holders is required under this Declaration, the Trustees shall give all such
notices and communications specified herein to be given to the Holders of Global
Capital Securities to the Clearing Agency, and shall have no notice obligations
to the Capital Security 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 Capital Securities, the Administrative
Trustees may, in their sole discretion, appoint a successor Clearing Agency with
respect to such Capital Securities.
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ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES 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:
(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; or
(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 fees, expenses,
debts and obligations of the Trust (other than with respect to the payment of
principal, interest and premium, if any, 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 Capital Securities 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 gross 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
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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 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 an 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 provides 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
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(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 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
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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 (1)
by the Administrative Trustees by a majority vote of a quorum consisting
of such Administrative Trustees who were not parties to such action,
suit or proceeding, (2) if such a quorum is not obtainable, or, even if
obtainable, if a quorum of disinterested Administrative Trustees so
directs, by independent legal counsel in a written opinion, or (3) by
the Common Security Holder of the Trust.
(v) 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 (i) by the Administrative Trustees by a majority vote
of a quorum of disinterested Administrative Trustees, (ii) if such a
quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested Administrative Trustees so directs, by independent legal
counsel in a written opinion or (iii) the Common Security Holder of the
Trust, that, based upon the facts known to the Administrative Trustees,
counsel or the Common Security Holder at the time such 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
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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 Administrative Trustees,
independent legal counsel or the Common Security Holder reasonably
determine that such Person deliberately breached his duty to the Trust
or its Common or Capital Security 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 Capital Security Holders of the Trust 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
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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 or the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee or 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, 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 resignation or
removal of the Property Trustee or the Delaware Trustee and the satisfaction and
discharge of this Declaration.
(c) The Sponsor agrees to pay the Property Trustee and the
Delaware Trustee, from time to time, such compensation for all services rendered
by the Property Trustee and the Delaware Trustee hereunder as may be mutually
agreed upon in writing by the Sponsor and the Property Trustee or the Delaware
Trustee, as the case may be, and, except as otherwise expressly provided herein,
to reimburse the Property Trustee and the Delaware Trustee upon its or their
request for all reasonable expenses, disbursements and advances incurred or made
by the Property Trustee or the Delaware Trustee, as the case may be, in
accordance with the provisions of this Declaration, except any such expense,
disbursement or advance as may be attributable to its or their negligence or bad
faith.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Property Trustee 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,
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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 for, 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
Administrative Trustees 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 books of account and the 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 Administrative Trustees.
(b) The Administrative Trustees shall cause to be prepared and
delivered to each of the Holders, within 90 days after the end of each Fiscal
Year of the Trust, annual financial statements of the Trust, including a balance
sheet of the Trust as of the end of such Fiscal Year, and the related statements
of income or loss.
(c) The Administrative Trustees 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 Administrative Trustees shall endeavor
to deliver all such information statements within 30 days after the end of each
Fiscal Year of the Trust.
(d) The Administrative Trustees shall cause to be duly prepared
and filed with the appropriate taxing authority, an
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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 Administrative Trustees 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 Administrative Trustees; provided, however,
that the Property Trustee shall designate the signatories for the Property
Trustee Account.
SECTION 11.4 Withholding.
The Trust and the Administrative Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust 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 Administrative Trustees 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
Trust 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.
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:
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(i) the Administrative Trustees (or if there are more than
two Administrative Trustees a majority of the Administrative Trustees);
(ii) the Property Trustee; and
(iii) 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
each of the Trust and 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 each of the Trust and
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 (who may be counsel to the
Sponsor or the Trust) that (x) such amendment is permitted by,
and conforms to, the terms of this Declaration (including the
terms of the Securities) and (y) all conditions precedent to the
execution and delivery of such amendment have been satisfied,
provided, however, that the Property Trustee shall not be
required to agree to or sign any such amendment, and
(iii) to the extent the result of such amendment would be
to:
(A) cause the Trust to fail to continue to be classified
for purposes of United States federal income taxation as a
grantor trust;
(B) reduce or otherwise adversely affect the powers of the
Property Trustee in contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an Investment
Company required to be registered under the Investment Company
Act.
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(c) At such time after the Trust has issued any Securities that
remain outstanding, any amendment that would adversely affect the rights,
privileges or preferences of any Holder of Securities may be effected only with
such additional requirements as may be set forth in the terms of such
Securities.
(d) Section 10.1(c) and this Section 12.1 shall not be amended
without the consent of all of the Holders.
(e) Article IV shall not be amended without the consent of the
Holders of a Majority in Liquidation Amount of the Common Securities.
(f) The rights of the Holders of the Common Securities under
Article V to increase or decrease the number of, and appoint and remove Trustees
shall not be amended without the consent of the Holders of a Majority in
Liquidation Amount of the Common Securities.
(g) Notwithstanding Section 12.1(c), this Declaration may be
amended without the consent of the Holders 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; and
(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 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 clause (i), such action shall not
adversely affect in any material respect the interests of the Holders, and any
amendments of this Declaration shall become effective when notice thereof is
given to the Holders.
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 Administrative Trustees (or as provided in the terms
of the Securities) to consider and act on any matter on which Holders of such
class of Securities 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 Capital
Securities are listed or admitted for trading. The Administrative Trustees shall
call a meeting of the Holders of
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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 Administrative Trustees one or more notices in a writing stating that the
signing Holders 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 Security Certificates 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:
(i) notice of any such meeting shall be given to all the
Holders 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 Capital
Securities 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 may be taken without a meeting if a
consent in writing setting forth the action so taken is signed by the
Holders 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 Administrative Trustees may specify that any
written ballot submitted to the Holder for the purpose of taking any
action without a meeting shall be returned to the Trust within the time
specified by the Administrative Trustees;
(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 pleasure of the Holder 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;
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(iii) each meeting of the Holders shall be conducted by the
Administrative Trustees or by such other Person that the Administrative
Trustees 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 Capital Securities are then listed or
trading, otherwise provides, the Administrative Trustees, 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 this Declaration has been duly authorized by all necessary corporate
action on the part of the Property Trustee. This 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
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
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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 a banking corporation 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 and does not conflict with or
constitute a breach of the charter or by-laws 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 or Delaware 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.
ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights Agreement
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The Holders of the Capital Securities, the Debentures and the
Capital Securities Guarantee shall be entitled to the benefits of the
Registration Rights Agreement.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 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 Administrative Trustees
at the Trust's mailing address set forth below (or such other address as the
Trust may give notice of to the Holders):
Executive Risk Capital Trust
c/o Executive Risk Inc.
82 Hopmeadow Street
Simsbury, CT 06070-7683
Attention: Chief Executive Officer and
Chief Financial Officer
Telecopy: (860) 408-2002
with a copy to:
James A. FitzPatrick, Esq.
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Telecopy: (212) 259-6333
(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 of the Securities):
Chase Manhattan Bank Delaware
1201 Market Street
Wilmington, Delaware 19001
(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 of the Securities):
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Attention: Global Trust Services
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Telecopy: (212) 946-8158/8159
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice to the Trust):
Executive Risk Inc.
82 Hopmeadow Street
Simsbury, CT 06070-7683
Attention: Chief Executive Officer and
Chief Financial Officer
Telecopy: (860) 408-2002
with a copy to:
James A. FitzPatrick, Esq.
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Telecopy: (212) 259-6333
(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 15.2 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. The provisions of Sections 3540 and 3561 of
Title 12 of the Delaware Code shall not apply to the Trust.
SECTION 15.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust. The
provisions of this Declaration shall be interpreted to further this intention of
the parties.
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SECTION 15.4 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 15.5 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 or not so expressed.
SECTION 15.6 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 application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 15.7 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.
/s/ Robert V. Deutsch
---------------------------------------
Robert V. Deutsch, solely in his
capacity as Administrative Trustee
/s/ Robert H. Kullas
---------------------------------------
Robert H. Kullas, solely in his
capacity as Administrative Trustee
/s/ Jeffrey H. Koenig
---------------------------------------
Jeffrey H. Koenig, solely in his
capacity as Administrative Trustee
Chase Manhattan Bank Delaware,
solely in its capacity as Delaware
Trustee
By:/s/ John J. Cashin
------------------------------------
Name: John J. Cashin
Title: Senior Trust Officer
The Chase Manhattan Bank,
solely in its capacity as Property
Trustee
By:/s/ Kathleen Perry
------------------------------------
Name: Kathleen Perry
Title: Second Vice President
EXECUTIVE RISK INC.
as Sponsor
By:/s/ Robert V. Deutsch
------------------------------------
Name: Robert V. Deutsch
Title: Executive Vice President
<PAGE> 84
ANNEX I
TERMS OF
8.675% SERIES A/SERIES B CAPITAL SECURITIES
8.675% COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration
of Trust, dated as of February 5, 1997 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities and the Common
Securities (collectively, 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 Indenture or, if not
defined therein, as defined in the Offering Memorandum:
1. Designation and Number.
(a) Capital Securities. 125,000 Series A Capital Securities of
the Trust and 125,000 Series B Capital Securities of the Trust, each series with
an aggregate liquidation amount with respect to the assets of the Trust of
$125,000,000 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 "8.675% Series A Capital Securities" and "8.675% Series B
Capital Securities", respectively (collectively, the "Capital Securities"). The
certificates evidencing the Capital Securities 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 stock exchange or quotation system on which
the Capital Securities are listed or quoted.
(b) Common Securities. 3,866 Common Securities of the Trust with
an aggregate liquidation amount with respect to the assets of the Trust of
$3,866,000 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 "8.675% Common Securities" (the "Common Securities"). The certificates
evidencing the Common 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 8.675% (the "Coupon Rate") of the 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. Distributions in
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<PAGE> 85
arrears for more than one semi-annual period will bear additional distributions
thereon compounded semi-annually at the Coupon Rate (to the extent permitted by
applicable law). Pursuant to the Registration Rights Agreement, in certain
limited circumstances the Debenture Issuer will be required to pay Liquidated
Damages (as defined in the Registration Rights Agreement) with respect to the
Debentures. The term "Distributions", as used herein, includes distributions of
any such interest and Liquidated Damages payable 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 February 5, 1997, and will be payable
semi-annually in arrears on February 1 and August 1 of each year, commencing on
August 1, 1997, except as otherwise described below. The amount of Distributions
payable for any period 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 on the basis of the actual number of days elapsed in such month.
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 shall 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 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 Event of Default (as defined in the Indenture) has
occurred and is continuing under the Indenture, the Debenture Issuer has the
right under the Indenture to defer payments of interest by extending the
interest payment period at any time and from time to time on the Debentures for
a period not exceeding 10 consecutive semi-annual periods, including the first
such semi-annual period during such period (each an "Extension Period"), during
which Extension Period no interest shall be due and payable on the Debentures,
provided that no Extension Period shall extend beyond the Maturity Date of the
Debentures. Upon any such election, Distributions will be deferred during such
Extension Period. Notwithstanding such deferral, Distributions to which Holders
are entitled shall continue to 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 semi-annually on the relevant Distribution Dates, during any such
Extension Period. Prior to the expiration 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, together with all
such previous and further extensions, if any, within such Extension Period, may
not exceed
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10 consecutive semi-annual periods, including the first semi-annual period
during such Extension Period, or extend beyond the Maturity Date of the
Debentures. Upon the expiration 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 date
fifteen days prior to the relevant Distribution Date, which Distribution Dates
correspond to the interest payment dates on the Debentures. Subject to any
applicable laws and regulations and the provisions of the Declaration, each such
payment in respect of the Capital Securities will be made as follows: (i) if the
Capital Securities are held in global form by a Clearing Agency (or its
nominee), in accordance with the procedures of the Clearing Agency; and (ii) if
the Capital Securities are held in definitive form by check mailed to the
address of the Holder thereof as reflected in the records of the Registrar
unless otherwise agreed by the Trust. The relevant record dates for the Common
Securities shall be the same as the record dates for the Capital Securities.
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.
(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) pursuant to Section 8 among the
Holders.
3. Liquidation Distribution Upon Dissolution.
In the event of any termination of the Trust or the Sponsor
otherwise gives notice of its election to liquidate the Trust pursuant to
Section 8.1(a)(iii) of the Declaration, the Trust shall be liquidated by the
Administrative Trustees as expeditiously as the Administrative Trustees
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 Amount of $1,000 per Security plus
accumulated and
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<PAGE> 87
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 a 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 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 as set forth in Section 8.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures on the Maturity Date
thereof or prepayment thereof (in whole or in part) prior thereto in accordance
with the terms thereof, the proceeds from such repayment or prepayment 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 or
prepayment) to redeem a Like Amount of the Securities at a redemption price
equal to (i) in the case of the repayment of the Debentures on the Maturity
Date, the Maturity Redemption Price (as defined below), (ii) in the case of the
optional prepayment of the Debentures upon the occurrence and continuation of a
Special Event, the Special Event Redemption Price (as defined below) and (iii)
in the case of the optional prepayment of the Debentures other than as a result
of the occurrence and continuance of a Special Event, the Optional Redemption
Price (as defined below). The Maturity Redemption Price, the Special Event
Redemption Price and the Optional Redemption Price are referred to collectively
as the "Redemption Price." Holders will be given not less than 30 nor more than
60 days notice of such redemption.
(b) (i) The "Maturity Redemption Price", with respect to a
redemption of Securities, shall mean an amount equal to the principal of and
accrued and unpaid interest on the Debentures as of the Maturity Date thereof.
(ii) The Debenture Issuer shall have the right (subject to
the conditions in the Indenture) to elect to prepay the Debentures in whole or
in part at any time on or after February 1, 2007, (the "Initial Optional
Redemption Date"), upon not less than 30 days and not more than 60 days notice,
at the Optional Prepayment Price (as defined in the Indenture) and, simultaneous
with such prepayment, to cause a Like Amount of the Securities to be redeemed at
the Optional Redemption Price on a
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<PAGE> 88
Pro Rata basis. "Optional Redemption Price" shall mean a price equal to the
percentage of the Liquidation Amount of Securities to be redeemed plus
accumulated and unpaid Distributions thereon, if any, to the date of such
redemption if redeemed during the 12 month period beginning February 1, of the
years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2007................................ 104.338%
2008................................ 103.904
2009................................ 103.470
2010................................ 103.036
2011................................ 102.603
2012................................ 102.169
2013................................ 101.735
2014................................ 101.301
2015................................ 100.868
2016................................ 100.434
2017 and thereafter................. 100.000%
=======
</TABLE>
(c) If a Tax Event or an Investment Company Event (each as
defined below, and each a "Special Event") occurs, the Debenture Issuer shall
have the right (subject to the conditions set forth in the Indenture) at any
time prior to the Initial Optional Redemption Date, upon not less than 30 nor
more than 60 days notice, to prepay the Debentures in whole, but not in part, at
any time prior to the Initial Option Redemption Date, within the 90 days
following the occurrence of such Special Event (the "90 Day Period"), and,
simultaneous with such redemption, to cause a Like Amount of the Securities to
be redeemed by the Trust at the Special Event Redemption Price on a Pro Rata
basis.
"Tax Event" shall mean the receipt by the Sponsor and the Trust
of an Opinion of Counsel, requested by the Sponsor (a "Tax Event Opinion"),
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 written decision or pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is made on or after January 31,
1997, 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 Debentures, (ii)
interest payable by the
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<PAGE> 89
Debenture Issuer on the Debentures is not, or within 90 days of the date of such
opinion, will not be, deductible by the Debenture Issuer, in whole or in part,
for United States federal income tax purposes, or (iii) 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.
"Investment Company Event" means the Sponsor and the Trust shall
have received an opinion, requested by the Sponsor of counsel experienced in
practice under the Investment Company Act, to the effect that, as a result of
the occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), there is more than
an insubstantial risk that the Trust is or will be considered an "investment
company" which is required to be registered under the 1940 Act, which Change in
1940 Act Law becomes effective on or after January 31, 1997.
"Special Event Redemption Price" shall mean a price equal to the
greater of (i) 100% of the Liquidation Amount of the Securities and (ii) the
sum, as determined by a Quotation Agent (as defined in the Indenture), of the
present values of the principal amount and premium payable as part of the
Optional Redemption Price on the Initial Optional Redemption Date together with
the scheduled payments of interest thereon from the prepayment date to and
including the Initial Optional Redemption Date, discounted to the redemption
date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Adjusted Treasury Rate (as defined in the Indenture), plus, in
each case, accumulated and unpaid Distributions thereon, if any, to the date of
such redemption.
(d) On and from the date fixed by the Administrative Trustees 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
Capital 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 until such
certificates are presented to the Debenture Issuer or its agent for transfer or
reissue.
(e) The Trust may not redeem fewer than all the outstanding
Securities unless all accumulated and unpaid Distributions have been paid on all
Securities for all semi-annual Distribution periods that expire on or before the
date of redemption.
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(f) The procedure with respect to redemptions or distributions of
Debentures shall be as follows:
(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 of Securities
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 date fixed for repayment or prepayment
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 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) In the event that fewer than all the outstanding Securities are
to be redeemed, the Securities to be redeemed shall be redeemed pro rata
from each Holder of Capital Securities, it being understood that, in
respect of Capital Securities registered in the name of and held of
record by the Clearing Agency or its nominee (or any successor Clearing
Agency or its nominee), the distribution of the proceeds of such
redemption will be made to the Clearing Agency or its nominee and
disbursed by such Clearing Agency or its nominee in accordance with the
procedures applied by such agency or nominee.
(iii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice (which notice will be irrevocable), then
(A) with respect to Capital Securities registered in the name of or held
of record by a Clearing Agency or its nominee, by 12:00 noon, New York
City time, on the redemption date, provided that the Debenture Issuer has
paid the Property Trustee a sufficient amount of cash in connection with
the related maturity or prepayment of the Debentures by 10:00 a.m., New
York City time, on the Maturity Date or the date of prepayment, as the
case may be, 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 applicable Redemption Price with
respect to such Capital Securities and will give the Clearing Agency
irrevocable instructions and authority to pay the Redemption Price to the
relevant Clearing Agency Participants, and (B) with respect to
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<PAGE> 91
Capital Securities issued in certificated form and Common Securities,
provided that the Debenture Issuer has paid the Property Trustee a
sufficient amount of cash in connection with the related maturity or
prepayment of the Debentures, the Property Trustee or the Paying Agent
will pay the relevant Redemption Price to the Holders of such Securities
against presentation to the Registrar of the certificates therefor. 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 so called for redemption and all rights of
Holders so called for redemption will cease, except the right of the
Holders to receive the Redemption Price, but without interest on such
Redemption Price, and such Securities shall cease to be outstanding.
(iv) Payment of accumulated and unpaid Distributions on the
Redemption Date of any Securities will be subject to the rights of
Holders of such Securities on the close of business on a regular record
date in respect of a Distribution Date occurring on or prior to such
Redemption Date.
(v) Neither the Administrative Trustees nor the Trust shall be
required to register or cause to be registered the transfer of (A) any
Securities beginning on the opening of business 15 days before the day of
mailing of a notice of redemption or any notice of selection of
Securities for redemption or (B) any Securities selected for redemption
(except the unredeemed portion of any Security being redeemed). If any
date fixed for redemption of Securities is not a Business Day, then
payment of the 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), except that, if such
Business Day falls on the next calendar year, such payment will be made
on the immediately preceding Business Day, with the same force and effect
as if made on such date fixed for redemption. If payment of the
Redemption Price in respect of any Securities is improperly withheld or
refused and not paid either by the Property Trustee or the Paying Agent
or by the Sponsor as guarantor pursuant to the relevant Securities
Guarantee, on the date fixed for redemption, Distributions on such
Securities will continue to accumulate from such redemption 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
Redemption Price.
(vi) Redemption/Distribution Notices shall be sent by the Property
Trustee on behalf of the Trust to (A) in respect of the Capital
Securities, the Clearing Agency or
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<PAGE> 92
its nominee (or any successor Clearing Agency or its nominee) if the
Global Certificates have been issued or, if Definitive Capital Security
Certificates have been issued, to the Holder thereof, and (B) in respect
of the Common Securities to the Holder thereof.
(vii) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), the Sponsor or any of
its Affiliates may at any time and from time to time purchase outstanding
Capital Securities by tender, in the open market or by private agreement.
5. Voting Rights - Capital Securities.
(a) Except as provided under Sections 5(b) and 7 and as otherwise
required by law and the Declaration, the Holders of the Capital Securities will
have no voting rights.
(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 executing 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 Capital Securities; 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 Capital Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Capital Securities except by subsequent vote of such Holders. The
Property Trustee shall notify each Holder of Capital Securities of any notice of
default with respect to the Debentures. In addition to obtaining the foregoing
approvals of such Holders of the Capital Securities, 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 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 any due
date (including
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<PAGE> 93
any Interest Payment Date or prepayment date or the Maturity Date), then a
Holder of Capital Securities 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 Securities Holder will be subrogated to the rights of such
Holder of Capital Securities to the extent of any payment made by the Debenture
Issuer to such Holder of Capital Securities in such Direct Action. Except as
provided in the second preceding sentence, the Holders of Capital 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 Capital Securities may be
given at a separate meeting of Holders of Capital Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which Holders of Capital 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 Capital 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 Capital Securities will
be required for the Trust to redeem and cancel Capital Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
Notwithstanding that Holders of Capital Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Capital Securities 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 Securities.
(a) Except as provided under Sections 6(b), 6(c), and 7 or as
otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) Unless a Debenture Event of Default shall have occurred and
be continuing, any Trustee may be removed at any time by the Holder of the
Common 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
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<PAGE> 94
the Holders of a Majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the Holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Sponsor as the Holder of the Common
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) 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 executing 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 Common Securities; 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 Common Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Common Securities except by subsequent vote of such Holders. The Property
Trustee shall notify each Holder of Common Securities of any notice of default
with respect to the Debentures. In addition to obtaining the foregoing approvals
of such Holders of the Common Securities, 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 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 (including any Interest Payment Date or prepayment date or Maturity Date)
(or in the case of redemption, on the redemption date), then, subject to Section
2.6 of the Declaration, a Holder of Common 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 Holders of Capital Securities will be subrogated to the rights of
such Holder of Common Securities to the extent of any payment made by the
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<PAGE> 95
Debenture Issuer to such Holder of Common Securities in such Direct Action.
Except as provided in the second preceding sentence, the Holders of Common
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 Securities may be
given at a separate meeting of Holders of Common Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Administrative Trustees will cause a notice of
any meeting at which Holders of Common 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 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 Securities will
be required for the Trust to redeem and cancel Common Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
7. Amendments to Declaration and Indenture.
In addition to the requirements set out in Section 12.1 of the
Declaration, the Declaration may be amended from time to time by the Sponsor and
the Trustees, without the consent of the Holders of the Securities (i) to cure
any ambiguity, correct or supplement any provisions in the Declaration that may
be inconsistent with any other provisions, 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 (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 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 clause (i), such action shall not adversely affect in any material
respect the interests of any Holder of Securities. Any amendments of the
Declaration pursuant to the foregoing shall become effective when notice thereof
is given to the Holders of the Securities. The Declaration also may be amended
by the Trustees and the Sponsor with (i) the consent of Holders representing a
Majority in Liquidation Amount of all outstanding Securities, and (ii) receipt
by the Trustees of an Opinion of Counsel experienced in such matters to the
effect that
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<PAGE> 96
such amendment or the exercise of any power granted to the Trustees in
accordance with such amendment will not 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 Holder of Trust Securities, the Declaration
may not be amended to (i) change the amount or timing of any Distribution on the
Trust Securities or otherwise adversely affect the amount of any Distribution
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.
8. 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
of Securities 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 Capital
Securities pro rata according to the aggregate Liquidation Amount of Capital
Securities held by the relevant Holder relative to the aggregate Liquidation
Amount of all Capital Securities outstanding, and only after satisfaction of all
amounts owed to the Holders of the Capital Securities, to each Holder of Common
Securities pro rata according to the aggregate liquidation amount of Common
Securities held by the relevant Holder relative to the aggregate Liquidation
Amount of all Common Securities outstanding.
9. Ranking.
The Capital Securities rank pari passu with the Common Securities
and payment thereon shall be made Pro Rata with the Common Securities, except
that, if an Event of Default under the Declaration occurs and is continuing, no
payments in respect of Distributions on, or payments upon liquidation,
redemption or otherwise with respect to, the Common Securities shall be made
until the Holders of the Capital Securities shall be paid in full the
Distributions, Redemption Price, Liquidation Distribution and other payments to
which they are entitled at such time.
10. Acceptance of Securities Guarantee and Indenture.
Each Holder of Capital Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Capital Securities Guarantee
and the Common Securities Guarantee, respectively, including the subordination
provisions therein and to the provisions of the Indenture.
13
<PAGE> 97
11. No Preemptive Rights.
The Holders of the Securities shall have no preemptive or other
similar rights to subscribe for any additional securities.
12. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the Capital
Securities Guarantee or the Common 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.
14
<PAGE> 98
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
[IF THIS GLOBAL SECURITY IS A GLOBAL CAPITAL SECURITY, INSERT:
THIS CAPITAL SECURITY IS A GLOBAL CAPITAL 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 CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES 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
CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY 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.]
[IF THIS GLOBAL SECURITY IS A RULE 144A GLOBAL SECURITY, INSERT:
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE TRUST OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THIS CAPITAL 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. NEITHER THIS CAPITAL
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE
LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH EXECUTIVE
RISK INC. ("THE COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
CAPITAL SECURITY (OR ANY PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS CAPITAL SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
1
<PAGE> 99
ACT ("RULE 144A") TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7)
OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE TRUST AND THE COMPANY
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO CLAUSE (E), TO
REQUIRE THAT THE TRANSFEROR DELIVER TO THE TRUST A LETTER FROM THE TRANSFEREE
SUBSTANTIALLY IN THE FORM OF ANNEX A TO THE OFFERING MEMORANDUM DATED JANUARY
31, 1997. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF REPRESENTS AND
ACKNOWLEDGES THAT IT EITHER (A) IS NOT A PLAN SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND IS NOT PURCHASING SUCH SECURITIES (OR ANY INTEREST
THEREIN) ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY SUCH PLAN OR (B) IS ELIGIBLE
FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR
84-14. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
[IF THIS GLOBAL SECURITY IS A REGULATION S GLOBAL SECURITY,
INSERT: THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES ACT
OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS
AVAILABLE.]
2
<PAGE> 100
Certificate Number _______ Capital Securities
CUSIP NO.
Certificate Evidencing Capital Securities
of
EXECUTIVE RISK CAPITAL TRUST
8.675% Series __ Capital Securities
(Liquidation Amount $1,000 per Capital Security)
Executive Risk Capital Trust, 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 _______ capital securities
of the Trust representing undivided beneficial interests in the assets of the
Trust designated the 8.675% Series __ Capital Securities (Liquidation Amount
$1,000 per Capital Security) (the "Capital Securities"). The Capital 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 Capital Securities represented
hereby are set forth herein, on the reverse hereof and in the Amended and
Restated Declaration of Trust of the Trust dated as of February 5, 1997, as the
same may be amended from time to time (the "Declaration"), and shall in all
respects be subject to the provisions thereof, including the designation of the
terms of the Capital Securities as set forth in Annex I to the Declaration. Each
capitalized term used but not defined herein or in any legend, form or
certificate hereon shall have the meaning given it in the Declaration. The
Sponsor will provide a copy of the Declaration, the Capital Securities Guarantee
and the Indenture to any 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 Capital Securities Guarantee to the extent provided therein.
By its acceptance hereof, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of indirect beneficial ownership in the
Debentures.
3
<PAGE> 101
IN WITNESS WHEREOF, an Administrative Trustee on behalf of the
Trust has duly executed this certificate.
Date: February __, 1997
EXECUTIVE RISK CAPITAL TRUST
By: ________________________________
Name: Jeffrey H. Koenig
Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
The Chase Manhattan Bank, as
Property Trustee
By:_________________________________
Authorized Officer
<PAGE> 102
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Capital Security will be fixed at
a rate per annum of 8.675% (the "Coupon Rate") of the Liquidation Amount of
$1,000 per Capital 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 semi-annual period will bear interest thereon compounded semi-annually
at the Coupon Rate (to the extent permitted by applicable law). Pursuant to the
Registration Rights Agreement, in certain limited circumstances the Debenture
Issuer will be required to pay Liquidated Damages (as defined in the
Registration Rights Agreement) with respect to the Debentures. The term
"Distributions", as used herein, includes such cash distributions and any such
interest and such Liquidated Damages payable 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 Capital 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 February 5, 1997 and will be payable
semi-annually in arrears, on August 1 and February 1 of each year, commencing on
August 1, 1997, except as otherwise described below and in the Declaration.
Distributions 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. So long as no Event of Default (as defined
in the Indenture) has occurred and is continuing under the Indenture, the
Debenture Issuer has the right under the Indenture to defer payments of interest
by extending the interest payment period at any time and from time to time on
the Debentures for a period not exceeding 10 consecutive calendar semi-annual
periods, including the first such semi-annual period during such extension
period (each an "Extension Period"), during which Extension Period no interest
shall be due and payable, provided that no Extension Period shall extend beyond
the Maturity Date of the Debentures. As a consequence of such deferral,
Distributions will also be deferred. Notwithstanding such deferral, semi-annual
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 semi-annually on
the relevant Distribution dates 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, together with all such previous and further extensions,
if any, within such Extension Period, may not exceed 10 consecutive semi-annual
periods, including the first semi-annual period during such Extension Period, or
extend beyond
5
<PAGE> 103
the Maturity Date of the Debentures. Payments of Distributions that have
accumulated but not been paid during any Extension Period will be payable to
Holders as they appear on the books and records of the Trust on the record date
for the first scheduled Distribution payment date following the expiration of
the Extension Period. Upon the expiration 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 certain conditions set forth in the Declaration and
the Indenture, the Property Trustee shall, at the direction of the Sponsor, at
any time liquidate the Trust and cause the Debentures to be distributed to the
holders of the Securities in liquidation of the Trust or, simultaneously with
any redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.
The Capital Securities shall be redeemable as provided in the
Declaration.
6
<PAGE> 104
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Capital Security Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
agent to transfer this Capital Security Certificate 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 Capital Security
Certificate)
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.
7
<PAGE> 105
[Include the following if the Capital Security bears a Restricted Capital
Securities Legend --
In connection with any transfer of any of the Capital Securities evidenced by
this certificate, the undersigned confirms that such Capital Securities are
being:
CHECK ONE BOX BELOW
(1) |_| exchanged for the undersigned's own account
without transfer; or
(2) |_| transferred pursuant to and in compliance with
Rule 144A under the Securities Act of 1933, as
amended; or
(3) |_| transferred pursuant to and in compliance with
Regulation S under the Securities Act of 1933, as
amended; or
(4) |_| transferred to an institutional "accredited
investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act of 1933, as amended, that is
acquiring the Capital Securities for its own
account, or for the account of such an
institutional "accredited investor," for
investment purposes and not with a view to, or for
offer or sale in connection with, any distribution
in violation of the Securities Act of 1933, as
amended; or
(5) |_| transferred pursuant to another available
exemption from the registration requirements of
the Securities Act of 1933, as amended; or
(6) |_| transferred pursuant to an effective registration
statement.
Unless one of the boxes is checked, the Exchange Agent will refuse to register
any of the Capital Securities evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided, however, that if box
(3), (4) or (5) is checked, the Exchange Agent may require, prior to registering
any such transfer of the Capital Securities such legal opinions, certifications
and other information as the Trust has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, as
amended, such as the exemption provided by Rule 144
8
<PAGE> 106
under such Act; provided, further, that (i) if box 2 is checked, the transferee
must also certify that it is a qualified institutional buyer as defined in Rule
144A or (ii) if box (4) is checked, the transferee must also provide to the
Exchange Agent a Transferee Letter of Representation in the form attached to the
Offering Memorandum of the Trust dated January 31, 1997; provided, further, that
after the date that a Registration Statement has been filed and so long as such
Registration Statement continues to be effective, the Exchange Agent may only
permit transfers for which box (6) has been checked.
Date:
----------------------------------------
Signature
(Sign exactly as you name appears on the
other side of this Capital Security
Certificate)
9
<PAGE> 107
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON 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. NEITHER THIS COMMON SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS COMMON SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS COMMON SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE
LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH EXECUTIVE
RISK INC. ("THE COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
CAPITAL SECURITY (OR ANY PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS COMMON SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS COMMON SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT, SUBJECT TO THE RIGHT OF THE TRUST AND THE COMPANY PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO CLAUSE (E), TO REQUIRE THAT
THE TRANSFEROR DELIVER TO THE TRUST A LETTER FROM THE TRANSFEREE SUBSTANTIALLY
IN THE FORM OF ANNEX A TO THE OFFERING MEMORANDUM DATED JANUARY 31, 1997. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF REPRESENTS AND ACKNOWLEDGES
THAT IT EITHER (A) IS NOT A PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, AND IS NOT PURCHASING SUCH SECURITIES (OR ANY INTEREST
THEREIN) ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY SUCH PLAN OR (B) IS ELIGIBLE
FOR THE EXEMPTIVE RELIEF
1
<PAGE> 108
AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14. SUCH HOLDER FURTHER
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS COMMON SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
2
<PAGE> 109
Certificate Number __ _____ Common Securities
Certificate Evidencing Common Securities
of
Executive Risk Capital Trust
8.675% Common Securities
(Liquidation Amount $1,000 per Common Security)
Executive Risk Capital Trust, a statutory business trust created
under the laws of the State of Delaware (the "Trust"), hereby certifies that
Executive Risk Inc. (the "Holder") is the registered owner of _____ common
securities of the Trust representing undivided beneficial interests in the
assets of the Trust designated the 8.675% Common Securities (liquidation amount
$1,000 per Common Security) (the "Common Securities"). The Common 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 Securities represented
hereby are set forth herein, on the reverse hereof and in the Amended and
Restated Declaration of Trust of the Trust dated as of February 5, 1997, as the
same may be amended from time to time (the "Declaration"), and shall in all
respects be subject to the provisions thereof including the designation of the
terms of the Common Securities as set forth in Annex I to the Declaration. Each
capitalized term used but not defined herein or in any legend, form or
certificate hereon shall have the meaning given to it in the Declaration. The
Sponsor will provide a copy of the Declaration, the Common Securities Guarantee
and the Indenture (including any supplemental indenture) to any 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 Securities Guarantee to the extent provided therein.
By its acceptance hereof, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Common Securities as evidence of indirect beneficial ownership in the
Debentures.
3
<PAGE> 110
IN WITNESS WHEREOF, the Trust has executed this certificate this
___ day of February, 1997.
EXECUTIVE RISK CAPITAL TRUST
By:______________________________
Name: Jeffrey H. Koenig
Administrative Trustee
<PAGE> 111
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a
rate per annum of 8.675% (the "Coupon Rate") of the liquidation amount of $1,000
per Common 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 semi-annual period will bear interest thereon compounded semiannually
at the Coupon Rate (to the extent permitted by applicable law). Pursuant to the
Registration Rights Agreement, in certain limited circumstances the Debenture
Issuer will be required to pay Liquidated Damages (as defined in the
Registration Rights Agreement) with respect to the Debentures. The term
"Distributions", as used herein, includes such cash distributions and any such
interest and such Liquidated Damages payable 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 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 February 5, 1997 and will be payable
semi-annually in arrears, on August 1 and February 1 of each year, commencing on
August 1, 1997, except as otherwise described below and in the Declaration.
Distributions 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. So long as no Event of Default (as defined
in the Indenture) has occurred and is continuing under the Indenture, the
Debenture Issuer has the right under the Indenture to defer payments of interest
on the Debentures by extending the interest payment period at any time and from
time to time on the Debentures for a period not exceeding 10 consecutive
calendar semi-annual periods, including the first such semi-annual period during
such extension period (each an "Extension Period"), during which Extension
Period no interest shall be due and payable, provided that no Extension Period
shall extend beyond the Maturity Date of the Debentures. As a consequence of
such deferral, Distributions will also be deferred. Notwithstanding 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
semi-annually on the relevant Distribution dates 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, together with all such
previous and further extensions, if any, within such Extension Period, may not
exceed 10 consecutive semi-annual periods, including the first semi-annual
period during such Extension
5
<PAGE> 112
Period, or extend beyond the Maturity Date of the Debentures. Payments of
Distributions that have accumulated but not been paid during any Extension
Period will be payable to Holders as they appear on the books and records of the
Trust on the record date for the first Distribution Date following the
expiration of such Extension Period. Upon the expiration 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 certain conditions set forth in the Declaration and
the Indenture, the Property Trustee shall, at the direction of the Sponsor, at
any time liquidate the Trust and cause the Debentures to be distributed to the
holders to the Securities in liquidation of the Trust or, simultaneous with any
redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.
The Common Securities shall be redeemable as provided in the
Declaration.
6
<PAGE> 113
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints________________________________________________________
________________________________________________________________________________
__________________________________________________ agent to transfer this Common
Security Certificate 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
Common Security Certificate)
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.
7
<PAGE> 114
[Include the following if the Common Security bears a Restricted Common
Securities Legend -
In connection with any transfer of any of the Common Securities evidenced by
this certificate, the undersigned confirms that such Common Securities are
being:
CHECK ONE BOX BELOW
(1) |_| exchanged for the undersigned's own account
without transfer; or
(2) |_| transferred pursuant to and in compliance with
Rule 144A under the Securities Act of 1933, as
amended; or
(3) |_| transferred pursuant to and in compliance with
Regulation S under the Securities Act of 1933, as
amended; or
(4) |_| transferred to an institutional "accredited
investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act of 1933, as amended that is
acquiring the Preferred Security for its own
account, or for the account of such an
institutional "accredited investor," for
investment purposes and not with a view to, or for
offer or sale in connection with, any distribution
in violation of the Securities Act of 1933, as
amended; or
(5) |_| transferred pursuant to another available
exemption from the registration requirements of
the Securities Act of 1933; or
(6) |_| transferred pursuant to an effective registration
statement
Unless one of the boxes is checked, the Exchange Agent will refuse to register
any of the Common Securities evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided, however, that if box
(3), (4) or (5) is checked, the Exchange Agent may require, prior to registering
any such transfer of the Common Securities such legal opinions, certifications
and other information as the Trust has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, as
amended, such as the exemption provided by Rule 144 under such
8
<PAGE> 115
Act; provided, further, that (i) if box 2 is checked, the transferee must also
certify that it is a qualified institutional buyer as defined in Rule 144A or
(ii) if box 4 is checked, the transferee must also provide to the Exchange Agent
a Transferee Representation Letter in the form attached to the Offering
Memorandum of the Trust, dated January 31, 1997, after the date that a
Registration Statement has been filed and so long as such Registration Statement
continues to be effective, the Exchange Agent may only permit transfers for
which box (6) has been checked.
Date: ___________________________________________
Signature
(Sign exactly as your name appears on the
other side of this Common Security
Certificate)
9
<PAGE> 1
EXHIBIT 4.7
========================================
Form of
SERIES B CAPITAL SECURITIES GUARANTEE AGREEMENT
EXECUTIVE RISK INC.
Dated as of , 1997
========================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND INTERPRETATION....................................... 2
SECTION 1.1 Definitions and Interpretation..................... 2
ARTICLE II
TRUST INDENTURE ACT.................................................. 6
SECTION 2.1 Trust Indenture Act; Application................... 6
SECTION 2.2 Lists of Holders of Securities..................... 6
SECTION 2.3 Reports by the Capital Securities
Guarantee Trustee.................................. 7
SECTION 2.4 Periodic Reports to Capital
Securities Guarantee Trustee....................... 7
SECTION 2.5 Evidence of Compliance with
Conditions Precedent............................... 8
SECTION 2.6 Events of Default; Waiver.......................... 8
SECTION 2.7 Event of Default; Notice........................... 8
SECTION 2.8 Conflicting Interests.............................. 9
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE................................. 9
SECTION 3.1 Powers and Duties of the Capital
Securities Guarantee Trustee....................... 9
SECTION 3.2 Certain Rights of Capital
Securities Guarantee Trustee....................... 11
SECTION 3.3 Not Responsible for Recitals or
Issuance of Series B Capital
Securities Guarantee............................... 14
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE................................. 14
SECTION 4.1 Capital Securities Guarantee
Trustee; Eligibility............................... 14
SECTION 4.2 Appointment, Removal and
Resignation of Capital Securities
Guarantee Trustee.................................. 15
ARTICLE V
GUARANTEE............................................................ 16
SECTION 5.1 Guarantee.......................................... 16
SECTION 5.2 Waiver of Notice and Demand........................ 16
SECTION 5.3 Obligations Not Affected........................... 16
SECTION 5.4 Rights of Holders.................................. 17
SECTION 5.5 Guarantee of Payment............................... 18
SECTION 5.6 Subrogation.... ................................... 18
SECTION 5.7 Independent Obligations............................ 18
SECTION 5.8 Possibility of Advancement
of Maturity Date of Debentures..................... 19
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION............................ 19
SECTION 6.1 Limitation of Transactions......................... 19
SECTION 6.2 Ranking............................................ 20
ARTICLE VII
TERMINATION.......................................................... 20
SECTION 7.1 Termination........................................ 20
ARTICLE VIII
INDEMNIFICATION...................................................... 21
SECTION 8.1 Exculpation........................................ 21
SECTION 8.2 Indemnification.................................... 21
ARTICLE IX
MISCELLANEOUS........................................................ 22
SECTION 9.1 Successors and Assigns............................. 22
SECTION 9.2 Amendments......................................... 22
SECTION 9.3 Notices............................................ 22
SECTION 9.4 Benefit............................................ 24
SECTION 9.5 Governing Law...................................... 24
</TABLE>
<PAGE> 4
SERIES B CAPITAL SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Series B Capital Securities
Guarantee"), dated as of , 1997, is executed and delivered by
Executive Risk Inc., a Delaware insurance holding corporation (the "Guarantor"),
and The Chase Manhattan Bank, a New York banking corporation, as indenture
trustee (the "Capital Securities Guarantee Trustee"), for the benefit of the
Holders (as defined herein) from time to time of the Series B Capital Securities
(as defined herein) of Executive Risk Capital Trust, a Delaware statutory
business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Declaration", which expression includes Annex I and Exhibits A-1, A-2, B
and C thereto), dated as of February 5, 1997, 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 issued on February
5, 1997 125,000 capital securities, having an aggregate liquidation amount of
$1,000 such capital securities being designated the 8.675% Series A Capital
Securities (the "Series A Capital Securities") and, in connection with an
Exchange Offer (as defined in the Declaration) is executing and delivering on
the date hereof this Series B Capital Securities Guarantee (as defined in the
Declaration) for the benefit of holders of the Series B Capital Securities (as
defined in the Declaration).
WHEREAS, as incentive for the Holders to exchange their Series A
Capital Securities for an equal aggregate liquidation amount of the Series B
Capital Securities, the Guarantor desires irrevocably and unconditionally to
agree, to the extent set forth in this Series B Capital Securities 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 executed and delivered on February 5, 1997 a
guarantee agreement (the "Common Securities Guarantee"), with substantially
identical terms to this Series B Capital Securities Guarantee, for the benefit
of the holders of the Common Securities (as defined herein), except that if an
Event of Default (as defined in the Declaration) has occurred and is continuing,
the rights of holders of the Common Securities to receive Guarantee Payments
under the Common Securities Guarantee are subordinated, to the extent and in the
manner set forth in the Common Securities Guarantee, to the rights of holders of
Series A Capital Securities and the Series B Capital Securities to receive
Guarantee Payments under the Series A Capital Securities Guarantee and this
Series B Capital Securities Guarantee, as the case may be.
<PAGE> 5
NOW, THEREFORE, in consideration of the exchange by each Holder of
its Series A Capital Securities for Series B Capital Securities, which exchange
the Guarantor hereby acknowledges shall benefit the Guarantor, the Guarantor
executes and delivers this Series B Capital Securities Guarantee for the benefit
of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Series B Capital Securities Guarantee, unless the context
otherwise requires:
(a) capitalized terms used in this Series B Capital Securities
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 or the Indenture as at the
date of execution of this Series B Capital Securities
Guarantee have the same meaning when used in this Series B
Capital Securities Guarantee unless otherwise defined in this
Series B Capital Securities Guarantee;
(c) a term defined anywhere in this Series BA Capital Securities
Guarantee has the same meaning throughout;
(d) all references to "the Series B Capital Securities Guarantee"
or "this Series B Capital Securities Guarantee" are to this
Series B Capital Securities Guarantee as modified,
supplemented or amended from time to time;
(e) all references in this Series B Capital Securities Guarantee
to Articles and Sections are to Articles and Sections of this
Series B Capital Securities Guarantee, unless otherwise
specified;
(f) a term defined in the Trust Indenture Act has the same meaning
when used in this Series B Capital Securities Guarantee,
unless otherwise defined in this Series B Capital Securities
Guarantee or unless the context otherwise requires; and
<PAGE> 6
(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.
"Capital Securities Guarantee Trustee" means The Chase Manhattan
Bank, a New York banking corporation, until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Series B Capital Securities Guarantee and thereafter means
each such Successor Capital Securities Guarantee Trustee.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer.
"Corporate Trust Office" means the office of the Capital Securities
Guarantee Trustee at which the corporate trust business of the Capital
Securities Guarantee Trustee shall, at any particular time, be principally
administered, which office at the date of execution of this Agreement is located
at 450 West 33rd Street, 15th Floor, New York, New York 10001, Attention: Global
Trust Services.
"Covered Person" means any Holder or beneficial owner of Series B
Capital Securities.
"Debentures" means the series of subordinated debt securities of the
Guarantor designated the 8.675% Series B Junior Subordinated Deferrable Interest
Debentures due February 1, 2027 held by the Property Trustee (as defined in
the Declaration) of the Issuer.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Series B Capital Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Series B Capital Securities, 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 Series B Capital Securities to the extent that the Issuer has funds on hand
legally available therefor at such time, (ii) the applicable redemption price,
including all accumulated and unpaid Distributions to the date of
<PAGE> 7
redemption (the "Redemption Price") to the extent the Issuer has funds on hand
legally available therefor at such time, with respect to any Series B Capital
Securities called for redemption by the Issuer, and (iii) upon a voluntary or
involuntary termination and liquidation of the Issuer (other than in connection
with the distribution of Debentures to the Holders in exchange for Series B
Capital Securities as provided in the Declaration), the lesser of (a) the
aggregate of the liquidation amount and all accumulated and unpaid Distributions
on the Series B Capital Securities 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 (in either case, the "Liquidation Distribution"). If
an Event of Default has occurred and is continuing, no Guarantee Payments under
the Common Securities Guarantee with respect to the Common Securities or any
guarantee payment under any Other Common Securities Guarantees shall be made
until the Holders shall be paid in full the Guarantee Payments to which they are
entitled under this Series B Capital Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and
records of the Issuer, of any Series B Capital Securities; provided, however,
that, in determining whether the holders of the requisite percentage of Series B
Capital Securities 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 Capital Securities Guarantee Trustee,
any Affiliate of the Capital Securities Guarantee Trustee, or any officers,
directors, shareholders, members, partners, employees, representatives,
nominees, custodians or agents of the Capital Securities Guarantee Trustee.
"Indenture" means the Indenture dated as of February 5, 1997, among
the Guarantor (the "Debenture Issuer") and The Chase Manhattan Bank, as trustee,
pursuant to which the Debentures are to be issued to the Property Trustee of the
Issuer.
"Majority in liquidation amount of the Series B Capital Securities"
means, except as provided by the Trust Indenture Act, a vote by Holder(s) of
Series B Capital Securities, voting separately as a class, 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 Series B Capital Securities.
<PAGE> 8
"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, a Vice President, the Controller, the
Secretary, an Assistant Secretary, the Treasurer or Assistant Treasurer of the
Guarantor. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Series B Capital Securities Guarantee
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 Securities Guarantees" shall have the same meaning as
"Other Guarantees" as set forth in the Common 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 (if any), in each case similar to the Issuer.
"Other Guarantees" means all guarantees hereafter issued by the
Guarantor with respect to capital securities (if any) similar to the Series B
Capital Securities issued by other trusts to be established by the Guarantor (if
any), 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.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of February 5, 1997, by and among the Guarantor, the Issuer
and the Initial Purchasers named therein as such agreement may be amended,
modified or supplemented from time to time.
"Responsible Officer" means, with respect to the Capital Securities
Guarantee Trustee, any officer of the
<PAGE> 9
Capital Securities Guarantee Trustee, with responsibility for the administration
of this Series B Capital Securities Guarantee 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 Capital Securities Guarantee Trustee" means a successor
Capital Securities Guarantee Trustee possessing the qualifications to act as
Capital Securities Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Trust Securities" means the Common Securities and the Series A
Capital Securities and Series B Capital Securities, collectively.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a) This Series B Capital Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Series B Capital Securities Guarantee in order for the Declaration to be a
qualified indenture 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 Series B Capital
Securities 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 Capital Securities Guarantee
Trustee (unless the Capital Securities Guarantee Trustee is otherwise the
registrar of the Capital Securities) with a list, in such form as the Capital
Securities Guarantee Trustee may reasonably require, of the names and addresses
of the Holders ("List of Holders") as of such date, (i) within five days after
the fifteenth day prior to each Distribution Date, and (ii) at any other time
within 30 days of receipt by the Guarantor of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Capital Securities 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 given to the Capital
Securities
<PAGE> 10
Guarantee Trustee by the Guarantor. The Capital Securities Guarantee Trustee may
destroy any List of Holders previously given to it on receipt of a new List of
Holders.
(b) The Capital Securities 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 Capital Securities Guarantee Trustee
Within 60 days after January 31 of each year, commencing January 31,
1998, the Capital Securities Guarantee Trustee shall provide to the Holders such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
The Capital Securities Guarantee Trustee shall also comply with the requirements
of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee
The Guarantor shall provide to the Capital Securities 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. Delivery of such reports, information and
documents to the Capital Securities Guarantee Trustee is for informational
purposes only and the Capital Securities 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 Capital
Securities 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 Capital Securities Guarantee
Trustee such evidence of compliance with any conditions precedent, if any,
provided for in this Series B Capital Securities 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 Events of Default; Waiver
<PAGE> 11
The Holders of a Majority in liquidation amount of Series B Capital
Securities may, by vote, on behalf of the Holders of all of the Series B Capital
Securities, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Series B Capital Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 2.7 Event of Default; Notice
(a) The Capital Securities Guarantee Trustee shall, within 90 days
after the occurrence of a default with respect to this Capital Securities
Guarantee known to a Responsible Officer of the Capital Securities Guarantee
Trustee, mail by first class postage prepaid, to all Holders, notices of all
defaults actually known to a Responsible Officer of the Capital Securities
Guarantee Trustee, unless such defaults have been cured before the giving of
such notice, provided, that, except in the case of default in the payment of any
Guarantee Payment, the Capital Securities 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 Capital Securities Guarantee Trustee in good faith determines
that the withholding of such notice is in the interests of the Holders.
(b) The Capital Securities Guarantee Trustee shall not be deemed to
have knowledge of any Event of Default unless the Capital Securities Guarantee
Trustee shall have received written notice, or a Responsible Officer of the
Capital Securities Guarantee Trustee 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
Series B Capital Securities Guarantee and the Indenture for the purposes of
clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
<PAGE> 12
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee
(a) This Series B Capital Securities Guarantee shall be held by the
Capital Securities Guarantee Trustee for the benefit of the Holders, and the
Capital Securities Guarantee Trustee shall not transfer this Series B Capital
Securities Guarantee to any Person except a Holder of Series B Capital
Securities exercising his or her rights pursuant to Section 5.4(b) or to a
Successor Capital Securities Guarantee Trustee on acceptance by such Successor
Capital Securities Guarantee Trustee of its appointment to act as Successor
Capital Securities Guarantee Trustee. The right, title and interest of the
Capital Securities Guarantee Trustee shall automatically vest in any Successor
Capital Securities Guarantee Trustee, and such vesting and succession of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Capital Securities
Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer
of the Capital Securities Guarantee Trustee has occurred and is continuing, the
Capital Securities Guarantee Trustee shall enforce this Series B Capital
Securities Guarantee for the benefit of the Holders.
(c) The Capital Securities 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 Series B Capital Securities Guarantee, and no implied
covenants shall be read into this Series B Capital Securities Guarantee against
the Capital Securities 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 of the Capital Securities Guarantee
Trustee, the Capital Securities Guarantee Trustee shall exercise such of the
rights and powers vested in it by this Series B Capital Securities 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 Series B Capital Securities Guarantee shall
be construed to relieve the Capital Securities Guarantee Trustee from liability
for its own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
<PAGE> 13
(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 Capital Securities
Guarantee Trustee shall be determined solely by the express
provisions of this Series B Capital Securities Guarantee, and the
Capital Securities Guarantee Trustee shall not be liable except for
the performance of such duties and obligations as are specifically
set forth in this Series B Capital Securities Guarantee, and no
implied covenants or obligations shall be read into this Series B
Capital Securities Guarantee against the Capital Securities
Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Capital
Securities Guarantee Trustee, the Capital Securities 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 Capital Securities
Guarantee Trustee and conforming to the requirements of this Series
B Capital Securities Guarantee; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Capital Securities
Guarantee Trustee, the Capital Securities Guarantee Trustee shall be
under a duty to examine the same to determine whether or not they
conform to the requirements of this Series B Capital Securities
Guarantee;
(ii) the Capital Securities Guarantee Trustee shall not be liable
for any error of judgment made in good faith by a Responsible Officer of
the Capital Securities Guarantee Trustee, unless it shall be proved that
the Capital Securities Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Capital Securities 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 Series B Capital Securities relating to the
time, method and place of conducting any proceeding for any remedy
available to the Capital Securities Guarantee Trustee, or exercising any
trust or power conferred upon the Capital Securities Guarantee Trustee
under this Series B Capital Securities Guarantee; and
<PAGE> 14
(iv) no provision of this Series B Capital Securities Guarantee
shall require the Capital Securities 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 Capital Securities 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 Series B
Capital Securities Guarantee or indemnity, reasonably satisfactory to the
Capital Securities Guarantee Trustee, against such risk or liability is
not reasonably assured to it.
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Capital Securities 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
Series B Capital Securities Guarantee may be sufficiently evidenced by an
Officers' Certificate.
(iii) Whenever, in the administration of this Series B Capital
Securities Guarantee, the Capital Securities Guarantee Trustee shall deem
it desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Capital Securities
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 Capital Securities 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 Capital Securities Guarantee Trustee may consult with
counsel of its selection, and the advice or opinion of such counsel with
respect to legal
<PAGE> 15
matters 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 Guarantor or any of its Affiliates and may include any of its
employees. The Capital Securities Guarantee Trustee shall have the right
at any time to seek instructions concerning the administration of this
Series B Capital Securities Guarantee from any court of competent
jurisdiction.
(vi) The Capital Securities Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Series B Capital Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Capital Securities
Guarantee Trustee such security and indemnity, reasonably satisfactory to
the Capital Securities Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses and the expenses of the Capital
Securities 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
Capital Securities Guarantee Trustee; provided that, nothing contained in
this Section 3.2(a)(vi) shall be taken to relieve the Capital Securities
Guarantee Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this Series B
Capital Securities Guarantee.
(vii) The Capital Securities 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 Capital Securities
Guarantee Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.
(viii) The Capital Securities 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 Capital Securities 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 Capital Securities Guarantee Trustee or
its agents hereunder shall bind
<PAGE> 16
the Holders, and the signature of the Capital Securities 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 Capital Securities Guarantee Trustee to so act or as to its compliance
with any of the terms and provisions of this Series B Capital Securities
Guarantee, both of which shall be conclusively evidenced by the Capital
Securities Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Series B Capital
Securities Guarantee the Capital Securities Guarantee Trustee shall deem
it desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the Capital Securities
Guarantee Trustee (i) may request instructions from the Holders of a
Majority in liquidation amount of the Series B Capital Securities, (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 Capital Securities 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
Series B Capital Securities Guarantee.
(b) No provision of this Series B Capital Securities Guarantee shall
be deemed to impose any duty or obligation on the Capital Securities 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 Capital Securities 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 Capital Securities Guarantee
Trustee shall be construed to be a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of Series B Capital
Securities Guarantee
The recitals contained in this Series B Capital Securities Guarantee
shall be taken as the statements of the Guarantor, and the Capital Securities
Guarantee Trustee does not assume any responsibility for their correctness. The
Capital Securities Guarantee Trustee makes no representation
<PAGE> 17
as to the validity or sufficiency of this Series B Capital Securities Guarantee.
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility
(a) There shall at all times be a Capital Securities 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 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 Capital Securities Guarantee Trustee shall
cease to be eligible to so act under Section 4.1(a), the Capital Securities
Guarantee Trustee shall immediately resign in the manner and with the effect set
out in Section 4.2(c).
(c) If the Capital Securities Guarantee Trustee has or shall acquire
any "conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Capital Securities Guarantee Trustee and Guarantor shall in
all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 Appointment, Removal and Resignation of Capital Securities Guarantee
Trustee
(a) Subject to Section 4.2(b), the Capital Securities Guarantee
Trustee may be appointed or removed without cause at any time by the Guarantor
except during an Event of Default.
<PAGE> 18
(b) The Capital Securities Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Capital Securities Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Capital Securities Guarantee Trustee and
delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee shall hold office until
a Successor Capital Securities Guarantee Trustee shall have been appointed or
until its removal or resignation. The Capital Securities Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Capital Securities Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Capital Securities Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Capital Securities Guarantee Trustee and delivered to the Guarantor and the
resigning Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities 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 Capital
Securities Guarantee Trustee resigning or being removed may petition any court
of competent jurisdiction for appointment of a Successor Capital Securities
Guarantee Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Capital Securities Guarantee
Trustee.
(e) No Capital Securities Guarantee Trustee shall be liable for the
acts or omissions to act of any Successor Capital Securities Guarantee Trustee.
(f) Upon termination of this Series B Capital Securities Guarantee
or removal or resignation of the Capital Securities Guarantee Trustee pursuant
to this Section 4.2, the Guarantor shall pay to the Capital Securities Guarantee
Trustee all amounts due to the Capital Securities 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
on a subordinated basis to the extent set forth in this Series B Capital
Securities Guarantee to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by the Issuer), as and when due,
<PAGE> 19
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 Series B
Capital Securities 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 Series B Capital Securities 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 Series B Capital Securities 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, Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Series B Capital Securities or the
extension of time for the performance of any other obligation under, arising out
of, or in connection with, the Series B Capital Securities (other than an
extension of time for payment of Distributions, 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 Holders pursuant to the terms of the Series B Capital
Securities, 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
<PAGE> 20
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 Series B
Capital Securities;
(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 Series B
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Capital Securities
Guarantee Trustee in respect of this Series B Capital Securities Guarantee or
exercising any trust or power conferred upon the Capital Securities Guarantee
Trustee under this Series B Capital Securities Guarantee.
(b) If the Capital Securities Guarantee Trustee fails to enforce
such Series B Capital Securities Guarantee, any Holder of Series B Capital
Securities may institute a legal proceeding directly against the Guarantor to
enforce the Capital Securities Guarantee Trustee's rights under this Series B
Capital Securities Guarantee, without first instituting a legal proceeding
against the Issuer, the Capital Securities 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.
SECTION 5.5 Guarantee of Payment
This Series B Capital Securities 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
<PAGE> 21
Series B Capital Securities 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 Series B Capital Securities Guarantee, if, at the
time of any such payment, any amounts are due and unpaid under this Series B
Capital Securities 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 Series B
Capital Securities, and that the Guarantor shall be liable as principal and as
debtor hereunder to make Guarantee Payments pursuant to the terms of this Series
B Capital Securities Guarantee notwithstanding the occurrence of any event
referred to in subsections (a) through (h), inclusive, of Section 5.3 hereof.
SECTION 5.8 Possibility of Advancement of Maturity Date of Debentures
The parties hereto acknowledge that the Maturity Date (as defined in
the Indenture) of the Debentures may be advanced pursuant to the provisions of
Section 14.06 of the Indenture.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
So long as any Capital Securities 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) or (ii)
make any payment of principal, interest or premium, if any, with respect to, 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 the debt securities of any subsidiary of the
Guarantor (including Other Guarantees) if such guarantee ranks pari passu with
or junior in right of payment to the Debentures (other than (a) dividends or
distributions in
<PAGE> 22
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 Capital
Securities Guarantee, (d) as a result of a reclassification 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, (f) the issuance of Common
Stock upon exercise of the Aetna Option and (g) purchases or issuances of common
stock in connection with any of the Guarantor's stock option, stock purchase,
stock loan or other benefit plans for its directors, officers or employees or
any of the Guarantor's dividend reinvestment plans, in each case as now existing
or hereafter established or amended), if at such time (i) there shall have
occurred any event of which the Guarantor has actual knowledge that (a) is, or
with the giving of notice or the lapse of time, or both, would be an Event of
Default and (b) in respect of which the Guarantor shall not have taken
reasonable steps to cure, (ii) 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 Series B Capital Securities Guarantee or (iii) 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 be continuing.
SECTION 6.2 Ranking
This Series B Capital Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank (i) 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
Senior Indebtedness pursuant to the Indenture (except as indicated below), it
being understood that the terms of Article XV of the Indenture shall apply to
the obligations of the Guarantor under this Series B Capital Securities
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, except that with respect to Section 15.03 of the Indenture only, insofar as
such section relates to bankruptcy or insolvency proceedings only, the term
"Senior Indebtedness" shall mean all liabilities of the Guarantor, whether or
not for money borrowed (other than obligations in respect of Other Guarantees),
(ii) pari passu with any Other
<PAGE> 23
Guarantee (as defined herein) and any Other Common Securities Guarantee and
(iii) senior to any obligations in respect of any class of the Guarantor's
capital stock.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Series B Capital Securities Guarantee shall terminate and be of
no further force and effect (i) upon full payment of the Redemption Price (as
defined in the Declaration) of all Series B Capital Securities, 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
the Series B Capital Securities. Notwithstanding the foregoing, this Series B
Capital Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of Series B Capital
Securities must restore payment of any sums paid under the Series B Capital
Securities or under this Series B Capital Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 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 Series
B Capital Securities 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 Series B Capital Securities 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 and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts
<PAGE> 24
pertinent to the existence and amount of assets from which Distributions to
Holders might properly be paid.
SECTION 8.2 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 8.2 shall survive the termination of this
Series B Capital Securities Guarantee or the earlier resignation or removal of
the Capital Securities Guarantee Trustee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Series B Capital
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
then outstanding.
SECTION 9.2 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 Series B Capital Securities Guarantee may only be amended with
the prior approval of the Holders of a Majority in liquidation amount of the
Securities (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). The provisions of Section 12.2 of
the Declaration with respect to meetings of Holders apply to the giving of such
approval.
SECTION 9.3 Notices
All notices provided for in this Series B Capital Securities
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 the Administrative Trustee at
the Issuer's mailing address set
<PAGE> 25
forth below (or such other address as the Issuer may give notice of to the
holders of the Common Securities):
Executive Risk Capital Trust
c/o Executive Risk Inc.
82 Hopmeadow Street
Simsbury, CT 06070-7683
Attention: Chief Executive Officer and
Chief Financial Officer
Telecopy: (860) 408-2002
with a copy to:
James A. FitzPatrick, Esq.
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Telecopy: (212) 259-6333
(b) If given to the Capital Securities Guarantee Trustee, at the
Capital Securities Guarantee Trustee's mailing address set forth below (or such
other address as the Capital Securities Guarantee Trustee may give notice of to
the Holders):
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Global Trust Services
Telecopy: (212) 946-8160
(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):
Executive Risk Inc.
82 Hopmeadow Street
Simsbury, CT 06070-7683
Attention: Chief Executive Officer and
Chief Financial Officer
Telecopy: (860) 408-2002
with a copy to:
James A. FitzPatrick, Esq.
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Telecopy: (212) 259-6333
(d) If given to any Holder, at the address set forth on the books
and records of the Issuer.
<PAGE> 26
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 9.4 Benefit
This Series B Capital Securities Guarantee is solely for the benefit
of the Holders and, subject to Section 3.1(a), is not separately transferable
from the Series B Capital Securities.
SECTION 9.5 Governing Law
THIS SERIES B CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
<PAGE> 27
THIS SERIES B CAPITAL SECURITIES GUARANTEE is executed as of the day
and year first above written.
EXECUTIVE RISK INC., as
Guarantor
By:____________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as
Capital Securities Guarantee
Trustee
By:____________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 4.8
REGISTRATION RIGHTS AGREEMENT
Dated February 5, 1997
among
EXECUTIVE RISK INC.
EXECUTIVE RISK CAPITAL TRUST
and
J.P. MORGAN SECURITIES INC.
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
as Initial Purchasers
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of February 5, 1997 among EXECUTIVE RISK INC., a Delaware
corporation (the "Company"), EXECUTIVE RISK CAPITAL TRUST, a business trust
formed under the laws of the state of Delaware (the "Trust"), and J.P. MORGAN
SECURITIES INC., CHASE SECURITIES INC. AND DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION (collectively the "Initial Purchasers").
This Agreement is made in connection with the Purchase Agreement
dated January 31, 1997 the "Purchase Agreement"), among the Company, as issuer
of the Series A 8.675% Junior Subordinated Deferrable Interest Debentures due
February 1, 2027 (the "Subordinated Debentures"), the Trust and the Initial
Purchasers, which provides for among other things, the sale by the Trust to the
Initial Purchasers of 125,000 of the Trust's Series A 8.675% Capital Securities,
liquidation amount $1,000 per Capital Security (the "Capital Securities") the
proceeds of which will be used by the Trust to purchase Subordinated Debentures.
The Capital Securities, together with the Subordinated Debentures and the
Company's guarantee of the Capital Securities (the "Capital Securities
Guarantee") are collectively referred to as the "Securities". In order to induce
the Initial Purchasers to enter into the Purchase Agreement, the Company and the
Trust have agreed to provide to the Initial Purchasers and their direct and
indirect transferees the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the closing under the
Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"Advice" shall have the meaning set forth in the last paragraph of Section
3 hereof.
"Applicable Period" shall have the meaning set forth in Section 3(t)
hereof.
1
<PAGE> 3
"Business Day" shall mean a day that is not a Saturday, a Sunday, or a day
on which banking institutions in New York, New York are authorized or required
to be closed.
"Closing Time" shall mean the Closing Time as defined in the Purchase
Agreement.
"Company" shall have the meaning set forth in the preamble to this
Agreement and also includes the Company's successors and permitted assigns.
"Declaration" or "Declaration of Trust" shall mean the Amended and
Restated Declaration of Trust, dated as of February 5, 1997, by the trustees
named therein and the Company as sponsor.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Trust; provided, however, that such depositary must
have an address in the Borough of Manhattan, in The City of New York.
"Effectiveness Period" shall have the meaning set forth in Section 2(b)
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.
"Exchange Offer" shall mean the offer by the Company and the Trust to the
Holders to exchange all of the Registrable Securities (other than Private
Exchange Securities) for a like principal amount of Exchange Securities pursuant
to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement, in
each case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2(a) hereof.
2
<PAGE> 4
"Exchange Securities" shall mean (i) with respect to the Subordinated
Debentures, the Series B 8.675% Junior Subordinated Deferrable Interest
Debentures due February 1, 2027 (the "Exchange Debentures") containing terms
identical to the Subordinated Debentures (except that they will not contain
terms with respect to the transfer restrictions under the Securities Act, will
not require transfers thereof to be in minimum blocks of $100,000 principal
amount and will not provide for any increase in the interest rate thereon), (ii)
with respect to the Capital Securities, the Trust's Series B 8.675% Capital
Securities, liquidation amount $1,000 per Capital Security (the "Exchange
Capital Securities") which will have terms identical to the Capital Securities
(except they will not contain terms with respect to transfer restrictions under
the Securities Act, will not require minimum transfers thereof to be in blocks
of $100,000 liquidation amount and will not provide for any increase in the
Distribution rate thereon) and (iii) with respect to the Capital Securities
Guarantee, the Company's guarantee (the "Exchange Capital Securities Guarantee")
of the Exchange Capital Securities containing terms identical to the Capital
Securities Guarantee, and shall include for all purposes the Private Exchange
Securities.
"Holder" shall mean the Initial Purchasers, for so long as they own any
Registrable Securities, and each of its respective successors, assigns and
direct and indirect transferees who become registered owners of Registrable
Securities under the Indenture or Declaration of Trust.
"Indenture" shall mean the Indenture relating to the Subordinated
Debentures and the Exchange Debentures dated as of February 5, 1997 between the
Company, as issuer, and The Chase Manhattan Bank, as trustee, as the same may be
amended from time to time in accordance with the terms thereof.
"Initial Purchasers" shall have the meaning set forth in the preamble to
this Agreement.
"Inspectors" shall have the meaning set forth in Section 3(n) hereof.
"Issue Date" shall mean the date of original issuance of the Securities.
"Liquidated Damages" shall have the meaning set forth in Section 2(e)
hereof.
3
<PAGE> 5
"Majority Holders" shall mean the Holders of a majority of the aggregate
liquidation amount of outstanding Capital Securities.
"Participating Broker-Dealer" shall have the meaning set forth in Section
3(t) hereof.
"Person" shall mean 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.
"Private Exchange" shall have the meaning set forth in Section 2(a)
hereof.
"Private Exchange Securities" shall have the meaning set forth in Section
2(a) hereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to a prospectus, including posteffective
amendments, and in each case including all material incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the preamble to
this Agreement.
"Records" shall have the meaning set forth in Section 3(n) hereof.
"Registrable Securities" shall mean the Securities and, if issued, the
Private Exchange Securities; provided, however, that Securities or Private
Exchange Securities, as the case may be, shall cease to be Registrable
Securities when (i) a Registration Statement with respect to such Securities or
Private Exchange Securities for the exchange or resale thereof, as the case may
be, shall have been declared effective under the Securities Act and such
Securities or Private Exchange Securities, as the case may be, shall have been
disposed of pursuant to such Registration Statement, (ii) such Securities or
Private Exchange Securities, as the case may be, shall have been
4
<PAGE> 6
sold to the public pursuant to Rule 144(k) (or any similar provision then in
force, but not Rule 144A) under the Securities Act, (iii) such Securities or
Private Exchange Securities, as the case may be, shall have ceased to be
outstanding or (iv) with respect to the Securities, such Securities have been
exchanged for Exchange Securities upon consummation of the Exchange Offer and
are thereafter freely tradeable by the holder thereof (other than an affiliate
of the Company).
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC or National Association of Securities Dealers,
Inc. (the "NASD") registration and filing fees, including, if applicable, the
fees and expenses of any "qualified independent underwriter" (and its counsel)
that is required to be retained by any Holder of Registrable Securities in
accordance with the rules and regulations of the NASD, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws (including reasonable fees and disbursements of counsel for any
underwriters or Holders in connection with blue sky qualification of any of the
Exchange Securities or Registrable Securities) and compliance with the rules of
the NASD, (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus and any amendments or supplements thereto, and in
preparing or assisting in preparing, printing and distributing any underwriting
agreements, securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating agency fees,
(v) the fees and disbursements of counsel for the Company and of the independent
certified public accountants of the Company, including the expenses of any "cold
comfort" letters required by or incident to such performance and compliance,
(vi) the fees and expenses of the Trustee, and any exchange agent or custodian,
(vii) all fees and expenses incurred in connection with the listing, if any, of
any of the Registrable Securities on any securities exchange or exchanges, and
(viii) the reasonable fees and expenses of any special experts retained by the
Company in connection with any Registration Statement.
"Registration Statement" shall mean any registration statement of the
Company and the Trust which covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement, and all amendments and
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<PAGE> 7
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Rule 144(k) Period" shall mean the period of three years (or such shorter
period as may hereafter be referred to in Rule 144(k) under the Securities Act
(or similar successor rule)) commencing on the Issue Date.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the preamble to this
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Event" shall have the meaning set forth in Section
2(b) hereof.
"Shelf Registration Event Date" shall have the meaning set forth in
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration statement
of the Company and the Trust pursuant to the provisions of Section 2(b) hereof
which covers all of the Registrable Securities or all of the Private Exchange
Securities, as the case may be, on an appropriate form under Rule 415 under the
Securities Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"TIA" shall have the meaning set forth in Section 3(1) hereof.
"Trustees" shall mean any and all trustees with respect to (i) the Capital
Securities under the Declaration, (ii) the Subordinated Debentures under the
Indenture and (iii) the Capital Securities Guarantee.
2. Registration Under the Securities Act.
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<PAGE> 8
(a) Exchange Offer. To the extent not prohibited by any applicable
law or applicable interpretation of the staff of the SEC, the Company and the
Trust shall, for the benefit of the Holders, at the Company's cost, use their
reasonable best efforts to (i) cause to be filed with the SEC within 150 days
after January 31, 1997 an Exchange Offer Registration Statement on an
appropriate form under the Securities Act covering the Exchange Offer, (ii)
cause such Exchange Offer Registration Statement to be declared effective under
the Securities Act by the SEC not later than the date which is 185 days after
January 31, 1997, (iii) commence the Exchange Offer promptly after effectiveness
of the Exchange Offer Registration Statement, and (iv) keep such Exchange Offer
Registration Statement effective for not less than 20 Business Days (or longer
if required by applicable law) after the date notice of the Exchange Offer is
mailed to the Holders. Upon the effectiveness of the Exchange Offer Registration
Statement, the Company and the Trust shall promptly commence the Exchange Offer,
it being the objective of such Exchange Offer to enable each Holder eligible and
electing to exchange Registrable Securities for a like principal amount of
Exchange Debentures or a like liquidation amount of Exchange Capital Securities,
together with the Exchange Guarantee, as applicable (assuming that such Holder
(A) is not an affiliate of the Company within the meaning of Rule 405 under the
Securities Act and is not a broker-dealer tendering Registrable Securities
acquired directly from the Company for its own account, (B) acquires the
Exchange Securities in the ordinary course of such Holder's business and (C) has
no arrangements or understandings with any Person to participate in the Exchange
Offer for the purpose of distributing the Exchange Securities) to transfer such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Securities Act and under state securities or blue sky
laws.
In connection with the Exchange Offer, the Company and the Trust
shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(ii) keep the Exchange Offer open for acceptance for a period of not less
than 20 Business Days after the date notice thereof is first mailed to the
Holders (or longer if
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<PAGE> 9
required by applicable law) (such period referred to herein as the "Exchange
Period");
(iii) utilize the services of the Depositary for the Exchange Offer:
(iv) permit Holders to withdraw tendered Securities at any time on or
prior to the close of business, New York City time, on the last Business Day of
the Exchange Period, by sending to the institution specified in the notice, a
telegram, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Securities delivered for exchange, and a
statement that such Holder is withdrawing his election to have such Securities
exchanged;
(v) notify each Holder that any Security not tendered by such Holder in
the Exchange Offer will remain outstanding and continue to accrue interest or
accumulate distributions, as the case may be, but will not retain any rights
under this Agreement (except in the case of the Initial Purchasers and
Participating Broker-Dealers as provided herein); and
(vi) otherwise comply in all respects with all applicable laws relating to
the Exchange Offer.
If any Initial Purchaser determines upon advice of its outside
counsel that it is not eligible to participate in the Exchange Offer with
respect to the exchange of Securities constituting any portion of an unsold
allotment in the initial distribution, as soon as practicable upon receipt by
the Company and the Trust of a written request from such Initial Purchaser, the
Company and the Trust, as applicable, shall issue and deliver to such Initial
Purchasers in exchange (the "Private Exchange") for the Securities held by such
Initial Purchasers, a like liquidation amount of Capital Securities of the
Trust, together with the Exchange Guarantee, or a like principal amount of the
Subordinated Debentures of the Company, as applicable, that are identical
(except that such securities may bear a customary legend with respect to
restrictions on transfer pursuant to the Securities Act) to the Exchange
Securities (the "Private Exchange Securities") and which are issued pursuant to
the Indenture, the Declaration or the Guarantee (which provides that the
Exchange Securities will not be subject to the transfer restrictions set forth
in the Indenture or the Declaration, as applicable, and that the Exchange
Securities, the Private Exchange Securities and the Securities will vote and
consent together on all matters as one class and that none of the Exchange
Securities, the
8
<PAGE> 10
Private Exchange Securities or the Securities will have the right to vote or
consent as a separate class on any matter). The Private Exchange Securities
shall be of the same series as the Exchange Securities and the Company and the
Trust will seek to cause the CUSIP Service Bureau to issue the same CUSIP
Numbers for the Private Exchange Securities as for the Exchange Securities
issued pursuant to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer and, if
applicable, the Private Exchange, the Company and the Trust, as the case
requires, shall:
(i) accept for exchange all Securities or portions thereof tendered and
not validly withdrawn pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver, or cause to be delivered, to the applicable Trustee for
cancellation all Securities or portions thereof so accepted for exchange by the
Company; and
(iii) issue, and cause the applicable Trustee under the Indenture, the
Declaration or the Guarantee, as applicable, to promptly authenticate and
deliver to each Holder, new Exchange Securities or Private Exchange Securities,
as applicable, equal in principal amount to the principal amount of the
Subordinated Debentures or equal in liquidation amount to the liquidation amount
to the Capital Securities (together with the guarantee thereof) as are
surrendered by such Holder.
Distributions on each Exchange Capital Security and interest on each
Exchange Debenture and Private Exchange Security issued pursuant to the
Registered Exchange Offer and in the Private Exchange will accrue from the last
date on which a Distribution or interest was paid on the Capital Security or the
Subordinated Debenture surrendered in exchange therefore or, if no Distribution
or interest has been paid on such Capital Security or Subordinated Debenture,
from the Issue Date. To the extent not prohibited by any law or applicable
interpretation of the staff of the SEC, the Company and the Trust shall use
their reasonable best efforts to complete the Exchange Offer as provided above,
and shall comply with the applicable requirements of the Securities Act, the
Exchange Act and other applicable laws in connection with the Exchange Offer.
The Exchange Offer shall not be subject to any conditions, other than that the
Exchange Offer does not violate
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<PAGE> 11
applicable law, any applicable interpretation of the staff of the SEC and any
other conditions that are reasonable and customary for these types of exchange
offers. Each Holder of Registrable Securities who wishes to exchange such
Registrable Securities for Exchange Securities in the Exchange Offer will be
required to make certain customary representations in connection therewith,
including, in the case of any Holder of Capital Securities, representations that
(i) it is not an affiliate of the Trust or the Company, (ii) the Exchange
Securities to be received by it were acquired in the ordinary course of its
business and (iii) at the time of the Exchange Offer, it has no arrangement with
any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Capital Securities. The Company and the Trust
shall inform the Initial Purchasers, after consultation with the Trustee, of the
names and addresses of the Holders to whom the Exchange Offer is made, and the
Initial Purchasers shall have the right to contact such Holders and otherwise
facilitate the tender of Registrable Securities in the Exchange Offer.
Upon consummation of the Exchange Offer in accordance with this
Section 2(a), the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Securities that are Private
Exchange Securities and Exchange Securities held by Participating
Broker-Dealers, and the Company and the Trust shall have no further obligation
to register the Registrable Securities (other than Private Exchange Securities)
pursuant to Section 2(b) of this Agreement.
(b) Shelf Registration. In the event that (i) the Company, the Trust
or the Majority Holders reasonably determine, after conferring with counsel
(which may be in-house counsel), that the Exchange Offer Registration provided
in Section 2(a) above is not available because of any change in law or in
currently prevailing interpretations of the staff of the SEC, or (ii) the
Exchange Offer Registration Statement is not declared effective within 185 days
of January 31, 1997 or (iii) upon the request of any Initial Purchaser with
respect to any Registrable Securities held by it, if such Initial Purchaser is
not permitted, in the reasonable opinion of Brown & Wood LLP, pursuant to
applicable law or applicable interpretations of the staff of the SEC, to
participate in the Exchange Offer and thereby receive securities that are freely
tradeable without restriction under the Securities Act and applicable blue sky
or state securities laws (any of the events specified in (i)-(iii) being a
"Shelf
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<PAGE> 12
Registration Event" and the date of occurrence thereof, the "Shelf Registration
Event Date"), the Company and the Trust shall, at their cost, use their
reasonable best efforts to cause to be filed as promptly as practicable after
such Shelf Registration Event Date, as the case may be, and, in any event,
within 45 days after such Shelf Registration Event Date (which shall be no
earlier than 75 days after the Closing Time), a Shelf Registration Statement
providing for the sale by the Holders of all of the Registrable Securities, and
shall use their reasonable best efforts to have such Shelf Registration
Statement declared effective by the SEC as soon as practicable. No Holder of
Registrable Securities shall be entitled to include any of its Registrable
Securities in any Shelf Registration pursuant to this Agreement unless and until
such Holder agrees in writing to be bound by all of the provisions of this
Agreement applicable to such Holder and furnishes to the Company and the Trust
in writing, within 15 days after receipt of a request therefor, such information
as the Company and the Trust may, after conferring with counsel with regard to
information relating to Holders that would be required by the SEC to be included
in such Shelf Registration Statement or Prospectus included therein, reasonably
request for inclusion in any Shelf Registration Statement or Prospectus included
therein. Each Holder as to which any Shelf Registration is being effected agrees
to furnish to the Company and the Trust all information with respect to such
Holder necessary to make the information previously furnished to the Company by
such Holder not materially misleading.
In addition, the Company and the Trust may, in lieu of filing an
Exchange Offer Registration Statement, file a Shelf Registration Statement if
the Company receives an opinion of legal counsel that, as a result of the
consummation of the Exchange Offer, there is more than an insubstantial risk
that (x) the Trust would be subject to United States federal income tax with
respect to income received or accrued on the Subordinated Debentures or the
Exchange Debentures, (y) interest payable by the Company on such Subordinated
Debentures or the Exchange Debentures would not be deductible by the Company, in
whole or in part, for United States federal income tax purposes, or (z) the
Trust would be subject to more than a de minimis amount of other taxes, duties
or governmental charges.
The Company and the Trust agree to use their reasonable best efforts
to keep the Shelf Registration Statement continuously effective for the Rule
144(k) Period
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<PAGE> 13
(subject to extension pursuant to the last paragraph of Section 3 hereof) or for
such shorter period which will terminate when all of the Registrable Securities
covered by the Shelf Registration Statement cease to be Registrable Securities
or have been sold pursuant to the Shelf Registration Statement or cease to be
outstanding (the "Effectiveness Period"). The Company and the Trust shall not
permit any securities other than Registrable Securities to be included in the
Shelf Registration. The Company and the Trust will, in the event a Shelf
Registration Statement is declared effective, provide to each Holder a
reasonable number of copies of the Prospectus which is a part of the Shelf
Registration Statement and notify each such Holder when the Shelf Registration
has become effective. The Company and the Trust further agree, if necessary, to
supplement or amend the Shelf Registration Statement, if required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the Securities Act or by any
other rules and regulations thereunder for shelf registrations, and the Company
and the Trust agree to furnish to the Holders of Registrable Securities copies
of any such supplement or amendment promptly after its being used or filed with
the SEC. Notwithstanding the foregoing agreement of the Company and the Trust to
supplement or amend the Shelf Registration Statement, the Company and the Trust
may require the Holders to suspend sales of the Registrable Securities pursuant
to the Shelf Registration Statement for a reasonable period not to exceed 30
days if the Company determines in good faith that such sales might (1) interfere
with or affect the negotiation or completion of any transaction as being
contemplated by the Company (whether or not final decision has been made to
undertake such transaction) at the time the right to suspend sales is exercised
or (2) involve initial or continuing disclosure obligations that might not be in
the best interest of the Company's stockholders or for which required
information is not reasonably available. The period referred to herein during
which the Shelf Registration Statement must be kept current after its effective
date shall be extended for an additional number of Business Days equal to the
number of business days during which the Holders' rights to sell Registrable
Securities was suspended pursuant to the preceding sentence.
(c) Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or 2(b) hereof and
will reimburse the Initial Purchasers for the reasonable fees and
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<PAGE> 14
disbursements (not to exceed $50,000) of Brown & Wood LLP, counsel for the
Initial Purchasers and the Holders, incurred in connection with the Exchange
Offer and, if applicable, the Private Exchange Offer. Except as provided herein,
each Holder shall pay all expenses of its counsel, underwriting discounts and
commissions and transfer taxes if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to the Shelf Registration
Statement.
(d) Effective Registration Statement. An Exchange Offer Registration
Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement
pursuant to Section 2(b) hereof will not be deemed to have become effective
unless it has been declared effective by the SEC; provided, however, that if,
after it has been declared effective, the offering of Registrable Securities
pursuant to a Shelf Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Registration Statement will be deemed not to have been
effective during the period of such interference, until the offering of
Registrable Securities pursuant to such Registration Statement may legally
resume. The Company and the Trust will be deemed not to have used their
reasonable best efforts to cause the Exchange Offer Registration Statement or
the Shelf Registration Statement, as the case may be, to become, or to remain,
effective during the requisite period if either of them voluntarily take any
action that either of them knows would result in any such Registration Statement
not being declared effective or in the Holders of Registrable Securities covered
thereby not being able to exchange or offer and sell such Registrable Securities
during that period unless such action is required by applicable law.
(e) Liquidated Damages. In the event that (i) (A) neither the
Exchange Offer Registration Statement nor a Shelf Registration Statement is
filed with the SEC on or prior to the 150th day after January 31, 1997 or (B)
notwithstanding that the Company and the Trust have accepted for exchange or
will accept for exchange the Subordinated Debentures, the Capital Securities and
the Capital Securities Guarantee for, respectively, the Exchange Debentures, the
Exchange Capital Securities and the Exchange Capital Securities Guarantee, the
Company and the Trust are required to file a Shelf Registration Statement and
such Shelf Registration Statement is not filed on or prior to the date required
by Section 2(b) hereof, then commencing on the
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<PAGE> 15
day after the applicable required filing date, additional interest shall accrue
on the principal amount of the Subordinated Debentures, and additional
Distributions shall accumulate on the liquidation amount of the Capital
Securities, each at a rate of 0.25% per annum; or
(ii) (A) neither the Exchange Offer Registration Statement nor a Shelf
Registration Statement is declared effective by the SEC on or prior to the 35th
day after the applicable required filing date or (B) notwithstanding that the
Company and the Trust have accepted for exchange the Subordinated Debentures,
the Capital Securities and the Capital Securities Guarantee for, respectively,
the Exchange Debentures, the Exchange Capital Securities and the Exchange
Capital Securities Guarantee, the Company and the Trust are required to file a
Shelf Registration Statement and such Shelf Registration Statement is not
declared effective by the SEC on or prior to the 35th day after the date such
Shelf Registration Statement was required to be filed, then, commencing on the
36th day after the applicable required filing date, additional interest shall
accrue on the principal amount of the Subordinated Debentures and additional
Distributions shall accumulate on the liquidation amount of the Capital
Securities, each at a rate of 0.25% per annum; or
(iii) (A) the Trust has not accepted for exchange all validly tendered
Capital Securities for Exchange Capital Securities or the Company has not
accepted for exchange the Capital Securities Guarantee and all Subordinated
Debentures for the Exchange Guarantee and all Exchange Debentures, respectively,
in accordance with the terms of the Exchange Offer on or prior to the 35th day
after the date on which the Exchange Offer Registration Statement was declared
effective or (B) if applicable, the Shelf Registration Statement has been
declared effective and such Shelf Registration Statement ceases to be effective
at any time prior to the expiration of the Rule 144(k) Period (other than after
such time as all Capital Securities have been disposed of thereunder or
otherwise cease to be Registrable Securities), then additional interest shall
accrue on the principal amount of Subordinated Debentures, and additional
Distributions shall accumulate on the liquidation amount of the Capital
Securities, each at a rate of 0.25% per annum commencing on (x) the 36th day
after such effective date, in the case of (A) above, or (y) the day such Shelf
Registration Statement ceases to be effective in the case of (B) above;
provided, however, that neither the additional interest rate on the Subordinated
Debentures, nor the
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<PAGE> 16
additional distribution rate on the liquidation amount of the Capital
Securities, may exceed in the aggregate 0.25% per annum; provided, further,
however, that (1) upon the filing of the Exchange Offer Registration Statement
or a Shelf Registration Statement (in the case of clause (i) above), (2) upon
the effectiveness of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (ii) above), or (3) upon the
acceptance for exchange of all validly tendered Capital Securities, the
Guarantee and the Subordinated Debentures for all Exchange Capital Securities,
the Exchange Capital Securities Guarantee and all Exchange Debentures (in the
case of clause (iii)(A) above), or upon the effectiveness of the Shelf
Registration Statement which had ceased to remain effective (in the case of
clause (iii)(B) above), additional interest on the Subordinated Debentures and
additional distributions on the liquidation amount of the Capital Securities as
a result of such clause (or the relevant subclause thereof), as the case may be,
shall cease to accrue or accumulate, as the case may be.
Any amounts of additional interest and additional Distributions due
pursuant to Section 2(e)(i), (ii) or (iii) above (the "Liquidated Damages") will
be payable in cash on February 1 and August 1 of each year to the holders of
record on the 15th day prior to the relevant payment date for the payment of
interest and Distributions pursuant to the Indenture and the Declaration
respectively.
(f) Specific Enforcement. Without limiting the remedies available to
the Holders, the Company and the Trust acknowledge that any failure by the
Company or the Trust to comply with its obligations under Section 2(a) and
Section 2(b) hereof may result in material irreparable injury to the Holders for
which there is no adequate remedy at law, that it would not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, any Holder may obtain such relief as may be required to specifically
enforce the Company's and the Trust's obligations under Section 2(a) and Section
2(b) hereof.
3. Registration Procedures. In connection with the obligations of
the Company and the Trust with respect to the Registration Statements pursuant
to Sections 2(a) and 2(b) hereof, the Company and the Trust shall use their
reasonable best efforts to:
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(a) prepare and file with the SEC a Registration Statement or
Registration Statements as prescribed by Sections 2(a) and 2(b) hereof
within the relevant time period specified in Section 2 hereof on the
appropriate form under the Securities Act, which form (i) shall be
selected by the Company and the Trust, (ii) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Securities by
the selling Holders thereof and (iii) shall comply as to form with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith; and use its reasonable best
efforts to cause such Registration Statement to become effective and
remain effective in accordance with Section 2 hereof; provided, however,
that if (1) such filing is pursuant to Section 2(b), or (2) a Prospectus
contained in an Exchange Offer Registration Statement filed pursuant to
Section 2(a) is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities, before
filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company and the Trust shall furnish to and afford
the Holders of the Registrable Securities and each such Participating
Broker-Dealer, as the case may be, covered by such Registration Statement,
their counsel and the managing underwriters, if any, a reasonable
opportunity to review copies of all such documents (including copies of
any documents to be incorporated by reference therein and all exhibits
thereto) proposed to be filed; and the Company and the Trust shall not
file any Registration Statement or Prospectus or any amendments or
supplements thereto in respect of which the Holders must be afforded an
opportunity to review prior to the filing of such document if the Majority
Holders or such Participating Broker-Dealer, as the case may be, their
counsel or the managing underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the Effectiveness Period or the
Applicable Period, as the case may be; and cause each Prospectus to be
supplemented, if so determined by the Company or the Trust or requested by
the SEC, by any required prospectus supplement and as so supplemented to
be filed pursuant to Rule 424 (or any similar provision then in force)
under the Securities Act, and comply with the provisions of the Securities
Act, the
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Exchange Act and the rules and regulations promulgated thereunder
applicable to it with respect to the disposition of all securities covered
by each Registration Statement during the Effectiveness Period or the
Applicable Period, as the case may be, in accordance with the intended
method or methods of distribution by the selling Holders thereof described
in this Agreement (including sales by any Participating Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Securities included in the Shelf Registration Statement, at
least three Business Days prior to filing, that a Shelf Registration
Statement with respect to the Registrable Securities is being filed and
advising such Holder that the distribution of Registrable Securities will
be made in accordance with the method selected by the Majority Holders;
and (ii) furnish to each Holder of Registrable Securities included in the
Shelf Registration Statement and to each underwriter of an underwritten
offering of Registrable Securities, if any, without charge, as many copies
of each Prospectus, including each preliminary Prospectus, and any
amendment or supplement thereto and such other documents as such Holder or
underwriter may reasonably request, in order to facilitate the public sale
or other disposition of the Registrable Securities; and (iii) consent to
the use of the Prospectus or any amendment or supplement thereto by each
of the selling Holders of Registrable Securities included in the Shelf
Registration Statement in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or
supplement thereto;
(d) in the case of a Shelf Registration, use their reasonable best
efforts to register or qualify the Registrable Securities under all
applicable United States state securities or "blue sky" laws of such
jurisdictions by the time the applicable Registration Statement is
declared effective by the SEC as any Holder of Registrable Securities
covered by a Registration Statement and each underwriter of an
underwritten offering of Registrable Securities shall reasonably request
in writing in advance of such date of effectiveness, and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such Holder and underwriter to consummate the disposition in each
such jurisdiction of such
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Registrable Securities owned by such Holder; provided, however, that the
Company and the Trust shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d); (ii)
file any general consent to service of process in any jurisdiction where
it would not otherwise be subject to such service of process or (iii)
subject itself to taxation in any such jurisdiction if it is not then so
subject;
(e) in the case of (1) a Shelf Registration or (2) Participating
Broker-Dealers from whom the Company or the Trust has received prior
written notice that they will be utilizing the Prospectus contained in the
Exchange Offer Registration Statement as provided in Section 3(t) hereof,
are seeking to sell Exchange Securities and are required to deliver
Prospectuses, notify each Holder of Registrable Securities, or such
Participating Broker-Dealers, as the case may be, their counsel and the
managing underwriters, if any, promptly and promptly confirm such notice
in writing (i) when a Registration Statement has become effective and when
any post-effective amendments and supplements thereto become effective,
(ii) of any request by the SEC or any state securities authority for
amendments and supplements to a Registration Statement or Prospectus or
for additional information after the Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a Registration
Statement or the qualification of the Registrable Securities or the
Exchange Securities to be offered or sold by any Participating
Broker-Dealer in any jurisdiction described in paragraph 3(d) hereof or
the initiation of any proceedings for that purpose, (iv) in the case of a
Shelf Registration, if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities covered
thereby, the representations and warranties of the Company and the Trust
contained in any purchase agreement, securities sales agreement or other
similar agreement, if any cease to be true and correct in all material
respects, and (v) of the happening of any event or the failure of any
event to occur or the discovery of any facts or otherwise, during the
Effectiveness Period which makes any statement made in such Registration
Statement or the related Prospectus untrue in any material respect or
which causes such
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<PAGE> 20
Registration Statement or Prospectus to omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (vi) the
Company and the Trust's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the
earliest possible moment;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities included within the coverage of such Shelf
Registration Statement, without charge, at least one conformed copy of
each Registration Statement relating to such Shelf Registration and any
post-effective amendment thereto (without documents incorporated therein
by reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold
and not bearing any restrictive legends and in such denominations
(consistent with the provisions of the Indenture and the Declaration) and
registered in such names as the selling Holders or the underwriters may
reasonably request at least two Business Days prior to the closing of any
sale of Registrable Securities pursuant to such Shelf Registration
Statement;
(i) in the case of a Shelf Registration or an Exchange Offer
Registration, upon the occurrence of any circumstance contemplated by
Section 3(e)(ii), 3(e)(iii), 3(e)(v) or 3(e)(vi) hereof, use its
reasonable best efforts to prepare a supplement or post-effective
amendment to a Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were
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made, not misleading; and to notify each Holder to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an
event, and each Holder hereby agrees to suspend use of the Prospectus
until the Company has amended or supplemented the Prospectus to correct
such misstatement or omission;
(j) in the case of a Shelf Registration, a reasonable time prior to
the filing of any document which is to be incorporated by reference into a
Registration Statement or a Prospectus after the initial filing of a
Registration Statement, provide a reasonable number of copies of such
document to the Holders; and make such of the representatives of the
Company and the Trust as shall be reasonably requested by the Holders of
Registrable Securities or the Initial Purchasers on behalf of such Holders
available for discussion of such document;
(k) obtain a CUSIP number for all Exchange Capital Securities and
the Capital Securities (and if the Trust has made a distribution of the
Subordinated Debentures to the Holders of the Capital Securities, the
Subordinated Debentures or the Exchange Subordinated Debentures) as the
case may be, not later than the effective date of a Registration
Statement, and provide the Trustee with printed certificates for the
Exchange Securities or the Registrable Securities, as the case may be, in
a form eligible for deposit with the Depositary;
(l) cause the Indenture, the Declaration and the Exchange Guarantee
to be qualified under the Trust Indenture Act of 1939 (the "TIA") in
connection with the registration of the Exchange Securities or Registrable
Securities, as the case may be, and effect such changes to such documents
as may be required for them to be so qualified in accordance with the
terms of the TIA and execute, and use its reasonable best efforts to cause
the relevant trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents required to be
filed with the SEC to enable such documents to be so qualified in a timely
manner;
(m) in the case of a Shelf Registration, enter into such agreements
(including underwriting agreements) as are customary in underwritten
offerings
20
<PAGE> 22
and take all such other appropriate actions as are reasonably requested in
order to expedite or facilitate the registration or the disposition of
such Registrable Securities, and in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration
is an underwritten registration, if requested by (x) any Initial
Purchaser, in the case where an Initial Purchaser holds Securities
acquired by it as part of its initial distribution and (y) other Holders
of Securities covered thereby: (i) make such representations and
warranties to Holders of such Registrable Securities and the underwriters
(if any), with respect to the business of the Trust, the Company and its
subsidiaries as then conducted and the Registration Statement, Prospectus
and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Company and the Trust
and updates thereof (which may be in the form of a reliance letter) in
form and substance reasonably satisfactory to the managing underwriters
(if any) and the Holders of a majority in principal amount of the
Registrable Securities being sold, addressed to each selling Holder and
the underwriters (if any) covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may
be reasonably requested by such underwriters (it being agreed that the
matters to be covered by such opinion may be subject to customary
qualifications and exceptions); (iii) obtain "cold comfort" letters and
updates thereof in form and substance reasonably satisfactory to the
managing underwriters from the independent certified public accountants of
the Company and the Trust (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company and the
Trust or of any business acquired by the Company and the Trust for which
financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by
such underwriters in accordance with Statement on Auditing Standards No.
72; and (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and
21
<PAGE> 23
procedures no less favorable than those set forth in Section 4 hereof (or
such other provisions and procedures acceptable to Holders of a majority
in aggregate principal amount of Registrable Securities covered by such
Registration Statement and the managing underwriters or agents) with
respect to all parties to be indemnified pursuant to said Section
(including, without limitation, such underwriters and selling Holders).
The above shall be done at each closing under such underwriting agreement,
or as and to the extent required thereunder;
(n) if (1) a Shelf Registration is filed pursuant to Section 2(b) or
(2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2(a) is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, make reasonably
available for inspection by any selling Holder of such Registrable
Securities being sold, or each such Participating Broker-Dealer, as the
case may be, any underwriter participating in any such disposition of
Registrable Securities, if any, and any attorney, accountant or other
agent retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Trust, the Company and its subsidiaries
(collectively, the "Records") as shall be reasonably necessary to enable
them to exercise any applicable due diligence responsibilities, and cause
the officers, directors and employees of the Trust, the Company and its
subsidiaries to supply all relevant information in each case reasonably
requested by any such Inspector in connection with such Registration
Statement provided, however, that the foregoing inspection and information
gathering shall be coordinated on behalf of the Holders and all other
parties by the Initial Purchasers and by one counsel designated by the
Initial Purchasers. Records which the Company and the Trust determine, in
good faith, to be confidential and any records which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors
unless (i) the disclosure of such Records is necessary to avoid or correct
a material misstatement or omission in such Registration Statement, (ii)
the release of such Records is ordered
22
<PAGE> 24
pursuant to a subpoena or other order from a court of competent
jurisdiction or is necessary in connection with any action, suit or
proceeding or (iii) the information in such Records has been made
generally available to the public. Each selling Holder of such Registrable
Securities and each such Participating Broker-Dealer will be required to
agree in writing that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as
the basis for any market transactions in the securities of the Trust or
the Company unless and until such is made generally available to the
public. Each selling Holder of such Registrable Securities and each such
Participating Broker-Dealer will be required to further agree in writing
that it will, upon learning that disclosure of such Records is sought in a
court of competent jurisdiction, give notice to the Company and allow the
Company at its expense to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(o) comply with all applicable rules and regulations of the SEC so
long as any provision of this Agreement shall be applicable and make
generally available to its securityholders earning statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no
later than 45 days after the end of any 12-month period (or 90 days after
the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which
statements shall cover said 12-month periods;
(p) upon consummation of an Exchange Offer or a Private Exchange, if
requested by a Trustee, obtain an opinion of counsel to the Company
addressed to the Trustee for the benefit of all Holders of Registrable
Securities participating in the Exchange Offer or the Private Exchange, as
the case may be, and which includes an opinion that (i) the Company and
the Trust, as the case requires, has duly authorized, executed and
delivered the Exchange Securities and Private Exchange Securities, and
(ii) each of the Exchange Securities or
23
<PAGE> 25
the Private Exchange Securities, as the case may be, constitute a legal,
valid and binding obligation of the Company or the Trust, as the case
requires, enforceable against the Company or the Trust, as the case
requires, in accordance with its respective terms (in each case, with
customary exceptions);
(q) if an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Securities by Holders to the Company or
the Trust, as applicable (or to such other Person as directed by the
Company or the Trust, respectively), in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, the
Company or the Trust, as applicable, shall mark, or cause to be marked, on
such Registrable Securities delivered by such Holders that such
Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be; in no
event shall such Registrable Securities be marked as paid or otherwise
satisfied;
(r) cooperate with each seller of Registrable Securities covered by
any Registration Statement and each underwriter, if any, participating in
the disposition of such Registrable Securities and their respective
counsel in connection with any filings required to be made with the NASD;
(s) use its reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Securities covered
by a Registration Statement contemplated hereby;
(t) (A) in the case of the Exchange Offer Registration Statement (i)
include in the Exchange Offer Registration Statement a section entitled
"Plan of Distribution, which section shall be reasonably acceptable to the
Initial Purchasers or another representative of the Participating
Broker-Dealers, and which shall contain a summary statement of the
positions taken or policies made by the staff of the SEC with respect to
the potential "underwriter" status of any broker-dealer that holds
Registrable Securities acquired for its own account as a result of
market-making activities (a "Participating Broker-Dealer") or other
trading activities and that will be the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act) of Exchange Securities to be
24
<PAGE> 26
received by such broker-dealer in the Exchange Offer, whether such
positions or policies have been publicly disseminated by the staff of the
SEC or such positions or policies, in the reasonable judgment of the
Initial Purchasers or such other representative, represent the prevailing
views of the staff of the SEC, including a statement that any such
broker-dealer who receives Exchange Securities for Registrable Securities
pursuant to the Exchange Offer may be deemed a statutory underwriter and
must deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Exchange Securities, (ii) furnish to
each Participating Broker-Dealer who has delivered to the Company the
notice referred to in Section 3(e), without charge, as many copies of each
Prospectus included in the Exchange Offer Registration Statement,
including any preliminary prospectus, and any amendment or supplement
thereto, as such Participating Broker-Dealer may reasonably request (each
of the Company and the Trust hereby consents to the use of the Prospectus
forming part of the Exchange Offer Registration Statement or any amendment
or supplement thereto by any Person subject to the prospectus delivery
requirements of the Securities Act, including all Participating
Broker-Dealers, in connection with the sale or transfer of the Exchange
Securities covered by the Prospectus or any amendment or supplement
thereto), (iii) use its reasonable best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be
lawfully delivered by all Persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such Persons
must comply with such requirements under the Securities Act and applicable
rules and regulations in order to resell the Exchange Securities;
provided, however, that such period shall not be required to exceed 90
days (or such longer period if extended pursuant to the last sentence of
Section 3 hereof) (the "Applicable Period"), and (iv) include in the
transmittal letter or similar documentation to be executed by an exchange
offeree in order to participate in the Exchange Offer (x) the following
provision:
"If the exchange offeree is a broker-dealer holding Registrable
Securities acquired for its own account as a result of market-making
activities or other trading activities, it will
25
<PAGE> 27
deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of Exchange Securities received in
respect of such Registrable Securities pursuant to the
Exchange Offer";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by delivering a Prospectus in
connection with the exchange of Registrable Securities, the broker-dealer
will not be deemed to admit that it is an underwriter within the meaning
of the Securities Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Company and the Trust agree to deliver to the Initial Purchasers or to
another representative of the Participating Broker-Dealers, if requested
by any such Initial Purchasers or such other representative of the
Participating Broker-Dealers, on behalf of the Participating
Broker-Dealers upon consummation of the Exchange Offer (i) an opinion of
counsel in form and substance reasonably satisfactory to the Initial
Purchasers or such other representative of the Participating
Broker-Dealers, covering the matters customarily covered in opinions
requested in connection with Exchange Offer Registration Statements and
such other matters as may be reasonably requested (it being agreed that
the matters to be covered by such opinion may be subject to customary
qualifications and exceptions), (ii) an officers' certificate containing
certifications substantially similar to those set forth in Section 5(d) of
the Purchase Agreement and such additional certifications as are
customarily delivered in a public offering of debt securities and (iii) as
well as upon the effectiveness of the Exchange Offer Registration
Statement, a comfort letter, in each case, in customary form if permitted
by Statement on Auditing Standards No. 72.
The Company or the Trust may require each seller of Registrable
Securities as to which any registration is being effected to furnish to the
Company or the Trust, as applicable, such information regarding such seller as
may be required by the staff of the SEC to be included in a Registration
Statement. The Company or the Trust may exclude from such registration the
Registrable Securities of any seller who fails to furnish such information
within a
26
<PAGE> 28
reasonable time after receiving such request. The Company shall have no
obligation to register under the Securities Act the Registrable Securities of a
seller who so fails to furnish such information.
In the case of (1) a Shelf Registration Statement or (2)
Participating Broker-Dealers who have notified the Company and the Trust that
they will be utilizing the Prospectus contained in the Exchange Offer
Registration Statement as provided in Section 3(t) hereof, who are seeking to
sell Exchange Securities and are required to deliver the Prospectus each Holder
agrees that, upon receipt of any notice from the Company or the Trust of the
happening of any event of the kind described in Section 3(e)(ii), 3(e)(iii),
3(e)(v) or 3(e)(vi) hereof, such Holder will forthwith discontinue disposition
of Registrable Securities pursuant to a Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(i) hereof or until it is advised in writing (the
"Advice") by the Company and the Trust that the use of the applicable Prospectus
may be resumed, and, if so directed by the Company and the Trust, such Holder
will deliver to the Company or the Trust (at the Company's or the Trust's
expense, as the case requires) all copies in such Holder's possession, other
than permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities or Exchange Securities, as the case may be,
current at the time of receipt of such notice. If the Company or the Trust shall
give any such notice to suspend the disposition of Registrable Securities or
Exchange Securities, as the case may be, pursuant to a Registration Statement,
the Company and the Trust shall use their reasonable best efforts to file and
have declared effective (if an amendment) as soon as practicable an amendment or
supplement to the Registration Statement and shall extend the period during
which such Registration Statement shall be maintained effective pursuant to this
Agreement by the number of days in the period from and including the date of the
giving of such notice to and including the date when the Company and the Trust
shall have made available to the Holders (x) copies of the supplemented or
amended Prospectus necessary to resume such dispositions or (y) the Advice.
4. Indemnification and Contribution. In connection with any
Registration Statement, the Company and the Trust shall, jointly and severally,
indemnify and hold harmless each Initial Purchaser, each Holder, each
underwriter who participates in an offering of the
27
<PAGE> 29
Registrable Securities, each Participating Broker-Dealer, each Person, if any,
who controls any of such parties within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act and each of their respective
directors, officers, employees and agents, as follows:
(i) from and against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, arising out of any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto), covering
Registrable Securities or Exchange Securities, including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) from and against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any court or governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the prior written consent of
the Company; and
(iii) from and against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of counsel chosen by such
Holder, such Participating Broker-Dealer, or any underwriter (except to
the extent otherwise expressly provided in Section 4(c) hereof)),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such
28
<PAGE> 30
expense is not paid under subparagraph (i) or (ii) of this Section 4(a);
provided, however, that (i) this indemnity does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished in writing to the
Company or the Trust by such Holder, such Participating Broker-Dealer or any
underwriter with respect to such Holder, Participating Broker-Dealer or any
underwriter, as the case may be, expressly for use in the Registration Statement
(or any amendment thereto) or any Prospectus (or any amendment or supplement
thereto) and (ii) the Company and the Trust shall not be liable to any such
Holder, Participating Broker-Dealer, any underwriter or controlling person, with
respect to any untrue statement or alleged untrue statement or omission or
alleged omission in any preliminary Prospectus to the extent that any such loss,
liability, claim, damage or expense of any Holder, Participating Broker-Dealer,
any underwriter or controlling person results from the fact that such Holder,
any underwriter or Participating Broker-Dealer sold Securities to a person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the final Prospectus as then amended or supplemented if the
Company had previously furnished copies thereof to such Holder, underwriter or
Participating Broker-Dealer and the loss, liability, claim, damage or expense of
such Holder, underwriter, Participating Broker-Dealer or controlling person
results from an untrue statement or omission of a material fact contained in the
preliminary Prospectus which was corrected in the final Prospectus. Any amounts
advanced by the Company or the Trust to an indemnified party pursuant to this
Section 4 as a result of such losses shall be returned to the Company or the
Trust if it shall be finally determined by such a court in a judgment not
subject to appeal or final review that such indemnified party was not entitled
to indemnification by the Company or the Trust.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, the Trust, any underwriter and the other selling
Holders and each of their respective directors, trustees, officers (including
each officer of the Company and the Trust who signed the Registration
Statement), employees and agents and each Person, if any, who controls the
Company, the Trust, any underwriter or any other selling Holder within the
meaning of Section 15 of the Securities Act or Section 20 of
29
<PAGE> 31
the Exchange Act, from and against any and all loss, liability, claim, damage
and expense whatsoever described in the indemnity contained in Section 4(a)
hereof, as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration Statement (or
any amendment thereto) or any Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company or the Trust by such selling Holder with respect to such Holder
expressly for use in the Registration Statement (or any amendment thereto), or
any such Prospectus (or any amendment or supplement thereto); provided, however,
that, in the case of Shelf Registration Statement, no such Holder shall be
liable for any claims hereunder in excess of the amount of net proceeds received
by such Holder from the sale of Registrable Securities pursuant to such Shelf
Registration Statement.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, enclosing a copy of all papers properly
served on such indemnified party, but failure to so notify an indemnifying party
shall not relieve such indemnifying party from any liability which it may have
under this Section 4, except to the extent that it is materially prejudiced by
such failure. An indemnifying party may participate at its own expense in the
defense of such action. If an indemnifying party so elects within a reasonable
time after receipt of such notice, an indemnifying party, severally or jointly
with any other indemnifying parties receiving such notice, may assume the
defense of such action with counsel chosen by it and reasonably acceptable to
the indemnified parties defendant in such action, provided, however, that if (i)
representation of such indemnified party by the same counsel would present a
conflict of interest or (ii) the actual or potential defendants in, or targets
of, any such action include both the indemnified party and the indemnifying
party and any such indemnified party reasonably determines that there may be
legal defenses available to such indemnified party which are different from or
in addition to those available to such indemnifying party, then in the case of
clauses (i) and (ii) of this Section 4(c) such indemnifying party and counsel
for each indemnifying party or parties shall not be entitled to assume such
defense. If an indemnifying party is not entitled to assume the defense of such
action as a result of the proviso to the preceding sentence, counsel for such
indemnifying party and counsel for each indemnified party or parties shall be
30
<PAGE> 32
entitled to conduct the defense of such indemnified party or parties. If an
indemnifying party assumes the defense of such action, in accordance with and as
permitted by the provisions of this paragraph, such indemnifying parties shall
not be liable for any fees and expenses of counsel for the indemnified parties
incurred thereafter in connection with such action. In no event shall the
indemnifying parties be liable for the reasonable fees and expenses of more than
one counsel (in addition to local counsel), separate from its own counsel,
for-all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 4 (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional written release
in form and substance satisfactory to the indemnified parties of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding 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. No indemnifying party shall be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify any indemnified party from and against any loss or
liability by reason of such settlement or judgement. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement.
(d) Notwithstanding the last sentence of Section 4(c), if at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified
31
<PAGE> 33
party for reasonable fees and expenses of counsel pursuant to Section 4(a)(iii)
above, such indemnifying party agrees that it shall be liable for any settlement
effected without its written consent if (i) such settlement is entered into more
than 45 days after receipt by such indemnifying party of the aforesaid request,
(ii) such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement; provided
that an indemnifying party shall not be liable for any such settlement effected
without its consent if such indemnifying party (1) reimburses such indemnified
party in accordance with such request to the extent it considers reasonable and
(2) provides written notice to the indemnified party substantiating the unpaid
balance as unreasonable, in each case prior to the date of such settlement.
(e) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company, the Trust, and
the Holders shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, the Trust, and the Holders, as incurred; provided that
no Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any Person that
was not guilty of such fraudulent misrepresentation. As between the Company, the
Trust, and the Holders, such parties shall contribute to such aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement in such proportion as shall be appropriate to reflect the
relative fault of the Company and Trust, on the one hand, and the Holders, on
the other hand, with respect to the statements or omissions which resulted in
such loss, liability, claim, damage or expense, or action in respect thereof, as
well as any other relevant equitable considerations. The relative fault of the
Company and the Trust, on the one hand, and of the Holders, on the other hand,
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 or the
Trust, on the one hand, or by or on behalf of the Holders, on the other, and
32
<PAGE> 34
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company, the Trust and the
Holders of the Registrable Securities agree that it would not be just and
equitable if contribution pursuant to this Section 4 were to be determined by
pro rata allocation or by any other method of allocation that does not take into
account the relevant equitable considerations. For purposes of this Section 4,
each affiliate of a Holder, and each director, officer, employee, agent and
Person, if any, who controls a Holder or such affiliate within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Holder, and each director, trustee,
employee or agent of each of the Company or the Trust, each officer of each of
the Company or the Trust who signed the Registration Statement, and each Person,
if any, who controls each of the Company and the Trust within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as each of the Company or the Trust.
5. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents reasonably required under the terms of such underwriting
arrangements.
6. Selection of Underwriters. The Holders of Registrable Securities
covered by the Shelf Registration Statement who desire to do so may sell the
securities covered by such Shelf Registration in an underwritten offering. In
any such underwritten offering, the underwriter or underwriters and manager or
managers that will administer the offering will be selected by the Holders of a
majority in aggregate principal amount of the Registrable Securities included in
such offering; provided, however, that such underwriters and managers must be
reasonably satisfactory to the Company and the Trust.
7. Miscellaneous.
(a) Rule 144 and Rule 144A. For so long as the Company or the Trust
is subject to the reporting
33
<PAGE> 35
requirements of Section 13 or 15 of the Exchange Act and any Registrable
Securities remain outstanding, each of the Company and the Trust will use its
reasonable best efforts to file the reports required to be filed by it under the
Securities Act and Section 13(a) or 15(d) of the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and that if it ceases to be so
required to file such reports, it will, upon the request of any Holder of
Registrable Securities (a) make publicly available such information as is
necessary to permit sales of their securities pursuant to Rule 144 under the
Securities Act, (b) deliver such information to a prospective purchaser as is
necessary to permit sales of their securities pursuant to Rule 144A under the
Securities Act and take such further action as any Holder of Registrable
Securities may reasonably request, and (c) take such further action that is
reasonable in the circumstances, in each case, to the extent required from time
to time to enable such Holder to sell its Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such rule may be amended
from time to time, (ii) Rule 144A under the Securities Act, as such rule may be
amended from time to time, or (iii) any similar rules or regulations hereafter
adopted by the SEC. Upon the request of any Holder of Registrable Securities,
the Company and the Trusts will deliver to such Holder a written statement as to
whether it has complied with such requirements.
(b) No Inconsistent Agreements. Neither the Company nor the Trust
has entered into nor will the Company or the Trust on or after the date of this
Agreement enter into any agreement which is inconsistent with the rights granted
to the Holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's or the Trust's other issued and
outstanding securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company and the Trust have obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or departure; provided no amendment,
34
<PAGE> 36
modification or supplement or waiver or consent to the departure with respect to
the provisions of Section 4 hereof shall be effective as against any Holder of
Registrable Securities unless consented to in writing by such Holder of
Registrable Securities. Notwithstanding the foregoing sentence, (i) this
Agreement may be amended, without the consent of any Holder of Registrable
Securities, by written agreement signed by the Company, the Trust and Initial
Purchasers, to cure any ambiguity, correct or supplement any provision of this
Agreement that may be inconsistent with any other provision of this Agreement or
to make any other provisions with respect to matters or questions arising under
this Agreement which shall not be inconsistent with other provisions of this
Agreement, (ii) this Agreement may be amended, modified or supplemented, and
waivers and consents to departures from the provisions hereof may be given, by
written agreement signed by the Company, the Trust and Initial Purchasers to the
extent that any such amendment, modification, supplement, waiver or consent is,
in their reasonable judgment, necessary or appropriate to comply with applicable
law (including any interpretation of the Staff of the SEC) or any change therein
and (iii) to the extent any provision of this Agreement relates to the Initial
Purchasers, such provision may be amended, modified or supplemented, and waivers
or consents to departures from such provisions may be given, by written
agreement signed by Initial Purchasers, the Company and the Trust.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company or the Trust by means of a notice given in accordance with the
provisions of this Section 7(d), which address initially is, with respect to the
Initial Purchasers, the address set forth in the Purchase Agreement; and (ii) if
to the Company or the Trust, initially at the Company's address set forth in the
Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 7(d).
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day,
35
<PAGE> 37
if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall
be concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of the
Initial Purchasers, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, however, that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms of the Purchase Agreement or
the Indenture. If any transferee of any Holder shall acquire Registrable
Securities, in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities, such Person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof.
(f) Third Party Beneficiary. Each of the Holders and the indemnified
parties referred to in Section 4 hereof shall be a third party beneficiary of
the agreements made hereunder between the Company and the Trust, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE
IN THE STATE OF NEW YORK. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND
THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND
36
<PAGE> 38
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Securities Held by the Company, the Trust or its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by the
Company, the Trust or its affiliates (as such term is defined in Rule 405 under
the Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
37
<PAGE> 39
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
EXECUTIVE RISK INC.
By:/s/ Robert V. Deutsch
-------------------------------------
Name: Robert V. Deutsch
Title: Executive Vice President,
Chief Financial Officer &
Chief Actuary
EXECUTIVE RISK CAPITAL TRUST
By: EXECUTIVE RISK INC.,
as Sponsor
By:/s/ Robert V. Deutsch
-------------------------------------
Name: Robert V. Deutsch
Title: Executive Vice President,
Chief Financial Officer &
Chief Actuary
<PAGE> 40
Confirmed and accepted as of
the date first above
written:
J.P. MORGAN SECURITIES INC.
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By: J.P. Morgan Securities Inc.
as Representative of the
Several Initial Purchasers
By: /s/ Robert Nordlinger
------------------------------------------
Name: Robert Nordlinger
Title: Vice President
39
<PAGE> 1
EXHIBIT 12
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratios of earnings to fixed charges for the five years ended
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net income................................... $28,105 $25,286 $19,240 $14,913 $15,959
Extraordinary items, net of tax.............. 0 0 0 0 0
Cumulative effect of changes in accounting
principles, net of tax..................... 0 0 0 0 1,387
Income tax expense........................... 6,634 4,854 3,533 2,360 2,870
------ ------ ------ ------ ------
Pretax earnings including net realized
capital gains (losses)..................... $34,739 $30,140 $22,773 $17,273 $17,442
====== ====== ====== ====== ======
Pretax earnings excluding net realized
capital gains (losses)..................... $33,692 $28,552 $23,228 $15,309 $16,573
====== ====== ====== ====== ======
Fixed charges:
Portion of rental expense (net of sublease
rental income) which approximates the
interest factor............................ 0 0 177 69 73
Interest on borrowed funds................... 4,277 1,816 1,440 1,383 1,415
------ ------ ------ ------ ------
Total fixed charges........................ $ 4,277 $ 1,816 $ 1,617 $ 1,452 $ 1,488
====== ====== ====== ====== ======
Earnings including net realized capital gains
(losses) (for ratio calculation)........... $39,016 $31,956 $24,390 $18,725 $18,930
====== ====== ====== ====== ======
Earnings excluding net realized capital gains
(losses) (for ratio calculation)........... $37,969 $30,368 $24,845 $16,761 $18,061
====== ====== ====== ====== ======
Ratio of earnings including net realized
capital gains (losses) to fixed charges.... 9.1 17.6 15.1 12.9 12.7
====== ====== ====== ====== ======
Ratio of earnings excluding net realized
capital gains (losses) to fixed charges.... 8.9 16.7 15.4 11.5 12.1
====== ====== ====== ====== ======
</TABLE>
For purposes of computing the consolidated ratio of earnings to fixed
charges, "earnings" represent net income before extraordinary items plus
applicable income taxes and fixed charges. "Fixed charges" include gross
interest expense (other than on deposits) and the proportion deemed
representative of the interest factor of rent expense.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 33-00000) and related Prospectus of
Executive Risk Capital Trust for the registration of 125,000 shares of its
Series B Capital Securities and to the incorporation by reference therein of our
reports dated February 7, 1997, with respect to the consolidated financial
statements of Executive Risk Inc. incorporated by reference in its Annual Report
(Form 10-K) for the year ended December 31, 1996 and the related financial
statement schedule included therein, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Stamford, Connecticut
April 4, 1997
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Power of
Attorney has been signed by the following persons in the capacities and on the
dates indicated. By so signing, each of the undersigned, in his or her capacity
as a director or officer, or both, as the case may be, of Executive Risk Inc.
(the "Company"), does hereby appoint LeRoy A. Vander Putten, Robert H. Kullas
and Robert V. Deutsch, and each of them severally, or if more than one acts, a
majority of them, his or her true and lawful attorneys or attorney to execute in
his or her name, place and stead, in his or her capacity as a director or
officer or both, as the case may be, of the Company, the Registration Statement
on Form S-4 to be filed with the Securities and Exchange Commission (the
"Commission"), and any and all amendments to said Registration Statement and all
instruments necessary or incidental in connection therewith, and to file the
same with the Commission. Each of said attorneys shall have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises as fully and to all intents and purposes as
each of the undersigned might or could do in person, hereby ratifying and
approving the acts of said attorneys and each of them.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------- ---------------
<C> <S> <C>
/s/ LEROY A. VANDER PUTTEN Chairman, Director and Chief April 8, 1997
- ------------------------------------------ Executive Officer (Principal
LeRoy A. Vander Putten Executive Officer)
/s/ ROBERT H. KULLAS Vice Chairman, Director and April 8, 1997
- ------------------------------------------ Chief Operating Officer
Robert H. Kullas
/s/ STEPHEN J. SILLS President, Director and Chief April 8, 1997
- ------------------------------------------ Underwriting Officer
Stephen J. Sills
/s/ GARY G. BENANAV Director April 8, 1997
- ------------------------------------------
Gary G. Benanav
/s/ JOHN G. CROSBY Director April 8, 1997
- ------------------------------------------
John G. Crosby
/s/ PATRICK A. GERSCHEL Director April 8, 1997
- ------------------------------------------
Patrick A. Gerschel
/s/ PETER GOLDBERG Director April 8, 1997
- ------------------------------------------
Peter Goldberg
/s/ BARBARA G. COHEN Director April 8, 1997
- ------------------------------------------
Barbara G. Cohen
/s/ MICHAEL D. RICE Director April 8, 1997
- ------------------------------------------
Michael D. Rice
/s/ JOSEPH D. SARGENT Director April 8, 1997
- ------------------------------------------
Joseph D. Sargent
/s/ ROBERT V. DEUTSCH Executive Vice President, Chief April 8, 1997
- ------------------------------------------ Financial Officer and Chief
Robert V. Deutsch Actuary (Principal Financial
and Accounting Officer)
</TABLE>
<PAGE> 1
EXHIBIT 25.1
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
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 CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
EXECUTIVE RISK INC.
(Exact name of obligor as specified in its charter)
DELAWARE 06-1388171
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
82 HOPMEADOW STREET
SIMSBURY, CONNECTICUT 06070
(Address of principal executive offices) (Zip Code)
SERIES B JUNIOR SUBORDINATED DEBT SECURITIES OF
EXECUTIVE RISK INC.
(Title of the indenture securities)
---------------------------------------------
<PAGE> 2
GENERAL
Item 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.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, 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 8th day of April, 1997.
THE CHASE MANHATTAN BANK
By /s/ Kathleen Perry
--------------------------
Kathleen Perry
Second Vice President
3
<PAGE> 4
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1996, 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 MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ....................................... $ 11,509
Interest-bearing balances ............................... 8,457
Securities:
Held to maturity securities ................................ 3,128
Available for sale securities .............................. 40,534
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold ...................................... 9,222
Securities purchased under agreements to resell ......... 422
Loans and lease financing receivables:
Loans and leases, net of unearned income ........$133,935
Less: Allowance for loan and lease losses ....... 2,789
Less: Allocated transfer risk reserve ........... 16
--------
Loans and leases, net of unearned income,
allowance, and reserve .................................. 131,130
Trading Assets ............................................. 49,876
Premises and fixed assets (including capitalized
leases) ................................................. 2,877
Other real estate owned .................................... 290
Investments in unconsolidated subsidiaries and
associated companies .................................... 124
Customer's liability to this bank on acceptances
outstanding ............................................. 2,313
Intangible assets .......................................... 1,316
Other assets ............................................... 11,231
--------
TOTAL ASSETS ............................................... $272,429
========
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
LIABILITIES
Deposits
In domestic offices .................................... $ 87,006
Noninterest-bearing .............................$35,783
Interest-bearing ................................ 51,223
-------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's .............................................. 73,206
Noninterest-bearing .............................$ 4,347
Interest-bearing ................................ 68,859
Federal funds purchased and securities sold under agree-
ments to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased ................................ 14,980
Securities sold under agreements to repurchase ......... 10,125
Demand notes issued to the U.S. Treasury .................. 1,867
Trading liabilities ....................................... 34,783
Other Borrowed money:
With a remaining maturity of one year or less .......... 14,639
With a remaining maturity of more than one year ........ 425
Mortgage indebtedness and obligations under capitalized
leases ................................................. 40
Bank's liability on acceptances executed and outstanding .. 2,267
Subordinated notes and debentures ......................... 5,471
Other liabilities ......................................... 11,343
TOTAL LIABILITIES ......................................... 256,152
--------
Limited-Life Preferred stock and related surplus .......... 550
EQUITY CAPITAL
Common stock .............................................. 1,251
Surplus ................................................... 10,243
Undivided profits and capital reserves .................... 4,526
Net unrealized holding gains (Losses)
on available-for-sale securities .......................... (309)
Cumulative foreign currency translation adjustments ....... 16
TOTAL EQUITY CAPITAL ...................................... 15,727
---------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL ............................... $ 272,429
=========
</TABLE>
I, Joseph L. Sclafani, S.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
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 in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER ) DIRECTORS
THOMAS G. LABRECQUE )
5
<PAGE> 1
EXHIBIT 25.2
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
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 CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------------------
EXECUTIVE RISK CAPITAL TRUST
(Exact name of obligor as specified in its charter)
DELAWARE 06-6442501
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
EXECUTIVE RISK INC.
82 HOPMEADOW STREET
SIMSBURY, CONNECTICUT 06070
(Address of principal executive offices) (Zip Code)
SERIES B CAPITAL SECURITIES OF EXECUTIVE RISK CAPITAL TRUST
(Title of the indenture securities)
--------------------------------------------------
<PAGE> 2
GENERAL
Item 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.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
2
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, 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 8TH day of APRIL, 1997.
THE CHASE MANHATTAN BANK
By /s/ Kathleen Perry
------------------------
Kathleen Perry
Second Vice President
3
<PAGE> 4
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1996, 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 MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin .................................... $ 11,509
Interest-bearing balances ............................ 8,457
Securities:
Held to maturity securities ................................ 3,128
Available for sale securities .............................. 40,534
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold ................................... 9,222
Securities purchased under agreements to resell ...... 422
Loans and lease financing receivables:
Loans and leases, net of unearned income .... $133,935
Less: Allowance for loan and lease losses ... 2,789
Less: Allocated transfer risk reserve ....... 16
--------
Loans and leases, net of unearned income,
allowance, and reserve ............................... 131,130
Trading Assets ............................................. 49,876
Premises and fixed assets (including capitalized
leases) .............................................. 2,877
Other real estate owned .................................... 290
Investments in unconsolidated subsidiaries and
associated companies ................................. 124
Customer's liability to this bank on acceptances
outstanding .......................................... 2,313
Intangible assets .......................................... 1,316
Other assets ............................................... 11,231
--------
TOTAL ASSETS ............................................... $272,429
========
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
LIABILITIES
Deposits
In domestic offices .................................. $ 87,006
Noninterest-bearing ...........................$35,783
Interest-bearing .............................. 51,223
-------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's ............................................ 73,206
Noninterest-bearing ...........................$ 4,347
Interest-bearing .............................. 68,859
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased .............................. 14,980
Securities sold under agreements to repurchase ....... 10,125
Demand notes issued to the U.S. Treasury ................... 1,867
Trading liabilities ........................................ 34,783
Other Borrowed money:
With a remaining maturity of one year or less ........ 14,639
With a remaining maturity of more than one year ...... 425
Mortgage indebtedness and obligations under capitalized
leases ............................................... 40
Bank's liability on acceptances executed and outstanding ... 2,267
Subordinated notes and debentures .......................... 5,471
Other liabilities .......................................... 11,343
TOTAL LIABILITIES .......................................... 256,152
---------
Limited-Life Preferred stock and related surplus ........... 550
EQUITY CAPITAL
Common stock ............................................... 1,251
Surplus .................................................... 10,243
Undivided profits and capital reserves ..................... 4,526
Net unrealized holding gains (Losses)
on available-for-sale securities ........................... (309)
Cumulative foreign currency translation adjustments ........ 16
TOTAL EQUITY CAPITAL ....................................... 15,727
---------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL ............................. $ 272,429
=========
</TABLE>
I, Joseph L. Sclafani, S.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
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 appropriate Federal regulatory authority and is
true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER ) DIRECTORS
THOMAS G. LABRECQUE )
5
<PAGE> 1
EXHIBIT 25.3
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
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 CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
-------------------------------------------------
EXECUTIVE RISK CAPITAL TRUST
(Exact name of obligor as specified in its charter)
DELAWARE 06-6442501
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
EXECUTIVE RISK INC.
82 HOPMEADOW STREET
SIMSBURY, CONNECTICUT 06070
(Address of principal executive offices) (Zip Code)
EXECUTIVE RISK INC.
SERIES B GUARANTEE WITH RESPECT TO THE
SERIES B CAPITAL SECURITIES OF EXECUTIVE RISK CAPITAL TRUST
(Title of the indenture securities)
-------------------------------------------------
<PAGE> 2
GENERAL
Item 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.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
2
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, 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 8th day of April, 1997.
THE CHASE MANHATTAN BANK
By /s/ Kathleen Perry
----------------------------------------
Kathleen Perry
Second Vice President
3
<PAGE> 4
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1996, 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 MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin .................................... $ 11,509
Interest-bearing balances ............................ 8,457
Securities:
Held to maturity securities ................................ 3,128
Available for sale securities .............................. 40,534
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold ................................... 9,222
Securities purchased under agreements to resell ...... 422
Loans and lease financing receivables:
Loans and leases, net of unearned income ............. $133,935
Less: Allowance for loan and lease losses ............ 2,789
Less: Allocated transfer risk reserve ................ 16
--------
Loans and leases, net of unearned income,
allowance, and reserve ............................... 131,130
Trading Assets ............................................. 49,876
Premises and fixed assets (including capitalized
leases) .............................................. 2,877
Other real estate owned .................................... 290
Investments in unconsolidated subsidiaries and
associated companies ................................. 124
Customer's liability to this bank on acceptances
outstanding .......................................... 2,313
Intangible assets .......................................... 1,316
Other assets ............................................... 11,231
--------
TOTAL ASSETS ............................................... $272,429
========
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
LIABILITIES
Deposits
In domestic offices .................................. $ 87,006
Noninterest-bearing .................................. $ 35,783
Interest-bearing ..................................... 51,223
---------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's ............................................ 73,206
Noninterest-bearing .................................. $ 4,347
Interest-bearing ..................................... 68,859
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased .............................. 14,980
Securities sold under agreements to repurchase ....... 10,125
Demand notes issued to the U.S. Treasury ................... 1,867
Trading liabilities ........................................ 34,783
Other Borrowed money:
With a remaining maturity of one year or less ........ 14,639
With a remaining maturity of more than one year ...... 425
Mortgage indebtedness and obligations under capitalized
leases ............................................... 40
Bank's liability on acceptances executed and outstanding ... 2,267
Subordinated notes and debentures .......................... 5,471
Other liabilities .......................................... 11,343
TOTAL LIABILITIES .......................................... 256,152
---------
Limited-Life Preferred stock and related surplus ........... 550
EQUITY CAPITAL
Common stock ............................................... 1,251
Surplus .................................................... 10,243
Undivided profits and capital reserves ..................... 4,526
Net unrealized holding gains (Losses)
on available-for-sale securities ........................... (309)
Cumulative foreign currency translation adjustments ........ 16
TOTAL EQUITY CAPITAL ....................................... 15,727
---------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL ............................. $ 272,429
=========
</TABLE>
I, Joseph L. Sclafani, S.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
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 appropriate Federal regulatory authority and is
true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER ) DIRECTORS
THOMAS G. LABRECQUE )
5
