<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 8, 1997
REGISTRATION NO. 333-40657
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
EXECUTIVE RISK INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 06-1388171
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
------------------------
82 HOPMEADOW STREET
SIMSBURY, CONNECTICUT 06070
(860) 408-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT H. KULLAS
CHAIRMAN
EXECUTIVE RISK INC.
82 HOPMEADOW STREET
SIMSBURY, CT 06070
(860) 408-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE AGENT FOR
SERVICE,
SHOULD BE SENT TO:
<TABLE>
<S> <C>
JAMES A. FITZPATRICK, JR., ESQ. STEPHEN G. ROONEY, ESQ.
JONATHAN L. FREEDMAN, ESQ. LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.
DEWEY BALLANTINE LLP 125 WEST 55TH STREET
1301 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019-5389
NEW YORK, NEW YORK 10019-6092 (212) 424-8000
(212) 259-8000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 8, 1997
Prospectus
LOGO
$75,000,000
% SENIOR NOTES DUE 20
Executive Risk Inc. ("ERI" or the "Company") is offering $75,000,000 aggregate
principal amount of % Senior Notes due 20 (the "Senior Notes"). Interest on
the Senior Notes is payable on and of each year,
commencing , 1998. The Senior Notes will mature on ,
20 . The Senior Notes may not be redeemed prior to maturity and are not subject
to any sinking fund.
The Senior Notes will be represented by one or more permanent global Senior
Notes registered in the name of The Depository Trust Company (the "Depositary")
or its nominee. Beneficial interests in the permanent global Senior Notes will
be shown on records maintained by participants, and transfers thereof will be
effected only through the Depositary or any participant. See "Description of
Notes--Book-Entry System." Except as described herein, Senior Notes in
definitive form will not be issued. Settlement for the Senior Notes will be made
in immediately available funds. The Senior Notes will trade in the Depositary's
Same-Day Funds Settlement System, and secondary trading activity in the Senior
Notes will therefore settle in immediately available funds.
The Senior Notes will be general unsecured obligations of the Company and will
rank senior in right of payment to all of the Company's existing or future
indebtedness that is by its terms expressly subordinated in right of payment to
the Senior Notes and will rank pari passu with all other existing or future
unsecured senior indebtedness of the Company.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SENIOR NOTES.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SENIOR NOTE % % %
TOTAL $75,000,000 $ $
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from .
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(3) Before deducting expenses payable by the Company, estimated at $ .
- --------------------------------------------------------------------------------
The Senior Notes are being offered by Chase Securities Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation (collectively, the "Underwriters"),
subject to prior sale, when, as and if issued by the Company and accepted by the
Underwriters, and subject to certain other conditions. The Underwriters reserve
the right to withdraw, cancel or modify such offers and to reject orders in
whole or in part. It is expected that delivery of the Senior Notes will be made
in book-entry form through the facilities of the Depositary on or about
.
CHASE SECURITIES INC. DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
The date of this Prospectus is December , 1997.
<PAGE> 3
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SENIOR NOTES,
INCLUDING OVERALLOTMENT, STABILIZING TRANSACTIONS AND SYNDICATE SHORT COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY OR
BY ANY UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE SENIOR NOTES OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION
FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO
WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY AND THE
UNDERWRITERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO
THE OFFERING OF THE SENIOR NOTES AND THE DISTRIBUTION OF THIS PROSPECTUS.
------------------------
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
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC
20549, and at the following regional offices of the Commission: 7 World Trade
Center, Suite 1300, New York, NY 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661-2511. Copies of such materials can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, DC 20549, at prescribed rates. The Commission
maintains a Web site on the Internet at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. In addition, copies of
the above reports, proxy statements and other information also may be inspected
at the offices of the NYSE, 20 Broad Street, New York, NY 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the securities offered hereby. This
Prospectus, which constitutes part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Senior Notes offered hereby, reference is hereby made to the
Registration Statement and the exhibits and schedules filed therewith, which may
be obtained from the principal office of the Commission in Washington, DC, upon
payment of the fees prescribed by the Commission.
2
<PAGE> 4
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference:
(i) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997; and
(iii) Current Reports on Form 8-K filed on February 18, 1997 and June 5,
1997.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
their respective dates of filing. 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 in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person (including any
beneficial owner of Senior Notes purchased in this offering) to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Written or telephone requests should be directed to the
Company at 82 Hopmeadow Street, Simsbury, CT 06070, Attention: Mr. Robert V.
Deutsch, Executive Vice President, telephone number (860) 408-2000.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This Prospectus and the documents
incorporated by reference herein, or any other written or oral statements made
by or on behalf of the Company, may include forward-looking statements which
reflect the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to uncertainties and
other factors that could cause actual results to differ materially from such
statements. These uncertainties and other factors (which are described in more
detail in the Company's Annual Report on Form 10-K for the year ended December
31, 1996, which is incorporated herein by reference) include, but are not
limited to, uncertainties relating to cyclical industry conditions,
uncertainties relating to government and regulatory policies, the legal
environment, the uncertainties of the reserving process, the competitive
environment in which the Company operates, the uncertainties inherent in
international operations, interest rate fluctuations and uncertainties related
to the Company's possible entrance into new insurance lines and new geographic
markets. The words "believe," "expect," "anticipate," "project," and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
their dates. The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements appearing elsewhere, or incorporated by reference, in this
Prospectus. Except where otherwise indicated, (i) the "Company" or "ERI" refers
to Executive Risk Inc., with respect to any period subsequent to December 31,
1993, and to its wholly-owned subsidiary, Executive Re Inc. ("Executive Re"),
with respect to any period prior to January 1, 1994; (ii) "ERII" refers to
Executive Risk Indemnity Inc. and "ERSIC" refers to Executive Risk Specialty
Insurance Company (ERII and ERSIC are wholly-owned insurance company
subsidiaries of the Company and are sometimes collectively referred to as the
"Insurance Subsidiaries"); (iii) "ERMA" refers to Executive Risk Management
Associates, the Company's wholly-owned underwriting agency which offers
insurance policies issued by ERII and ERSIC, as well as by certain other
insurance companies; (iv) "ERNV" refers to Executive Risk N.V., a Dutch
insurance company which is a wholly-owned subsidiary of Executive Re; and (v)
all financial information in this Prospectus is presented in accordance with
generally accepted accounting principles ("GAAP"), unless specified as being in
accordance with statutory accounting practices ("SAP").
THE COMPANY
ERI is a specialty insurance holding company which, through its
subsidiaries, develops, markets and underwrites directors and officers liability
insurance ("D&O") and errors and omissions liability insurance ("E&O") for
lawyers and other professionals. Based on the most recently available survey of
the domestic D&O market by Watson Wyatt Worldwide, the Company is a leading D&O
underwriter and is the leading underwriter of D&O for not-for-profit health care
organizations based on policy count. The Company's subsidiaries also offer
fiduciary liability insurance and fidelity bonds for corporations, employment
practices liability insurance for corporations and their employees, technology
maintenance and repair coverage for hospitals and clinics, stop-loss
arrangements for providers of medical services and medical malpractice liability
coverage for hospitals and other health care institutions. The Company markets
its products primarily through independent agents and brokers throughout the
United States. In recent years, the Company also has been marketing insurance
outside the United States, particularly in Europe. The Company intends to
continue the expansion of its international business. The Company and Union des
Assurances de Paris -- Incendie-Accidents have agreed to terminate, effective
December 31, 1997, their joint venture with respect to the marketing of D&O to
European insureds. Thereafter, the Company's operations in Europe will be
conducted through ERNV.
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, such liabilities can arise from claims by customers, vendors,
competitors and former employees, although the most severe liabilities have
historically arisen from lawsuits by stockholders alleging director or officer
failure 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 often implicated in employment practices litigation. E&O is most
often sold to professionals, such as attorneys, psychologists and insurance
agents, among others, where the principal sources of potential claims are
dissatisfied clients alleging breaches of professional standards or ethical
violations. Fiduciary liability coverages are intended primarily to protect
those who invest and administer benefit plan trusts, and fidelity insurance
coverages insure against losses associated with employee theft and other types
of employee dishonesty. Employment practices liability insurance, 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 non-liability
related products include a service contract and cost management product for
owners of high-tech diagnostic equipment and related health care technology, and
a stop-loss policy for providers of medical services that receive revenues for
their services under the capitation method.
The Company is in the process of exploring entry into certain new insurance
lines. Such entry could be by means of the establishment of new businesses or
the acquisition of existing businesses. Such new insurance lines may or may not
be related to the Company's core D&O and E&O lines.
4
<PAGE> 6
There can be no assurance as to whether the Company will in fact enter into any
such new insurance lines or, if it does, as to the timing thereof, or as to the
results of operations of such new insurance lines.
The following table sets forth the Company's gross premiums written by line
of business for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1996 GROSS 1995 GROSS 1994 GROSS
PREMIUMS PERCENT PREMIUMS PERCENT PREMIUMS PERCENT
WRITTEN OF TOTAL WRITTEN OF TOTAL WRITTEN OF TOTAL
---------- -------- ---------- -------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Domestic D&O....................... $240,680 72% $159,491 76% $104,871 81%
Lawyers E&O........................ 35,679 11 28,744 14 17,964 14
Miscellaneous E&O.................. 32,329 10 11,649 5 5,153 4
International D&O.................. 11,046 3 9,934 5 1,620 1
Other.............................. 12,351 4 822 -- 591 --
-------- --- -------- --- -------- ---
Total............................ $332,085 100% $210,640 100% $130,199 100%
======== === ======== === ======== ===
</TABLE>
The table below sets forth statutory combined ratios for the periods
indicated for the Insurance Subsidiaries and the property/casualty industry as a
whole. The Insurance Subsidiaries' specialty products business is not directly
comparable to the business of the property/casualty industry as a whole.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
SAP DATA:
Insurance Subsidiaries' Combined
Ratio.............................. 92.7% 90.7% 97.6% 102.1% 102.8%
Industry Combined Ratio(1)........... 105.9% 106.4% 108.4% 106.9% 115.7%
</TABLE>
- ---------------
(1) Source: Best's Aggregates & Averages -- Property-Casualty.
Approximately 92% of the Company's investment portfolio at September 30,
1997, on a fair value basis, consisted of cash and investment grade fixed
maturity securities. At that date, the Company's investment portfolio had an
amortized cost and fair value of $912.0 million and $956.0 million,
respectively, and the tax equivalent yield on the fixed maturity portfolio was
7.8%. The Company's investment philosophy is to seek optimum total return in a
manner consistent with what the Company believes is a generally conservative
investment approach. At September 30, 1997, the Company's total assets were $1.3
billion and stockholders' equity was $257.9 million.
The Insurance Subsidiaries' current pooled rating from A.M. Best Company,
Inc. ("A.M. Best") is "A (Excellent)" and their current pooled claims-paying
ability rating from Standard & Poor's Corporation ("S&P") is "A+ (Good)." These
ratings are based upon factors of concern to policyholders, including financial
condition and solvency, and are not directed to the protection of investors.
There can be no assurance that such ratings will not change in the future.
ERI employs approximately 480 people, most of whom are located at the
Company-owned headquarters building at 82 Hopmeadow Street, Simsbury,
Connecticut 06070.
5
<PAGE> 7
THE OFFERING
Securities Offered.............. $75,000,000 aggregate principal amount of %
Senior
Notes due 20 .
Maturity Date................... , 20 .
Interest Payment Dates.......... Interest on the Senior Notes will be payable
in cash semi-annually on , and
, of each year, commencing
, 1998.
Redemption...................... The Senior Notes will not be redeemable prior
to maturity.
Ranking......................... The Senior Notes will be general unsecured
obligations of the Company and will rank
senior in right of payment to all of the
Company's existing or future indebtedness
that is by its terms expressly subordinated
in right of payment to the Senior Notes and
will rank pari passu with all other existing
or future unsecured senior indebtedness of
the Company. The Senior Notes will be
effectively subordinated to all existing and
future liabilities of the Company's
subsidiaries. At September 30, 1997, the
liabilities of the Company's subsidiaries,
including obligations to the policyholders of
the Company's Insurance Subsidiaries,
amounted to $932.5 million.
Same-Day Settlement............. Initial settlement for the Senior Notes will
be made in immediately available funds. While
held in global form, the Senior Notes will
trade in the Depositary's Same-Day Funds
Settlement System, and settlement for any
secondary market trades and all payments of
principal and interest will be made in
immediately available funds.
Book-Entry System and Form and
Denomination of Senior Notes.... The Senior Notes will be issued in
denominations of $1,000 or any integral
multiple thereof. Payment of principal of,
and interest on, Senior Notes represented by
one or more permanent global Senior Notes
registered in the name of or held by the
Depositary or its nominee will be made in
immediately available funds to the Depositary
or its nominee as the registered owner and
holder of such permanent global Senior Note
or Senior Notes. Senior Notes will not be
issued in definitive form except under
certain limited circumstances described
herein. See "Description of Senior
Notes -- Book-Entry System."
Principal Covenants............. The indenture under which the Senior Notes
will be issued (the "Indenture") contains
covenants limiting, among other things, (i)
the creation and existence of liens by the
Company and its subsidiaries, (ii) the
issuance and disposition of capital stock of
the Company's subsidiaries and (iii) the
ability of the Company to effect a
consolidation, merger or sale of
substantially all of its assets as an
entirety.
Use of Proceeds................. The net proceeds from the issuance of the
Senior Notes offered hereby will be used by
the Company to make a contribution to the
capital and surplus of ERNV, in order to
support the development of its international
business, and for general corporate purposes.
See "Use of Proceeds."
6
<PAGE> 8
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following selected consolidated historical financial data as of
September 30, 1997 and 1996 and for each of the nine-month periods ended
September 30, 1997 and 1996 have been derived from unaudited consolidated
financial statements and include all adjustments (consisting only of normal
recurring accruals) that the Company considers necessary for a fair presentation
of such financial information for those periods. The results of operations for
the nine months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for any other interim period or for the full year
ended December 31, 1997. The selected consolidated historical financial data as
of December 31, 1996, 1995, 1994, 1993 and 1992 and for each of the years in the
five-year period ended December 31, 1996 have been derived from the audited
consolidated financial statements of the Company. The data set forth below
should be read in conjunction with the financial and other information included
in the Company's Annual Report on Form 10-K for the year ended December 31, 1996
and its Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- --------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Gross premiums written.................... $308,480 $229,511 $332,085 $210,640 $130,199 $84,255 $82,667
Net premiums written...................... 191,064 148,847 210,376 145,121 108,285 70,519 74,605
Net premiums earned....................... 151,222 111,404 155,784 116,434 94,961 69,014 71,926
Net investment income..................... 33,042 23,214 32,646 26,706 22,497 20,475 19,702
Net realized capital gains (losses)....... 1,928 (572) 1,047 1,588 (455) 1,964 869
Equity in earnings of ERMA................ -- -- -- -- -- 2,707 2,736
Other income (loss)....................... 150 135 166 83 82 (364) --
-------- -------- -------- -------- -------- -------- --------
Total revenues.......................... 186,342 134,181 189,643 144,811 117,085 93,796 95,233
Loss and loss adjustment expenses......... 101,543 75,279 105,335 78,530 64,171 46,640 51,427
Policy acquisition costs.................. 24,527 20,231 27,803 21,931 18,723 18,613 18,535
General and administrative costs.......... 20,334 11,704 17,068 10,730 8,890 8,749 6,409
Long-term incentive compensation.......... -- 187 187 1,458 1,009 1,100 --
Interest expense.......................... 1,446 3,192 4,511 2,022 1,519 1,421 1,420
Minority interest in Executive Risk
Capital Trust........................... 7,109 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total expenses.......................... 154,959 110,593 154,904 114,671 94,312 76,523 77,791
-------- -------- -------- -------- -------- -------- --------
Income before income taxes................ 31,383 23,588 34,739 30,140 22,773 17,273 17,442
Income tax expense........................ 5,486 4,059 6,634 4,854 3,533 2,360 2,870
-------- -------- -------- -------- -------- -------- --------
Income before cumulative effect of change
in accounting for income taxes.......... 25,897 19,529 28,105 25,286 19,240 14,913 14,572
Cumulative effect of change in accounting
for income taxes........................ -- -- -- -- -- -- 1,387
-------- -------- -------- -------- -------- -------- --------
Net income................................ $ 25,897 $ 19,529 $ 28,105 $ 25,286 $ 19,240 $14,913 $15,959
======== ======== ======== ======== ======== ======== ========
Earnings per common and common equivalent
share(1)................................ $ 2.50 $ 1.84 $ 2.67 $ 2.11 $ 1.80 $ 3.53 $ 3.44
======== ======== ======== ======== ======== ======== ========
Weighted average shares outstanding....... 10,377 10,624 10,509 11,956 10,108 3,128 3,120
Earnings per common share--assuming full
dilution(1)............................. $ 2.49 $ 1.83 $ 2.67 $ 2.11 $ 1.69 $ 1.69 $ 1.66
======== ======== ======== ======== ======== ======== ========
Weighted average shares outstanding--
assuming full dilution.................. 10,410 10,668 10,542 11,978 11,365 9,238 9,230
</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.
7
<PAGE> 9
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and invested assets........... $ 956,049 $628,289 $690,975 $549,852 $431,849 $371,596 $319,773
Total assets(2).................... 1,315,371 824,306 941,247 705,920(6) 516,747 420,382 361,149
Long-term debt..................... -- 70,000 70,000 25,000 25,000 25,000 25,000
Company obligated mandatorily
redeemable preferred
securities....................... 125,000 -- -- -- -- -- --
Stockholders' equity(2)............ 257,864 126,898 144,775 177,725 130,854 114,837 92,473
OTHER DATA:
Loss ratio......................... 67.1% 67.6% 67.6% 67.4% 67.6% 67.6% 71.5%
Expense ratio...................... 29.7 28.6 28.8 28.1 29.1 39.6 34.7
---------- -------- -------- -------- -------- -------- --------
Combined ratio..................... 96.8% 96.2% 96.4% 95.5% 96.7% 107.2% 106.2%
========== ======== ======== ======== ======== ======== ========
Ratio of net premiums written to
statutory surplus(3)(4).......... 1.1 1.5 1.5 1.2 1.0 0.7 0.8
Statutory surplus (at end of
period)(3)....................... $ 225,953 $126,479 $138,405 $121,465 $107,401 $ 94,445 $ 91,689
Operating margin(5)................ 20.6% 20.3% 20.3% 21.3% 21.1% 19.3% 19.3%
Ratio of earnings to fixed
charges(7)(8).................... 4.7 8.8 9.1 17.6 15.1 12.9 12.7
Ratio of debt to total
capitalization(9)................ 17.6% 35.6% 32.6% 12.3% 16.0% 17.9% 21.3%
</TABLE>
- ---------------
(2) As of September 30, 1997 and 1996 and as of December 31, 1996, 1995, 1994
and 1993, includes $16.7 million, $8.8 million, $11.7 million, $15.4
million, ($3.3) million and $12.4 million, respectively, 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 SAP.
(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, minority
interest in Executive Risk Capital Trust, realized capital gains (losses)
and certain non-recurring expenses, divided by total revenues, excluding
realized capital gains (losses).
(6) Certain 1995 amounts have been reclassified to conform with the 1996
presentation.
(7) For purposes of computing 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, amortization of financing costs and that portion of rent
expense deemed representative of the interest factor in such rent expense.
(8) For the nine months ended September 30, 1997, the decline in ratio of
earnings to fixed charges from the prior year period reflects interest
expense associated with the February 1997 issuance by a trust affiliated
with the Company (the "Trust") of $125 million of Company obligated
mandatorily redeemable preferred securities (the "Capital Securities").
(9) Ratio of debt to total capitalization has been calculated by assigning to
the Capital Securities partial equity credit, limited to 15% of total
capital of the Company and its consolidated subsidiaries, after giving
effect to the issuance of the Capital Securities.
8
<PAGE> 10
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors and risks should be considered carefully by potential purchasers in
evaluating the Company, its business and the Senior Notes offered hereby:
RANKING; HOLDING COMPANY STRUCTURE; DIVIDEND RESTRICTIONS
The Senior Notes will be general unsecured obligations of the Company and
will rank pari passu with all other senior indebtedness of the Company and
senior to all subordinated indebtedness of the Company. However, because the
Senior Notes will be unsecured, they will be effectively subordinated to all
secured indebtedness of the Company.
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 the creditors of such subsidiary, except to the extent the Company may
itself be recognized as a creditor of such subsidiary. Accordingly, the Senior
Notes will be effectively subordinated to all existing and future liabilities
and obligations of the Company's subsidiaries, including obligations to
policyholders of the Company's Insurance Subsidiaries, which liabilities and
obligations totalled approximately $932.5 million at September 30, 1997. The
Indenture also does not preclude the Company or its subsidiaries from issuing
indebtedness, subject to the covenant described below under "Description of
Senior Notes -- Certain Covenants of the Company -- Limitation on Liens."
Holders of Senior Notes should look only to the assets of the Company for
payments on the Senior Notes.
ERI is an insurance holding company. Dividends and other payments from the
Insurance Subsidiaries and ERMA are ERI's primary source of funds to pay
expenses, service debt (including principal and interest on the Senior Notes)
and pay dividends, if any. The payment of dividends by ERII and ERSIC is subject
to restrictions set forth in the Delaware and the Connecticut insurance laws,
respectively. In general, these restrictions limit the aggregate amount of
dividends or other distributions that the Insurance Subsidiaries may declare or
pay to ERI within any 12-month period without the permission of the applicable
regulatory authority (generally to an amount less than the greater of statutory
net income (excluding realized capital gains in the case of Delaware) for the
preceding year or 10% of statutory surplus), and require that the statutory
surplus of the applicable Insurance Subsidiary following any such dividend or
distribution be reasonable in relation to its outstanding liabilities and
adequate to its financial needs. 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. As of the date hereof, no dividends have been paid to the Company by
the Insurance Subsidiaries during 1997.
The Company's two other insurance company subsidiaries, ERNV and Executive
Risk (Bermuda) Ltd., are domiciled in the Netherlands and Bermuda, respectively,
the laws of each of which jurisdictions impose capital requirements and dividend
restrictions on such subsidiaries.
LIMITED COVENANTS
The Indenture does not contain any provisions specifically intended to
protect holders of the Senior Notes in the event of a future highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company. The Indenture does not contain any provision which will
restrict the Company or its subsidiaries from incurring, assuming or being
liable with respect to any indebtedness or other obligations, or from paying
dividends or making other distributions on its capital stock or purchasing or
redeeming its capital stock other than the covenant described below under
"Description of Senior Notes -- Certain Covenants of the Company -- Limitation
on Liens." The Indenture does not contain any financial ratios or specified
levels of net worth or liquidity to which the Company must adhere. In addition,
the Indenture does not contain any provision which would require that the
Company repurchase or redeem or otherwise modify the terms of any of the Senior
Notes upon a change of control or other events involving the
9
<PAGE> 11
Company which may adversely affect the creditworthiness of the Senior Notes. See
"Description of Senior Notes."
CERTAIN BUSINESS CONSIDERATIONS
Factors affecting the sectors of the insurance industry in which the
Company operates may subject the Company to significant fluctuations in
operating results. These factors include competition and general economic
conditions, including interest rate levels, as well as legislative initiatives,
the frequency of litigation, and the size of judgments obtained against
insureds. The impact of these factors can dramatically affect demand for the
Company's products, insurance capacity, pricing and claims experience and,
consequently, the Company's results of operations. Due to the Company's
underwriting policy of pricing its insurance products primarily according to
perceived risk exposure rather than according to pricing patterns in the market,
it is possible that the Company will seek to raise prices during times of excess
insurance capacity (or, will not seek to raise prices during times of limited
insurance capacity) with an accompanying adverse impact on the Company's results
of operations, market share or both.
The professional liability insurance sectors of the property/casualty
industry have experienced a prolonged "soft market," characterized by intense
competition and strong downward pricing pressures. The Company's business
strategy for continued growth relies on finding underserved markets, primarily
in the D&O and E&O sectors, where it can create and profitably underwrite
attractive insurance products. The Company's ability to pursue such strategy
entails certain risks, due to the highly competitive nature of the insurance
industry. The Company competes with domestic and foreign insurers and
reinsurers, some of which have greater financial, marketing and management
resources and experience than the Company. The Company may also be required to
compete with new market entrants in the future. Competition is based on many
factors, including the perceived financial strength of the insurer, pricing and
other terms and conditions, levels of customer service (including the speed with
which claims are paid), ratings assigned by independent rating organizations
(including A.M. Best and S&P) and reputation and experience in the business.
This competition could have an adverse effect on the Company's results of
operations. In addition, with respect to the Company's ratings, A.M. Best and
S&P each reviews its ratings of insurance companies from time to time. There can
be no assurance that any particular rating will continue for any given period of
time or that it will not be changed or withdrawn entirely if, in the judgment of
the rating agency, circumstances so warrant. If either the Company's A.M. Best
rating or its claims-paying ability rating from S&P were downgraded from its
current level, the Company's results of operations could be materially and
adversely affected.
The Company offers liability coverage on a program basis, that is, through
wholesale brokers who control regional or national books of business. These
"program administrators" function similarly to managing general agents. They are
authorized to receive insurance applications and issue Insurance Subsidiary
policies, all in accordance with underwriting criteria specified by the Company.
Program administrators generally are not authorized to handle or pay claims or
to bind reinsurance. Distribution through program administrators entails certain
fidelity, credit and underwriting risks not ordinarily encountered in connection
with the Company's other distribution methods.
REGULATION
The Insurance Subsidiaries are subject to a substantial degree of
regulatory oversight, which generally is designed to protect the interests of
policyholders as opposed to stockholders. Such regulation relates to authorized
lines of business, policy rates and forms, capital and surplus requirements,
investment parameters, underwriting limitations, transactions with affiliates,
dividend limitations, changes in control and a variety of other financial and
nonfinancial components of an insurance company's business. The Company believes
that more, rather than less, regulation is likely in the future. The National
Association of Insurance Commissioners (the "NAIC") has adopted a system of
assessing the financial condition and stability of insurance companies, known
10
<PAGE> 12
as "IRIS ratios," and a system to test the adequacy of statutory capital, known
as "risk-based capital," each of which applies to the Insurance Subsidiaries.
IRIS ratios consist of 11 ratios that are compiled annually from each insurance
company's statutory financial reports and then compared against the
NAIC-established "usual range" for each ratio. The Insurance Subsidiaries, which
are experiencing premium growth, have fallen outside the usual range for certain
IRIS ratios from time to time. The risk-based capital rules, required for the
first time in regulatory filings for 1994, establish statutory capital
requirements based on levels of risk assumed by an insurance company. The
formulas for determining the amount of risk-based capital specify various
weighting factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance is
determined by a ratio of the insurance company's regulatory total adjusted
capital to its authorized control level risk-based capital, both as defined by
the NAIC, calculated as of the end of each fiscal year. At December 31, 1996,
the total adjusted capital (as defined by the NAIC) of ERII and ERSIC was in
excess of the risk-based capital regulatory action level. The application of the
proceeds from the February 1997 offering of the Capital Securities caused the
total adjusted capital of ERII and ERSIC to exceed the risk-based capital
company action level, which is a higher standard. See Note 16 of the Notes to
Consolidated Financial Statements included in the Company's Annual Report on
Form 10-K incorporated herein by reference. Failure to maintain risk-based
capital at the required levels, or generation of IRIS ratios far outside the
NAIC's usual range, could adversely affect the Insurance Subsidiaries' ability
to secure regulatory approvals as necessary or appropriate in connection with
their insurance businesses.
ADEQUACY OF LOSS RESERVES
The reserves for losses and loss adjustment expenses represent the
Company's estimates of liability on outstanding claims. These estimates involve
actuarial and statistical projections of the expected ultimate cost of
administering and settling these claims based on facts and circumstances then
known, predictions of future events, estimates of future trends in claims
severity and other variable factors such as inflation and new theories of
liability. As estimates, reserves may not accurately reflect amounts that are
ultimately incurred in administering and settling insured losses, particularly
in the instance of companies with relatively short operating histories or
companies that have a heavy reliance on relatively newer product lines, such as
the Company. If the reserve estimates prove to be inadequate, the Company would
be required to augment its reserves, resulting in a charge to earnings in the
period in which such action occurs. Although the Company believes that its
reserves are adequate, there can be no assurance that ultimate loss experience
will not exceed the Company's reserves, resulting in a material adverse effect
on the Company's financial condition and results of operations. Since 1988, the
Company has retained the services of an independent actuarial consulting firm to
provide opinions regarding reserves as required for state regulatory filings.
The Company intends to utilize such services in the future. In addition,
although the Company seeks to spread risk through the use of reinsurance
programs, like other insurance companies, it is subject to the risk of severe or
multiple losses, which could materially and adversely affect its financial
position and results of operations.
REINSURANCE
The Company has historically utilized reinsurance arrangements to limit the
amount of risk retained under policies written or reinsured by the Insurance
Subsidiaries. The Company currently has in place a number of reinsurance
programs pursuant to which it cedes risks. The ceding of risk to reinsurers does
not relieve the Company of liability to its insureds and reinsureds, and
consequently the Company is subject to credit risk with respect to its
reinsurers. While the Company endeavors to reinsure only with financially sound
reinsurers, there can be no assurance that the Company will not experience
difficulties in the future in collecting reinsurance recoverables under these
arrangements should one or more of its reinsurers suffer financial detriment. In
addition, the availability and cost of reinsurance arrangements are subject to
prevailing market conditions, which are beyond the Company's control. The
Company may in the future choose to revise further its reinsurance practices to
increase, decrease or eliminate entirely the amount of risk it cedes to
reinsurers.
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the issuance of the Senior Notes
(after deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company in connection therewith) are estimated to be
$ million. The Company expects to use the net proceeds from the issuance of
the Senior Notes to make a contribution to the capital and surplus of ERNV, in
order to support the development of its international business, and for general
corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Company for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges....................... 4.7 8.8 9.1 17.6 15.1 12.9 12.7
Ratio of Earnings to Fixed
Charges, Excluding Net
Realized Capital Gains
(Losses)...................... 4.5 9.0 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, amortization of financing costs and that portion of rent expense deemed
representative of the interest factor in such rent expense.
For the nine months ended September 30, 1997, the decline in ratio of
earnings to fixed charges from the prior year period reflects interest expense
associated with the February 1997 issuance of the Capital Securities.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1997 and as adjusted to give effect to the issuance
and sale of the Senior Notes offered hereby and the application of the net
proceeds as described in "Use of Proceeds." The data set forth below should be
read in conjunction with the financial and other information included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 and
its Quarterly Report on Form 10-Q for the quarter ended September 30, 1997
incorporated herein by reference.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Senior Notes offered hereby........................................... $ -- $ 75,000
Company obligated mandatorily redeemable preferred securities of
subsidiary Executive Risk Capital Trust holding solely $125,000,000
aggregate principal amount of 8.675% Series B Junior Subordinated
Deferrable Interest Debentures of the Company due February 1, 2027
and $3,866,000 aggregate principal amount of 8.675% Series A Junior
Subordinated Deferrable Interest Debentures of the Company due
February 1, 2027.................................................... 125,000 125,000
Stockholders' equity:
Common stock, $0.01 par value, 50,000,000 shares authorized;
11,854,564 shares issued, 10,740,143 shares outstanding(1)....... 119 119
Additional paid-in capital.......................................... 171,558 171,558
Unrealized gains on investments, net of tax......................... 28,636 28,636
Currency translation adjustments.................................... (578) (578)
Retained earnings................................................... 90,689 90,689
Cost of shares in treasury, at cost--1,114,421 shares............... (32,560) (32,560)
-------- --------
Total stockholders' equity....................................... 257,864 257,864
-------- --------
Total capitalization........................................... $382,864 $ 457,864
======== ========
</TABLE>
- ---------------
(1) Does not include (i) 1,649,484 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., (iii) 42,642 shares of Common
Stock issuable upon exercise of options granted to directors under the
Company's Nonemployee Directors Stock Option Plan, (iv) 35,780 shares of
Common Stock issuable upon exercise of options granted to former directors
of Executive Re and (v) any shares of Common Stock issuable pursuant to the
Company's Stock Incentive Plan and Performance Share Plan.
13
<PAGE> 15
DESCRIPTION OF SENIOR NOTES
SENIOR NOTES
The statements herein relating to the Senior Notes and the following
summary of certain general provisions of the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indenture (as it may be amended or supplemented
from time to time), including the definitions therein of certain terms
capitalized in this Prospectus. All article and section references appearing
herein are to articles and sections of the Indenture. A copy of the form of the
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.
GENERAL
The Senior Notes will be issued under an indenture to be dated as of
December , 1997 (the "Indenture"), between the Company and The Chase Manhattan
Bank as trustee (the "Trustee").
The Senior Notes will be issued only in fully registered form, without
coupons, in minimum denominations of $1,000 or any integral multiple thereof. As
discussed below, payment of principal of, and interest on, Senior Notes
represented by one or more permanent global Senior Notes registered in the name
of or held by the Depositary or its nominee will be made in immediately
available funds to the Depositary or its nominee as the registered owner and
holder of such permanent global Senior Note or Senior Notes ("Global Notes").
The Senior Notes will be general unsecured obligations of the Company
limited to $75,000,000 aggregate principal amount and will rank senior in right
of payment to all existing or future indebtedness of the Company which is by its
terms expressly subordinated in right of payment to the Senior Notes and will
rank pari passu with all other existing or future unsecured senior indebtedness
of the Company. See "-- Ranking."
The Company will from time to time execute and deliver Senior Notes to the
Trustee for authentication and delivery, and the Trustee will authenticate and
deliver such Senior Notes upon written order of the Company. No service charge
will be made for any transfer or exchange of the Senior Notes, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
TERMS OF THE NOTES
Interest on the Senior Notes will be payable semi-annually in arrears on
and of each year, commencing , 1998, to
Holders of record on the preceding and , respectively,
at the per annum rate set forth on the cover page of this Prospectus, with
respect to interest accrued (based on a 360-day year of twelve 30-day months)
from the preceding Interest Payment Date (or from the date of issuance in the
case of the first interest payment) to but excluding the current interest
payment date.
The Senior Notes are not redeemable prior to maturity and no sinking fund
will be established with respect to the Senior Notes.
RANKING
The Senior Notes offered hereby will rank equally with the Company's other
general unsecured and unsubordinated indebtedness, including indebtedness from
time to time outstanding to banks and other unaffiliated lenders. The Senior
Notes will be effectively subordinated to any and all existing and future
secured indebtedness of the Company (to the extent of the value of the related
collateral). In addition, because the Company is a holding company whose
operations are conducted through the Subsidiaries, the Senior Notes will be
structurally subordinated to any and all existing and future liabilities
(whether or not secured) of any Subsidiary of the Company, including
14
<PAGE> 16
obligations to policyholders of the Company's Insurance Subsidiaries, which
liabilities totalled approximately $932.5 million at September 30, 1997. The
rights of the Company to participate in any distribution of earnings or assets
of any of its Subsidiaries (and thus the ability of the Company to use earnings
and assets of its Subsidiaries to pay principal and interest on the Senior
Notes) are subject to insurance regulatory and other statutory restrictions,
including limitations on the amount of dividends that may be paid by the
Company's Insurance Subsidiaries in any year without the prior approval of the
regulatory authorities, as more fully described in "Risk Factors -- Ranking;
Holding Company Structure; Dividend Restrictions." As of September 30, 1997, the
Company had outstanding no Senior Indebtedness and $125 million of Junior
Subordinated Debentures. See "Capitalization." The Indenture does not prohibit
the Company or its Subsidiaries from issuing additional debt securities or
incurring bank or other loans that may rank pari passu in right of payment to
the Senior Notes offered hereby, nor does it prohibit Subsidiaries of the
Company from issuing additional debt securities or incurring bank or other loans
that may be structurally senior in right of payment to the Senior Notes offered
hereby.
CERTAIN COVENANTS OF THE COMPANY
Limitations on Liens. The Indenture contains a covenant providing that
neither the Company nor any Subsidiary may incur, issue, assume or guarantee any
Indebtedness secured by a Lien on any property or assets of the Company or any
Subsidiary, or any shares of Capital Stock of any Subsidiary, without
effectively providing that the Senior Notes (together with, if the Company shall
so determine, any other Indebtedness which is not subordinated to the Senior
Notes) shall be secured equally and ratably with (or prior to) such
Indebtedness, so long as such Indebtedness shall be so secured; provided,
however, that this covenant shall not apply to Indebtedness secured by (i) Liens
existing on the date of the Indenture; (ii) Liens on property or assets of, or
on any shares of stock of, any entity existing at the time such entity becomes a
Subsidiary or merges into or consolidates with the Company or a Subsidiary;
(iii) Liens on property or assets or on shares of stock existing at the time of
acquisition thereof by the Company or any Subsidiary (including acquisition
through merger or consolidation or by a sale, lease or other disposition of the
properties of a corporation as an entirety or substantially as an entirety to
the Company or a Subsidiary); (iv) Liens to secure the financing of the
acquisition, construction or improvement of property, or the acquisition of
shares of stock by the Company or any Subsidiary, provided that such Liens cover
only the property or shares so acquired, constructed or improved and are created
not later than one year after such acquisition or, in the case of property, not
later than one year after completion of construction, improvement or
commencement of commercial operation, whichever is later; (v) Liens in favor of
the Company or any Subsidiary; (vi) Liens in favor of, or required by,
governmental authorities; (vii) Liens in favor of the Trustee for the benefit of
the Holders of the Senior Notes; (viii) Liens securing Indebtedness in an
aggregate principal amount not in excess of 10% of the Company's Total
Capitalization; and (ix) any extension, renewal or replacement, as a whole or in
part, of any Lien referred to in the foregoing clauses (i) to (viii) inclusive;
provided, however, that (a) such extension, renewal or replacement Lien shall be
limited to the same property, assets or shares of stock that secured the Lien
extended, renewed or replaced and (b) in the case of clauses (i), (ii), (iii)
and (iv) above, the Indebtedness secured by such Lien at such time is not so
increased (other than an increase in such Indebtedness equal to the amount of
any premium required to be paid in connection with, or reasonably determined by
the Company to be necessary to accomplish, any extension, renewal or replacement
of such Indebtedness and the expenses of the Company and its Subsidiaries
incurred in any such extension, renewal or replacement of such Indebtedness)
and, in the case of clause (viii) above, any increases will be subject to the
limit contained therein (collectively, the "Excluded Liens"). (Section 9.9)
Consolidation, Merger or Sale of Assets. The Indenture provides that the
Company shall not consolidate with or merge into any other Person or transfer,
sell, convey or lease its properties and assets substantially as an entirety,
nor may the Company permit any Person to consolidate with or merge into the
Company or transfer, sell, convey or lease its properties and assets
substantially as
15
<PAGE> 17
an entirety to the Company, unless: (i) the Person formed by such consolidation
or into which the Company is merged or the Person which acquires its properties
and assets is organized in the United States; (ii) the Person formed by such
consolidation or into which the Company is merged expressly assumes all of the
obligations of the Company under the Senior Notes and under the Indenture; (iii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have happened and be continuing; (iv) if, as a result of such
consolidation or merger or such conveyance, transfer or lease, properties or
assets of the Company would become subject to a Lien which is not an Excluded
Lien, the Company shall secure the Senior notes equally and ratably with the
indebtedness secured by such Lien; and (v) the Company shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel to the effect
that all conditions in the Indenture have been complied with. Upon any such
consolidation or merger into any other Person or any transfer, sale, conveyance
or lease of the Company's properties and assets substantially as an entirety to
any Person, the successor Person formed by such consolidation, or into which the
Company is merged or to which such transfer, sale, conveyance or lease is made,
shall succeed to, and be substituted for the Company under the Senior Notes and
the Indenture, and the Company, except in the case of a lease, shall be relieved
of all obligations and covenants under the Indenture and the Senior Notes it was
subject to as the predecessor corporation. (Section 7.1.)
Under the laws of New York, which govern the Indenture, there is no
established meaning of the phrase "substantially as an entirety" with regard to
a company's assets or property, and the interpretation of such phrase is very
fact-intensive. Due to such uncertainty, it may be difficult for Holders of the
Senior Notes to ascertain whether a viable claim exists under the Indenture with
respect to any given transaction.
Limitation on Disposition of Stock of Restricted Subsidiaries. The
Indenture provides that the Company will not, and will not permit any Subsidiary
to, issue, sell, transfer or otherwise dispose of, directly or indirectly, any
shares of Capital Stock (other than preferred stock having no voting rights of
any kind) of any Restricted Subsidiary (or of any Subsidiary having direct or
indirect control of any Restricted Subsidiary) except for, subject to the
covenant relating to mergers and sales of assets described in "-- Consolidation,
Merger or Sale of Assets", (i) directors' qualifying shares, (ii) any issuance,
sale, transfer or other disposition of any Capital Stock of any Restricted
Subsidiary (or of any Subsidiary having direct or indirect control of any
Restricted Subsidiary) to the Company or to a wholly-owned Subsidiary of the
Company or (iii) any issuance, sale, transfer or other disposition of any
Capital Stock of any Restricted Subsidiary (or of any Subsidiary having direct
or indirect control of any Restricted Subsidiary) made for at least a fair value
consideration as determined by the Board of Directors of the Company pursuant to
a Board Resolution adopted in good faith. (Section 9.10.)
The Company is not required pursuant to the Indenture to repurchase the
Senior Notes, in whole or in part, with the proceeds of any sale, transfer or
other disposition of any shares of Capital Stock of any Subsidiary (or of any
Subsidiary having direct or indirect control of any other Subsidiary).
Furthermore, the Indenture does not provide for any restrictions on the
Company's use of any such proceeds.
The Indenture does not contain any provisions specifically intended to
protect Holders of the Senior Notes in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company. The Indenture does not contain any provisions which will
restrict the Company from incurring, assuming or becoming liable with respect to
any indebtedness or other obligations, or from paying dividends or making other
distributions on its Capital Stock or purchasing or redeeming its Capital Stock
other than the covenant described above in "-- Limitation on Liens." The
Indenture does not contain any financial ratios or specified levels of net worth
or liquidity to which the Company must adhere. In addition, the Indenture does
not contain any provision which would require that the Company repurchase or
redeem or otherwise modify the terms of any of the Senior Notes upon a change in
control or other events involving the Company which may adversely affect the
creditworthiness of the Senior Notes.
16
<PAGE> 18
CERTAIN DEFINITIONS
"Capital Stock" is defined in the Indenture to mean any and all shares,
interests, rights to purchase, warrants, options, participations, or other
equivalents of or interests in (however designated) corporate stock, including
any class or classes of corporate stock which is preferred as to the payment of
dividends, or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such corporation, over shares of corporate stock
of any other class of such corporation. (Section 1.1.)
"Indebtedness" is defined in the Indenture to mean, with respect to any
Person, (i) every obligation of such Person for money borrowed, or under any
reimbursement obligation relating to a letter of credit (other than letters of
credit obtained in the ordinary course of business), (ii) every obligation
evidenced by a bond, note, debenture or similar instrument (including a purchase
money obligation) given in connection with the acquisition of any businesses,
properties or assets of any kind or with services incurred in connection with
capital expenditures (other than indebtedness to trade creditors arising in the
ordinary course of business) (provided, however, that the deferred purchase
price of any business, property or assets shall not be considered Indebtedness
if the purchase price thereof is payable in full within 90 days from the date on
which such indebtedness was incurred), (iii) every obligation of such Person in
respect of lease rentals which, under GAAP would be shown on a balance sheet of
such Person as a liability (other than a current liability or a deferred item),
(iv) every guarantee, direct or indirect, or any obligation described in clauses
(i) through (iii) above and (v) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any obligation described in clauses
(i) through (iii) above. For purposes of the Indenture, Indebtedness also
includes any obligation of, or any obligation guaranteed by, any Person for the
payment of amounts due under a swap agreement or similar instrument or
agreement, or under a foreign currency hedge exchange or similar instrument or
agreement. (Sections 1.1 and 9.9.)
"Restricted Subsidiary" is defined in the Indenture to mean a Subsidiary,
including its Subsidiaries, which meets any of the following conditions (in each
case determined in accordance with generally accepted accounting principles):
(i) the Company's and its other Subsidiaries' investments in and advances to
such Subsidiary exceed ten percent (10%) of the Total Assets of the Company and
its Subsidiaries on a consolidated basis as of the end of the most recently
completed fiscal quarter; (ii) the Company's and its other Subsidiaries'
proportionate share of the total assets (after intercompany eliminations) of
such Subsidiary exceeds ten percent (10%) of the total assets of the Company and
its Subsidiaries on a consolidated basis as of the end of the most recently
completed fiscal quarter; or (iii) the Company's and its other Subsidiaries'
equity interest in the income from continuing operations before income taxes,
extraordinary items and cumulative effect of a change in accounting principles
of such Subsidiary exceeds ten percent (10%) of such income of the Company and
its Subsidiaries on a consolidated basis for the most recently completed fiscal
quarter. (Section 1.1.)
"Subsidiary" is defined in the Indenture to mean, with respect to any
Person, (a) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock or other equity
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof is at the time owned
or controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof) and (b) any
partnership (i) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (ii) the only general
partners of which are such Person or one or more Subsidiaries of such Person (or
any combination thereof).
"Total Capitalization" is defined in the Indenture to mean, as of the date
of determination, the Company's consolidated stockholders' equity, plus Company
obligated mandatorily redeemable preferred securities, plus outstanding
indebtedness for borrowed money of the Company all as of
17
<PAGE> 19
the end of the most recently completed fiscal quarter of the Company and as set
forth in the Company's balance sheet as of the last day of such fiscal quarter,
plus any equity securities or Company obligated mandatorily redeemable preferred
securities issued or indebtedness for borrowed money incurred (net of any such
securities or indebtedness retired, redeemed or repaid) since the end of such
quarter and prior to such date of determination, and including any indebtedness
for borrowed money proposed to be incurred at such date of determination.
Additional covenants with respect to the Senior Notes may be added to the
Indenture by supplemental indenture.
EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
The Indenture provides that, if any Event of Default specified therein
occurs with respect to the Senior Notes and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of all of the outstanding
Senior Notes, by written notice to the Company (and to the Trustee, if notice is
given by such Holders of Senior Notes), may declare the principal of and accrued
interest on all the Senior Notes to be due and payable. (Section 5.2.)
Events of Default with respect to the Senior Notes are defined in the
Indenture as being any one of the following events: (a) a default for 30 days in
payment of interest on any Senior Note when due; (b) a default in payment of
principal, or premium, if any, at maturity or otherwise when due on any Senior
Note; (c) a default for 60 days after notice to the Company by the Trustee, or
by the Holders of at least 25% in aggregate principal amount of the Senior Notes
then Outstanding, in the performance of any other agreement in the Senior Notes
or in the Indenture; (d) (i) failure by the Company or any Subsidiary to pay any
portion of the principal of any Indebtedness having an aggregate principal
amount of $15 million or more when due and payable after the expiration of any
applicable grace period with respect thereto or (ii) acceleration of the
maturity of any Indebtedness of the Company or any Subsidiary in excess of $15
million and such acceleration is not rescinded or annulled or such Indebtedness
is not paid in full within 10 days after written notice thereof 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 Senior Notes then Outstanding, provided
that any such Event of Default will be deemed to be remedied or waived if the
default that resulted in the acceleration of such other indebtedness is
remedied, cured or waived; and (e) certain events of bankruptcy, insolvency or
reorganization of the Company. (Section 5.1.)
The Trustee will, within 90 days after the occurrence of a Default with
respect to the Senior Notes, give to the Holders of the Senior Notes notice of
all Defaults known to it unless such Default shall have been cured or waived;
provided that except in the case of a Default in payment on the Senior Notes,
the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding such notice is in
the interests of the Holders of the Senior Notes. (Section 6.6.) "Default" means
any event which is, or after notice or passage of time or both, would be, an
Event of Default. (Section 1.1.)
The Indenture provides that the Holders of a majority in aggregate
principal amount of the Senior Notes may, subject to certain limited conditions,
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 such
Trustee. (Section 5.8.)
The Indenture includes a covenant that the Company will file annually with
the Trustee a certificate as to the Company's compliance with all conditions and
covenants of the Indenture. (Section 9.7.)
The Holders of a majority in aggregate principal amount of the Senior Notes
by notice to the Trustee for such series may waive, on behalf of the Holders of
all Senior Notes, any past Default or Event of Default and its consequences
except a Default or Event of Default in the payment of the
18
<PAGE> 20
principal of or interest on any Senior Note, and except in respect of any Event
of Default resulting from the breach of a covenant or provision of the Indenture
which cannot be amended or modified without the consent of the Holders of each
Outstanding Senior Note. (Section 5.7.)
MODIFICATION OF THE INDENTURE
The Indenture permits the Company and the Trustee to enter into one or more
supplemental indentures without the consent of the Holders of any of the Senior
Notes in order, among other things, (i) to evidence the succession of another
corporation to the Company and the assumption of the covenants of the Company by
a successor to the Company; (ii) to add to the covenants of the Company or
surrender any right or power of the Company; (iii) to add additional Events of
Default with respect to the Senior Notes; (iv) to evidence and provide for
successor Trustees; (v) to secure the Senior Notes; (vi) to correct any defect
or supplement any inconsistent provisions or to make any other provisions with
respect to matters or questions arising under the Indenture, provided that such
action does not materially adversely affect the interests of any Holder of
Senior Notes; or (vii) to cure any ambiguity or correct any mistake, provided,
such action shall not materially adversely affect the interests of any Holder of
Senior Notes. (Section 8.1.)
The Indenture also permits the Company and the Trustee, with the consent of
the Holders of a majority in aggregate principal amount of the Outstanding
Senior Notes, to execute supplemental indentures adding any provisions to or
changing or eliminating any of the provisions of the Indenture or any
supplemental indenture or modifying the rights of the Holders of Senior Notes,
except that, without the consent of the Holder of each Senior Note so affected,
no such supplemental indenture may: (i) change the Stated Maturity of the
principal or interest on any Senior Note; (ii) reduce the principal of or
interest on any Senior Note, or change the manner in which the amount of any of
the foregoing is determined; (iii) change the currency in which any Senior Note
or any premium or interest thereon is payable; (iv) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Senior Note; (v) reduce the percentage in principal amount of the Outstanding
Senior Notes the consent of whose Holders is required for modification or
amendment of the Indenture or for waiver of compliance with certain provisions
of the Indenture or for waiver of certain defaults; (vi) change the obligation
of the Company to maintain an office or agency in the places and for the
purposes specified in the Indenture; or (vii) modify the provisions relating to
waiver of certain defaults or any of the foregoing provisions. (Section 8.2.)
DEFEASANCE AND COVENANT DEFEASANCE
The Company may elect either (i) to defease and be discharged from any and
all obligations with respect to the Senior Notes ("defeasance") or (ii) to be
released from its obligations with respect to certain covenants applicable to
the Senior Notes ("covenant defeasance"), upon the deposit with the Trustee (or
other qualifying trustee), in trust for such purpose, of money and/or Government
Obligations which through the payment of principal and interest in accordance
with their terms will provide money in an amount sufficient, without
reinvestment, to pay the principal of and interest on the Senior Notes to
Maturity. The conditions to defeasance or covenant defeasance include the
following: (i) that such action will not result in a breach or violation of the
Indenture or a default under any other material agreement to which the Company
is a party and (ii) such defeasance or covenant defeasance will not result in
the Trustee having a conflicting interest for purposes of the Trust Indenture
Act or in the trust arising from such deposit to constitute an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
In addition, as a condition to covenant defeasance, the Company must deliver to
the Trustee an Opinion of Counsel to the effect that the Holders of the Senior
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such covenant defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred. Under current United
States federal income tax laws, defeasance of the sort contemplated in the
Indenture would be treated as
19
<PAGE> 21
an exchange of the relevant Senior Notes in which Holders of the Senior Notes
might recognize gain or loss. In addition, thereafter, the amount, timing and
character of amounts that Holders would be required to include in income might
be different from that which would be includable in the absence of such
defeasance. Prospective investors are urged to consult their own tax advisors as
to the specific consequences of a defeasance, including the applicability and
effect of tax laws other than the United States federal income tax laws.
The Company may exercise its defeasance option with respect to the Senior
Notes notwithstanding its prior exercise of its covenant defeasance option. If
the Company exercises its defeasance option, payment of the Senior Notes may not
be accelerated because of a Default or an Event of Default. (Section 4.4.) If
the Company exercises its covenant defeasance option, payment of the Senior
Notes may not be accelerated by reason of a Default or an Event of Default with
respect to the covenants to which such covenant defeasance is applicable.
However, if such acceleration were to occur by reason of another Event of
Default, the realizable value at the acceleration date of the money and
Government Obligations in the defeasance trust could be less than the principal
and interest then due on the Senior Notes, in that the required deposit in the
defeasance trust is based upon scheduled cash flow rather than market value,
which will vary depending upon interest rates and other factors.
PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Payments in respect of the Senior Notes will be made at the office or
agency of the Company maintained for that purpose in The City of New York,
except that, at the option of the Company, interest payments may be made (i) by
check mailed to the Holders of Senior Notes entitled thereto at their registered
addresses or (ii) by wire transfer to an account maintained by the Person
entitled thereto as specified in the Register. (Section 3.7.) Payment of any
installment of interest on the Senior Notes will be made to the Person in whose
name such Senior Note is registered at the close of business on the regular
record date for such interest. (Section 3.7.) Senior Notes in registered form
will be transferable or exchangeable at the agency of the Company maintained for
such purpose as designated by the Company from time to time. Senior Notes may be
transferred or exchanged without service charge, other than any tax or other
governmental charge imposed in connection therewith. (Section 3.5.)
BOOK-ENTRY SYSTEM
Upon issuance, the Senior Notes will be represented by one or more Global
Notes. Each Global Note will be deposited with, or on behalf of, the Depositary
and registered in the name of a nominee of the Depositary. Except under the
limited circumstances described below, Global Notes will not be exchangeable for
definitive certificated Senior Notes.
Ownership of beneficial interests in Global Notes will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") or Persons that may hold interests through participants. In
addition, ownership of beneficial interests by participants in such Global Notes
will be evidenced only by, and the transfer of that ownership will be effected
only through, records maintained by the Depositary or its nominee for such
Global Notes. Ownership of beneficial interests in such Global Notes by Persons
that hold through participants will be evidenced only by, and the transfer of
that ownership interest within such participant will be effected only through,
records maintained by such participant. The Depositary will have no knowledge of
the actual beneficial owners of the Senior Notes. Beneficial owners will not
receive written confirmation from the Depositary of their purchase, but
beneficial owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the participants through which the beneficial owners entered the
transaction. The laws of some jurisdictions may require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such Global
Notes.
20
<PAGE> 22
The Company has been advised by the Depositary that upon the issuance of
Global Notes and the deposit of such Global Notes with the Depositary, the
Depositary will immediately credit, on its book-entry registration and transfer
system, the respective principal amounts represented by such Global Notes to the
accounts of participants.
Payment of principal of, and interest on, Senior Notes represented by
Global Notes registered in the name of or held by the Depositary or its nominee
will be made to the Depositary or its nominee, as the case may be, as the
registered owner and holder of the Global Notes representing such Senior Notes.
The Company has been advised by the Depositary that upon receipt of any payment
of principal of, or interest on, a Global Note, the Depositary will immediately
credit, on its book-entry registration and transfer system, accounts of
participants with payments in amounts proportionate to their respective
beneficial interests in the principal amount of such Global Note as shown in the
records of the Depositary. Payments by participants to owners of beneficial
interests in a Global Note held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name" and will be the sole responsibility of such participants subject
to any statutory or regulatory requirements as may be in effect from time to
time.
None of the Company, the Trustee or any other agent of the Company or the
Trustee will have any responsibility or liability for any aspect of the records
of the Depositary, any nominee or any participant relating to, or payments made
on account of, beneficial interests in a Global Note or for maintaining,
supervising or reviewing any of the records of the Depositary, any nominee or
any participant relating to such beneficial interests.
A Global Note shall be exchangeable for definitive Senior Notes registered
in the name of, and a transfer of a Global Note may be registered to, any Person
other than the Depositary or its nominee, only if:
(a) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global Note or if at any time the
Depositary ceases to be registered or in good standing under the Exchange
Act;
(b) the Company in its sole discretion determines that such Global
Note shall be exchangeable for definitive Senior Notes in registered form;
or
(c) there shall have occurred and be continuing an Event of Default or
an event which, with the giving of notice or lapse of time or both, would
constitute an Event of Default under the Senior Notes.
Any Global Note that is exchangeable pursuant to the preceding sentence
will be exchangeable in whole for definitive Senior Notes in registered form, of
like tenor and of an equal aggregate principal amount as the Global Note, in
denominations of $1,000 and integral multiples thereof. Such definitive Senior
Notes will be registered in the name or names of such Persons as the Depositary
shall instruct the Trustee. It is expected that such instructions may be based
upon directions received by the Depositary from its participants with respect to
ownership of beneficial interests in such Global Note. Any principal and
interest will be payable, the transfer of the definitive Senior Notes will be
registerable and the definitive Senior Notes will be exchangeable at the office
or agency of the Company in the Borough of Manhattan, The City of New York
(which will initially be the office of the Trustee), except that, at the option
of the Company, interest may be paid by mailing a check to the address of the
Person entitled thereto as it appears in the Register or by wire transfer to an
account maintained by such Person as specified in the Register.
Except as provided above, owners of beneficial interests in such Global
Notes will not be entitled to receive physical delivery of Senior Notes in
definitive form and will not be considered the Holders thereof for any purpose
under the Indenture, and no Global Note shall be exchangeable except for another
Global Note of like denomination and tenor to be registered in the name of the
Depositary or its nominee. Accordingly, each Person owning a beneficial interest
in such Global
21
<PAGE> 23
Note must rely on the procedures of the Depositary and, if such Person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a Holder under the Global Note or the
Indenture.
The Company understands that, under existing industry practices, in the
event that the Company requests any action of Holders, or an owner of a
beneficial interest in such Global Notes desires to give or take any action that
a Holder is entitled to give or take under the Indenture, the
Depositary would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning through
them.
The Depositary has advised the Company that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered under
the Exchange Act. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. The Depositary is owned by a
number of its participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the Depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. The rules applicable to the Depositary and its participants are on
file with the Commission.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Senior Notes will be made in immediately available
funds. So long as the Senior Notes are represented by one or more permanent
Global Notes, all payments of principal and
interest will be made by the Company in immediately available funds.
So long as the Senior Notes are represented by one or more Global Notes
registered in the name of the Depositary or its nominee, the Senior Notes will
trade in the Depositary's Same-Day Funds Settlement System, and secondary market
trading activity in the Senior Notes will therefore be required by the
Depositary to settle in immediately available funds. No assurance can be given
as to the effect, if any, of settlement in immediately available funds on the
trading activity in the Senior Notes.
CERTIFICATES AND OPINIONS TO BE FURNISHED TO TRUSTEE
The Indenture provides that, in addition to such other certificates or
opinions as may be specifically required by other provisions of the Indenture,
every application by the Company for action by the Trustee thereunder shall be
accompanied by a certificate of certain officers of the Company and an Opinion
of Counsel for the Company stating that, in the opinion of the signers, all
conditions precedent to such action have been complied with.
REPORT TO HOLDERS OF SENIOR NOTES
The Trustee is required to submit an annual report to the Holders of the
Senior Notes regarding, among other things, the Trustee's eligibility to serve
as such, the priority of the Trustee's claims regarding certain advances made by
it, and any action taken by the Trustee materially affecting the Senior Notes.
22
<PAGE> 24
THE TRUSTEE
The Chase Manhattan Bank, whose Corporate Trust Office is currently located
at 450 West 33rd Street, New York, New York, will be the Trustee under the
Indenture.
The Company and its affiliates maintain banking and other commercial
relationships with the Trustee and its affiliates in the ordinary course of
business. The Trustee is an affiliate of Chase Securities Inc., one of the
Underwriters. See "Underwriting."
The Trustee may resign or be removed by the Company and a successor trustee
may be appointed. The Holders of a majority in aggregate principal amount of the
Senior Notes then outstanding may remove the Trustee.
The Indenture contains certain limitations on the rights of the Trustee
thereunder, in the event that it becomes a creditor of the Company, to obtain
payment of claims in certain cases, or to realize on certain property received
in respect of any such claim as security or otherwise.
23
<PAGE> 25
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") dated December , 1997 among the Company and the
several Underwriters named below, the Company has agreed to sell to the
Underwriters, and the Underwriters have severally agreed to purchase from the
Company, the following respective principal amounts of the Senior Notes:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER SENIOR NOTES
-------------------------------------------------------------- ------------
<S> <C>
Chase Securities Inc. ........................................ $
Donaldson, Lufkin & Jenrette Securities Corporation...........
------------
Total............................................... $ 75,000,000
============
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Senior Notes
offered hereby if any of the Notes are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the Senior Notes to the public initially at the respective
public offering price set forth on the cover page of this Prospectus, and to
certain dealers initially at such price less a discount not in excess of % of
the principal amount of the Senior Notes. The Underwriters may allow, and such
dealers may reallow, a concession to certain other dealers not in excess of %
of the principal amount on sales to certain other dealers. After the public
offering, the public offering price and such concessions may be changed.
Chase Securities Inc. is an affiliate of The Chase Manhattan Bank, which is
the Trustee under the Indenture and the administrative agent for and a lender to
the Company under its revolving credit facility, and which participates on a
regular basis in various general financing and banking transactions with the
Company. Affiliates of Chase Securities Inc. are serving as trustees under the
Amended and Restated Declaration of Trust pursuant to which the Capital
Securities were issued. In addition, the Underwriters have engaged, and may in
the future engage, in investment banking transactions with the Company.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, and to contribute
to payments which the Underwriters might be required to make in respect thereof.
In connection with the offering and sale of the Senior Notes, Chase
Securities Inc., on behalf of the Underwriters, may engage in overallotment,
stabilizing transactions and syndicate covering transactions in accordance with
Regulation M under the Exchange Act. Overallotment involves sales in excess of
the offering size, which creates a short position for the Underwriters.
Stabilizing transactions permit bids to purchase the Senior Notes in the open
market for the purpose of pegging, fixing or maintaining the price of the Senior
Notes. Syndicate covering transactions involve purchases of the Senior Notes in
the open market after the distribution has been completed in order to cover
short positions. Such stabilizing transactions and syndicate covering
transactions may cause the price of the Senior Notes to be higher than it would
otherwise be in the absence of such transactions. Such activities, if commenced,
may be discontinued at any time.
The Senior Notes are a new series of securities with no established trading
market and will not be listed on any securities exchange. The Underwriters have
advised the Company that they intend to make a market in the Senior Notes, but
are under no obligations to do so and such market making may be terminated at
any time. Therefore, no assurance can be given as to the liquidity of, or the
trading market for, the Senior Notes.
24
<PAGE> 26
LEGAL OPINIONS
The validity of the Senior Notes offered hereby will be passed upon for the
Company by Dewey Ballantine LLP, New York, New York. James A. FitzPatrick, Jr.,
Secretary of the Company, is a member of Dewey Ballantine LLP. Certain legal
matters will be passed upon for the Underwriters by LeBoeuf, Lamb, Greene &
MacRae, L.L.P., a limited liability partnership including professional
corporations, New York, New York.
EXPERTS
The consolidated financial statements and schedules of the Company
incorporated by reference or appearing in the Company's Annual Report (Form
10-K) for the year ended December 31, 1996, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon incorporated by
reference or appearing therein and incorporated herein by reference. Such
consolidated financial statements and schedules are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
With respect to the unaudited consolidated interim financial information
for the three-month periods ended March 31, 1997 and March 31, 1996, the
six-month periods ended June 30, 1997 and June 30, 1996, and the nine-month
periods ended September 30, 1997 and September 30, 1996, incorporated by
reference in this Prospectus, Ernst & Young LLP have reported that they have
applied limited procedures in accordance with professional standards for a
review of such information. However, their separate reports, included in the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997,
June 30, 1997, and September 30, 1997, and incorporated herein by reference,
state that they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports on
such information should be restricted considering the limited nature of the
review procedures applied. The independent auditors are not subject to the
liability provisions of Section 11 of the Securities Act for their reports on
the unaudited interim financial information because those reports are not
"reports"' or "parts" of the Registration Statement prepared or certified by the
auditors within the meaning of Sections 7 and 11 of the Securities Act.
25
<PAGE> 27
(This page intentionally left blank)
<PAGE> 28
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER
OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
- ------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information..................... 2
Incorporation of Certain Information by
Reference............................... 3
Prospectus Summary........................ 4
The Offering.............................. 6
Selected Consolidated Historical Financial
Data.................................... 7
Risk Factors.............................. 9
Use of Proceeds........................... 12
Ratio of Earnings to Fixed Charges........ 12
Capitalization............................ 13
Description of Senior Notes............... 14
Underwriting.............................. 24
Legal Opinions............................ 25
Experts................................... 25
</TABLE>
Prospectus
LOGO
$75,000,000
% SENIOR NOTES DUE 20
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
Dated December , 1997
<PAGE> 29
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the estimated amounts (except for
the SEC Registration fee, which is an actual amount) of all expenses payable by
the Registrant in connection with the registration of the Senior Notes offered
hereby, other than underwriting discounts and commissions:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration fee.................................................. $ 22,727.27
Blue Sky fees and expenses (including counsel fees)................... 2,500.00
Accountants' fees and expenses........................................ 20,000.00
Legal fees and expenses............................................... 70,000.00
Printing and engraving expenses....................................... 30,000.00
Trustee's fees and expenses........................................... 11,500.00
Rating Agency Fees.................................................... 55,000.00
Miscellaneous......................................................... 272.73
Total............................................................ $212,000.00
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware
provides that a Delaware corporation may indemnify any 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 corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no cause to believe the person's conduct was
unlawful.
Section 145(b) provides that a Delaware corporation may indemnify any
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
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted under similar standards, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
court in which such action or suit was brought shall determine that despite the
adjudication of liability, such person is fairly and reasonably entitled to be
indemnified for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a present or former
director or officer of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and that the corporation may purchase and
maintain insurance on behalf of a director or officer of the corporation against
any liability asserted against or incurred by such person in any such capacity
or
II-1
<PAGE> 30
arising out of such person's status as such whether or not the corporation would
have the power to indemnify such person against such liabilities under such
Section 145.
The Company's By-laws provide that the Company shall indemnify officers and
directors, employees and agents of the Company, to the full extent permitted by
and in the manner permissible under the laws of the State of Delaware. The
By-laws also permit the Board of Directors to authorize the Company to purchase
and maintain insurance against any liability asserted against any director,
officer, employee or agent of the Company arising out of his capacity as such.
Section 102(b)(7) of the General Corporation Law provides that a
corporation in its original certificate of incorporation or an amendment thereto
validly approved by stockholders may eliminate or limit personal liability of
members of its board of directors or governing body for monetary damages for
breach of a director's fiduciary duty. However, no such provision may eliminate
or limit the liability of a director for breaching his duty of loyalty, failing
to act in good faith, engaging in intentional misconduct or knowingly violating
a law, paying a dividend or approving a stock repurchase which was illegal, or
obtaining an improper personal benefit. A provision of this type has no effect
on the availability of equitable remedies, such as injunction or rescission, for
breach of fiduciary duty. The Company's Certificate of Incorporation contains
such a provision.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
(a) EXHIBITS
<C> <C> <C> <S>
1.1 -- Form of Underwriting Agreement
4.1 -- Form of Indenture with respect to Senior Notes to be dated as of
December , 1997, between Executive Risk Inc. and The Chase Man-
hattan Bank, as Trustee.
5.1 -- Opinion of Dewey Ballantine LLP
**12.1 -- Statements Regarding Computation of Ratios
15.1 -- Acknowledgement Letter of Ernst & Young LLP
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Dewey Ballantine LLP (contained in Exhibit 5.1)
**24.1 -- Power of Attorney
**25.1 -- Statement of Eligibility of Trustee under the Trust Indenture Act
of 1939
</TABLE>
- ---------------
** Previously filed.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the 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, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-2
<PAGE> 31
(b) The undersigned registrant hereby undertakes:
(i) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof;
(ii) That, for the purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 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 the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(iii) For the purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
II-3
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Simsbury, State of Connecticut, on December 5, 1997.
EXECUTIVE RISK INC.
By: /s/ ROBERT H. KULLAS
------------------------------------
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below on December 5, 1997 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------- --------------------------------------------
<C> <S>
* Chief Executive Officer and President
- ----------------------------------------------- (Principal Executive Officer) and Director
Stephen J. Sills
/s/ ROBERT H. KULLAS Chairman
- -----------------------------------------------
Robert H. Kullas
* Executive Vice President, Treasurer, Chief
- ----------------------------------------------- Financial Officer (Principal Financial
Robert V. Deutsch Officer and Principal Accounting Officer),
Chief Actuary and Director
* Director
- -----------------------------------------------
Gary G. Benanav
Director
- -----------------------------------------------
Barbara G. Cohen
* Director
- -----------------------------------------------
John G. Crosby
Director
- -----------------------------------------------
Patrick A. Gerschel
</TABLE>
II-4
<PAGE> 33
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------- --------------------------------------------
<C> <S>
* Director
- -----------------------------------------------
Peter Goldberg
* Director
- -----------------------------------------------
Michael D. Rice
* Director
- -----------------------------------------------
Joseph D. Sargent
Director
- -----------------------------------------------
Irving B. Yoskowitz
* By /s/ ROBERT H. KULLAS
- -----------------------------------------------
Attorney-In-Fact
</TABLE>
II-5
<PAGE> 34
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-------- ------------------------------------------------------------------
<C> <C> <C> <S>
1.1 -- Form of Underwriting Agreement
4.1 -- Form of Indenture with respect to Senior Notes to be dated as of
December , 1997, between Executive Risk Inc. and The Chase Man-
hattan Bank, as Trustee.
5.1 -- Opinion of Dewey Ballantine LLP
**12.1 -- Statements Regarding Computation of Ratios
15.1 -- Acknowledgement Letter of Ernst & Young LLP
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Dewey Ballantine LLP (contained in Exhibit 5.1)
**24.1 -- Power of Attorney
**25.1 -- Statement of Eligibility of Trustee under the Trust Indenture Act
of 1939
</TABLE>
- ---------------
** Previously filed.
<PAGE> 1
Exhibit 1.1
EXECUTIVE RISK INC.
___% Senior Notes Due _________ ___, 20__
UNDERWRITING AGREEMENT
December __, 1997
CHASE SECURITIES INC.
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION
As Representatives of the several
Underwriters named in Schedule 1
c/o Chase Securities, Inc.
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
Executive Risk Inc., a Delaware corporation (the "Company"), proposes to
issue and sell $75,000,000 principal amount of its ___% Senior Notes Due
_________ ___, 20__ (the "Securities"). The Securities are to be issued pursuant
to an Indenture dated as of December __, 1997 (the "Indenture") to be entered
into between the Company and The Chase Manhattan Bank, as trustee (the
"Trustee"), the form of which has been filed as an exhibit to the Registration
Statement (as defined below). This is to confirm the agreement concerning the
purchase of the Securities from the Company by the several Underwriters named in
Schedule 1 hereto (the "Underwriters") for which Chase Securities Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation are acting as
representatives (the "Representatives").
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company represents and warrants to and agrees with the several
Underwriters that:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the provisions
of the Securities Act of 1933, as amended, and the rules and regulations
of the Commission thereunder (collectively, the "Act"), a registration
statement on Form S-3 (Registration No. 333-40657), including a
prospectus, relating to the Securities. The Company has filed one or more
amendments thereto, including the related preliminary prospectus, each of
which has previously been furnished to you. The Company will next file
with the Commission either (i) prior to effectiveness of such registration
statement, a further amendment to such registration
<PAGE> 2
statement (including the form of final prospectus) or (ii) after
effectiveness of such registration statement, a final prospectus in
accordance with Rules 430A and 424(b)(1) or (4). The registration
statement, as amended at the time it became effective, including any
amendment to the registration statement filed pursuant to Rule 462(b)
under the Act increasing the size of the offering registered under the Act
and the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the Act
("Rule 430A Information"), is hereinafter referred to as the "Registration
Statement"; and the prospectus in the form first used to confirm sales of
Securities is hereinafter referred to as the "Prospectus". The terms
"supplement" and "amendment" or "amend" as used in this Agreement with
respect to the Registration Statement, the Prospectus or any Preliminary
Prospectus (as defined below) shall include all documents subsequently
filed by the Company with the Commission pursuant to the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Exchange Act") that are deemed
to be incorporated by reference in the Prospectus or the Preliminary
Prospectus. For purposes of this Agreement, "Effective Time" means the
date and time as of which the Registration Statement, or the most recent
post-effective amendment thereto, if any, was or is declared effective by
the Commission. "Preliminary Prospectus" means each prospectus included in
the Registration Statement, or amendments thereof, before it became
effective under the Act, any prospectus filed with the Commission by the
Company pursuant to Rule 424(a) and the prospectus included in the
Registration Statement at the Effective Time that omits Rule 430A
Information. Reference made herein to any Preliminary Prospectus, to the
Prospectus or to the Registration Statement shall be deemed to refer to
and include any documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the Securities Act, as of the date of such
Preliminary Prospectus, the Prospectus or the Registration Statement, as
the case may be.
(b) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement
filed after the effectiveness of this Agreement will become effective no
later than 10:00 P.M., New York City time, on the date of this Agreement;
and no stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are pending
before or threatened by the Commission.
(c) (i) The Registration Statement, when it became effective, did
not contain and, as amended or supplemented, if applicable, and on the
Closing Date (as defined below), will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii)
the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, and on the Closing Date (as defined below)
will comply in all material respects with the Act and the Trust Indenture
Act of 1939, as amended, and the rules thereunder (collectively, the
"Trust Indenture Act"); (iii) if the Company is required to file a Rule
462(b) Registration Statement after the effectiveness of this Agreement,
such Rule 462(b) Registration Statement and any amendments thereto, when
they become effective (A) will not contain any untrue statement of a
material fact or omit to state a material fact required to be
-2-
<PAGE> 3
stated therein or necessary to make the statements therein not misleading
and (B) will comply in all material respects with the Act; and (iv) the
Prospectus does not contain and, as amended or supplemented, if
applicable, and on the Closing Date will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and warranties
set forth in this paragraph (c) do not apply to (x) that part of the
Registration Statement which shall constitute the Statement of Eligibility
and Qualification (Form T-1) of the Trustee under the Trust Indenture Act
or (y) statements or omissions in the Registration Statement or the
Prospectus based upon information relating to any Underwriter furnished to
the Company in writing by such Underwriter through the Representatives
expressly for use therein (the "Underwriters' Information"). The
Underwriters acknowledge that the Underwriters' Information includes the
fourth paragraph under the heading "Underwriting" in the Prospectus and
Preliminary Prospectus and in the Registration Statement.
(d) The documents incorporated by reference in the Registration
Statement or the Prospectus pursuant to Item 12 of Form S-3 under the Act,
at the time they were filed or last amended or hereafter are filed or
amended, as the case may be, with the Commission, complied and will comply
in all material respects with the requirements of the Exchange Act and,
when read together and with the other information in any Preliminary
Prospectus or in the Prospectus, at the time the Registration Statement
became effective and on the Closing Date, did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were or are made, not
misleading; and any documents deemed to be incorporated by reference in
the Registration Statement, any Preliminary Prospectus or the Prospectus,
if and when they were or are filed with the Commission, complied with or
will comply in all material respects with the requirements of the Exchange
Act and did not and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that the representations and warranties in this paragraph shall
not apply to statements in or omissions from the Registration Statement,
any Preliminary Prospectus or the Prospectus (or any supplement or
amendment to them) made based upon and conforming with the Underwriters'
Information furnished to the Company expressly for use therein.
(e) Each Preliminary Prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the Act, and did not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph (e) do not
apply to statements or omissions in any Preliminary Prospectus based upon
the Underwriters' Information furnished to the Company expressly for use
therein. The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus.
-3-
<PAGE> 4
(f) Each corporation, partnership or other entity in which the
Company owns beneficially at least 50% of the outstanding ownership
interests is listed on Schedule 2 hereto. With the exception of UAP
Executive Partners, each of such entities is referred to herein as a
"Subsidiary" and all of such entities, collectively, are referred to as
the "Subsidiaries." The Company owns 100% of the outstanding capital stock
of Executive Re Inc., a Delaware corporation ("ERI"), 100% of the common
securities of Executive Risk Capital Trust, a Delaware statutory business
trust (the "Trust"), and 70% of the general partnership interests in
Executive Risk Management Associates, a Connecticut general partnership
("ERMA"), free and clear of all liens, claims, charges, options,
restrictions or other encumbrances of any type or nature. ERI owns 100% of
the outstanding capital stock of Executive Risk Indemnity Inc., a Delaware
corporation ("ERII"), 100% of the outstanding capital stock of Talcott
Services Corporation, a Delaware corporation ("Talcott"), 100% of the
outstanding capital stock of Sullivan Kelly Inc., a California corporation
("Sullivan Kelly"), 100% of the issued share capital of Executive Risk
Limited, a company incorporated under the laws of the United Kingdom, 100%
of the outstanding capital stock of Executive Risk N.V., a company
incorporated under the laws of the Netherlands, 100% of the outstanding
capital stock of Executive Risk (Bermuda) Ltd., a company incorporated
under the laws of Bermuda ("Executive Risk Bermuda"), 50% of the
outstanding capital stock of UAP Executive Partners, a French corporation
("UPEX"), and 30% of the general partnership interests in ERMA, in each
case free and clear of all liens, claims, charges, options, restrictions
or other encumbrances of any type or nature. ERII owns 100% of the
outstanding capital stock of Executive Risk Specialty Insurance Company, a
Connecticut corporation ("ERSIC"), and 100% of the outstanding capital
stock of Quadrant Indemnity Company, a Connecticut corporation
("Quadrant"), free and clear of all liens, claims, charges, options,
restrictions or other encumbrances of any type or nature. Sullivan Kelly
owns 100% of the outstanding capital stock of IDFN of Arizona, Inc.
Insurance Brokers, free and clear of all liens, claims, charges, options,
restrictions or other encumbrances of any type or nature. Except as set
forth above, neither the Company nor any Subsidiary (i) owns equity
securities of any other corporation representing in excess of 5% of the
outstanding capital stock of such corporation, (ii) owns any partnership
interest representing in excess of 6% of the voting equity interests in
any partnership or (iii) owns any equity interest representing in excess
of 5% of the voting equity interests in any other legal entity.
(g) The Company and each Subsidiary (other than ERMA and the Trust)
(i) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it was organized and has all
requisite power and authority to conduct its business as it is currently
being conducted and to own, lease and operate its properties and (ii) is
duly qualified as a foreign corporation authorized to transact business
in, and is in good standing in, each jurisdiction in which the nature of
its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have
a material adverse effect on the business, prospects, operations,
properties, net worth, results of operations or condition (financial or
otherwise) of the Company and the Subsidiaries taken as a whole. ERMA is a
duly organized and validly existing general partnership and has all
requisite power and authority to conduct its business as it is currently
-4-
<PAGE> 5
being conducted and to own, lease and operate its properties. The only
partners in ERMA are the Company and ERI.
(h) The Company and each of the Subsidiaries (i) holds such
licenses, consents, certificates, permits, exemptions, franchises and
authorizations from insurance departments and other governmental or
regulatory authorities ("permits") (including, without limitation,
insurance licenses from the insurance regulatory agencies of the various
states or other jurisdictions where it conducts business (the "Insurance
Licenses")) and has made all filings with and notices to, all governmental
or regulatory authorities and self-regulatory organizations and all courts
and other tribunals, including, without limitation, under any applicable
Environmental Laws (as defined below), which are necessary to own, lease,
license and operate its respective properties and to conduct its
businesses as described in the Prospectus (or in the documents
incorporated therein by reference), except to the extent the failure to
hold any such permits or Insurance Licenses or to make any such filing or
notice (either singularly or in the aggregate) would not have a material
adverse effect on the business, prospects, operations, properties, net
worth, results of operations or condition (financial or otherwise) of the
Company and the Subsidiaries taken as a whole and (ii) to the Company's
knowledge, have fulfilled and performed all material obligations necessary
to maintain such permits and the Insurance Licenses. There has been, and
there is, no pending or, to the knowledge of the Company, threatened
action, suit, proceeding, investigation or event that may reasonably be
expected to lead to the revocation, termination, suspension or any other
material impairment of the rights of the holder of any such permit or
license (including, without limitation, the Insurance Licenses); and
except as disclosed in the Prospectus (or in the documents incorporated
therein by reference), the Company is not aware of any order or decree of
an insurance regulatory agency or body impairing, restricting or
prohibiting the payment of dividends by any of the Subsidiaries of the
Company to its parent.
(i) All of the outstanding shares of capital stock of, or other
ownership interests in, each Subsidiary of the Company have been, as
applicable, duly authorized and validly issued and, in the case of shares
of capital stock, are fully paid and non-assessable, and all such shares
and other ownership interests owned of record by the Company or by a
Subsidiary of the Company are owned free and clear of any security
interest, lien, claim, encumbrance or adverse interest of any nature. None
of such shares of capital stock or other ownership interests are subject
to any preemptive rights.
(j) The partnership agreement of ERMA has been duly executed and
delivered by each of the parties thereto and is a valid and binding
agreement enforceable in accordance with its terms except as (i) rights to
indemnity and contribution thereunder may be limited by applicable law or
principles of public policy, (ii) the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (iii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought. Other than as described in the Prospectus, there are no
outstanding warrants, rights or options to acquire,
-5-
<PAGE> 6
or instruments convertible into or exchangeable for, any shares of capital
stock or other equity interest in the Company or any of the Subsidiaries.
(k) All the outstanding shares of capital stock of the Company have
been duly authorized, validly issued, and are fully paid and
non-assessable.
(l) The Securities and the Indenture conform in all material
respects to the description thereof contained in the Prospectus.
(m) Except as described in the Prospectus or any Preliminary
Prospectus (or in the documents incorporated therein by reference),
neither the Company nor any of the Subsidiaries is (i) in violation of its
respective charter, by-laws or other organizational documents; and except
as described in the Prospectus or any Preliminary Prospectus (or in the
documents incorporated therein by reference) and except to the extent that
any of the following would not have a material adverse effect on the
business, prospects, operations, properties, net worth, results of
operations or financial condition of the Company and the Subsidiaries,
taken as a whole, neither the Company nor any of the Subsidiaries is (ii)
in violation of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries or any of
their respective properties, (iii) in violation of any judgment,
injunction, order or decree of any court, governmental agency or body
(including, without limitation, any insurance regulatory agency or body)
or arbitrator having jurisdiction over the Company or any of the
Subsidiaries, or (iv) in default in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any other agreement, indenture, lease or
instrument to which the Company or any of the Subsidiaries is a party or
by which it or any of the Subsidiaries or their respective property is
bound.
(n) No consent, approval, waiver, license, authorization, order,
filing, registration, qualification or other action of or with any court,
regulatory body, arbitrator, administrative agency or other governmental
agency or body (including, without limitation, any insurance regulatory
agency or body) is required for the issuance and sale of the Securities
being sold by the Company or the execution, delivery and performance of
this Agreement or the Indenture, compliance by the Company with all the
provisions hereof or thereof, or the consummation of the other
transactions contemplated hereby or thereby or by the Registration
Statement or for the use of the proceeds to be received by the Company
from such sale in the manner described under the caption "Use of Proceeds"
contained in the Prospectus and in any Preliminary Prospectus, except such
as have been obtained and made under the Act, the Exchange Act and the
Trust Indenture Act, all of which have been or will be obtained in
accordance with this Agreement and as may be required under the insurance
securities laws or securities or Blue Sky laws of various jurisdictions,
and except to the extent that the failure to obtain such would not have a
material adverse effect on the business, prospects, operations,
properties, net worth, results of operations or financial condition of the
Company and the Subsidiaries, taken as a whole.
-6-
<PAGE> 7
(o) The issuance and sale of the Securities to be sold by the
Company under this Agreement and the application of the net proceeds
therefrom as described under the caption "Use of Proceeds" contained in
the Prospectus and in any Preliminary Prospectus and the execution,
delivery and performance of this Agreement and the Indenture, compliance
by the Company with all the provisions hereof and thereof and the
consummation of the transactions contemplated hereby and thereby, (i) will
not result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to which
any of them is a party or by which any of them may be bound or to which
any of the property or assets of any of them is subject, and (ii) will not
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default (with notice or the passage of time
or both) under, (A) any statute, rule, regulation, judgment, order or
decree of any governmental agency or body (including, without limitation,
any insurance regulatory agency or body) or any court or arbitrator, which
is applicable to the Company or any Subsidiary or any of their respective
properties, (B) any bond, debenture, note, other evidence of indebtedness,
agreement, indenture, lease or other instrument to which the Company or
any such Subsidiary is a party or by which the Company or any such
Subsidiary is bound or to which any of the properties of the Company or
any such Subsidiary is subject, or (C) the organizational documents of the
Company or any such Subsidiary except, in the case of clauses (i) and
(ii), to the extent that any such creation or imposition or any such
breach, violation or default would not (x) require the Company to secure
the Securities equally and ratably, in accordance with the Indenture, or
(y) have a material adverse effect on the business, prospects, operations,
properties, net worth, results of operations or financial condition of the
Company and the Subsidiaries, taken as a whole.
(p) The Company is not (a) an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
or (b) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended (the "1935 Act").
(q) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in any securities being
registered pursuant to another registration statement filed by the Company
under the Act, except as provided in the Securityholders Agreement dated
as of January 1, 1994 (the "Securityholders Agreement"), as amended, among
the Company, The Aetna Casualty and Surety Company ("Aetna") and the other
persons named as parties therein. Any rights of Aetna or any of such other
persons under the Securityholders Agreement to require the Company to
include any securities with the Securities being registered pursuant to
the Registration Statement have been waived.
-7-
<PAGE> 8
(r) There is no broker, finder or other party that is entitled to
receive from the Company or any of the Subsidiaries any brokerage or
finder's fee or other similar fee or commission as a result of any of the
transactions contemplated by this Agreement.
(s) This Agreement has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company
enforceable in accordance with its terms except as (i) rights to indemnity
and contribution hereunder may be limited by applicable law or principles
of public policy, (ii) the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and
(iii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
(t) The Indenture has been duly qualified under the Trust Indenture
Act and has been duly authorized by the Company and, when duly executed
and delivered in accordance with its terms by each of the parties thereto,
will constitute a valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms, except to
the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and that the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. At the Effective Time and on
the Closing Date, the Indenture did and will comply in all material
respects with the requirements of the Trust Indenture Act applicable to an
indenture which is qualified thereunder.
(u) The Securities have been duly authorized by the Company and,
when duly executed, authenticated, issued and delivered as provided in the
Indenture and paid for as provided herein, will be duly and validly issued
and outstanding and will constitute valid and legally binding obligations
of the Company entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms, except to the extent
that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The issuance of the Securities is not
subject to preemptive rights.
(v) Except as described in the Prospectus or any Preliminary
Prospectus (or in the documents incorporated therein by reference), there
are no outstanding: (i) securities or obligations of the Company
convertible into or exchangeable for any capital stock of the Company,
(ii) warrants, rights or options to subscribe for or purchase from the
Company any such capital stock or any such convertible or exchangeable
securities or obligations, except for stock options granted by the Company
since September 30, 1997 pursuant to plans of the Company in effect prior
to that date, or (iii) obligations for the Company to issue such shares,
any such convertible or exchangeable securities or obligations, or any
such warrants, rights or obligations.
-8-
<PAGE> 9
(w) To the Company's knowledge, neither A.M. Best Company, Inc. nor
Standard & Poor's Corporation has pending, or has overtly threatened, as
applicable: (i) any downgrading in the ratings of the Subsidiaries or (ii)
any public announcement that its ratings of any of the Subsidiaries are
under surveillance or review.
(x) Subsequent to the dates as of which information is given in the
Registration Statement and the Prospectus, except as disclosed therein:
(i) neither the Company nor any of the Subsidiaries has incurred any
liability or obligation, direct or contingent, or entered into any
transaction, not in the ordinary course of business, that is material to
the Company and the Subsidiaries taken as a whole, (ii) there has not been
any change in the capital stock of the Company or any payment of or
declaration to pay any dividends other than regular quarterly dividends on
the Company's common stock and the exercise of outstanding stock options
or any other distribution with respect to the Company's capital stock,
except for the grant of stock options by the Company since September 30,
1997 pursuant to plans of the Company in effect prior to that date, and
(iii) there has not been any material adverse change in, nor has any event
occurred which, to the knowledge of the Company, could reasonably be
expected to have a material adverse effect on, the financial condition,
business, operations, properties, prospects, net worth or results of
operations or material increase in the loss and loss adjustment expense
reserves or any material decrease in statutory surplus of the Company and
the Subsidiaries, taken as a whole.
(y) Except as otherwise set forth in the Prospectus or any
Preliminary Prospectus (or in the documents incorporated therein by
reference), there are no material pending legal or governmental actions,
suits or proceedings to which the Company or any of the Subsidiaries is a
party or of which any of their respective property is the subject, and, to
the best of the Company's knowledge, no such actions, suits or proceedings
are threatened or contemplated. No statute, regulation, contract or
document of a character required to be described in the Registration
Statement, any Preliminary Prospectus or the Prospectus or to be filed as
an exhibit to the Registration Statement or incorporated by reference
therein is not so described, filed or incorporated by reference therein as
required. The descriptions of the terms of any such contracts, documents,
statutes or regulations contained in the Registration Statement, any
Preliminary Prospectus or the Prospectus (or with the documents
incorporated therein by reference) are correct in all material respects.
(z) Neither the Company nor any of the Subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), or any federal or state law relating to discrimination in the
hiring, promotion or pay of employees, or any applicable federal or state
wages and hours laws, or any provisions of the United States Employee
Retirement Income Security Act of 1974 and the regulations and published
interpretations thereunder ("ERISA"), which in each case might result in
any material adverse change in the business, prospects, operations,
properties, financial condition, net worth or results of operations of the
Company and the Subsidiaries, taken as a whole.
-9-
<PAGE> 10
(aa) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, any related constraints on operating
activities and any potential liabilities to third parties) which would
have a material adverse effect on the business, prospects, operations,
properties, net worth, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole.
(bb) Except as otherwise set forth in the Prospectus or any
Preliminary Prospectus (or in the documents incorporated therein by
reference) or such as are not material to the business, prospects,
operations, properties, net worth, results of operations or financial
condition of the Company and the Subsidiaries, taken as a whole, the
Company and each of the Subsidiaries has good and marketable title, free
and clear of all liens, claims, security interests, encumbrances and
restrictions except liens for taxes not yet due and payable, to all
property and assets described in the Registration Statement as being owned
by it. All material leases to which the Company or any of the Subsidiaries
is a party are binding on and enforceable against the Company or any such
Subsidiary, as the case may be, except as such may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
or other laws relating to or affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding at law or
in equity) in all material respects and no default on the part of the
Company or any such Subsidiary, as the case may be, or, to the Company's
knowledge, the other party thereto, has occurred or is continuing
thereunder, which might result in any material adverse change in the
business, prospects, operations, properties, financial condition, net
worth or results of operations of the Company and the Subsidiaries taken
as a whole, and the Company and the Subsidiaries enjoy peaceful and
undisturbed possession under all such leases to which any of them is a
party as lessee with such exceptions as do not materially interfere with
the use made by the Company or such Subsidiary.
(cc) Ernst & Young has informed the Company that they are
independent public accountants with respect to the Company, as required by
the Act.
(dd) The consolidated financial statements, together with related
schedules and notes, forming part of the Registration Statement and the
Prospectus (and any amendment or supplement thereto) or incorporated
therein by reference, present fairly the consolidated financial position,
results of operations, cash flows and changes in financial position of the
Company and the Subsidiaries on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which
they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein and except that quarterly financial statements contained in the
Registration Statement are subject to year-end adjustments; and the other
financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) is, in all material respects, accurately presented and prepared
on a basis consistent with such financial statements and the books and
records of the Company. The statutory
-10-
<PAGE> 11
financial statements of ERII and ERSIC required or permitted to be
prepared in accordance with the insurance laws of the States of Delaware
and Connecticut, respectively (the "Insurance Laws") and the rules and
regulations promulgated thereunder, from which certain ratios and other
statistical data contained in the Registration Statement and the
Prospectus have been derived, have for each relevant period been prepared
in conformity in all material respects with the requirements of the
Insurance Laws and such rules and regulations and present fairly the
information purported to be shown.
(ee) The Company has corporate power and authority to execute and
deliver this Agreement, the Indenture and the Securities and to issue,
sell and deliver the Securities to be sold by it to the Underwriters as
provided herein.
(ff) The Company has not taken and will not take, directly or
indirectly, any action designed to, or which might reasonably be expected
to, cause or result in the stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the
Securities pursuant to the distribution contemplated by this Agreement,
and other than as permitted by the Act, the Company has not distributed
and will not distribute, prior to the later to occur of (i) the Closing
Date and (ii) completion of the distribution of the Securities, any
prospectus or other offering material in connection with the offering and
sale of the Securities.
(gg) Each of the Company and the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in all material respects in accordance
with management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles or statutory
accounting principles, as the case may be, and to maintain accountability
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(hh) Each of the Company and the Subsidiaries owns or has valid and
adequate rights to use all patents, trademarks, trademark registration,
service marks, service mark registrations, trade names, copyrights,
licenses, inventions, trade secrets and rights described in the Prospectus
as being owned by it or necessary for the conduct of its respective
business, free and clear of all liens, claims, security interests
encumbrances and restrictions that may materially interfere with the
conduct of its business, and neither the Company nor any of the
Subsidiaries is aware of any claim to the contrary or any challenge by any
other person to the rights of the Company and any of the Subsidiaries with
respect to the foregoing which would have a material adverse effect on the
business, prospects, operations, properties, net worth, results of
operations or financial condition of the Company and the Subsidiaries
taken as a whole.
(ii) Except as disclosed in the Registration Statement all
reinsurance treaties, reinsurance contracts and reinsurance agreements to
which the Company or any of the
-11-
<PAGE> 12
Subsidiaries is a party (including without limitation, the Quota Share
Reinsurance Agreement dated as of January 1, 1997 (the "1997 Reinsurance
Agreement") between The Aetna Casualty and Surety Company ("Aetna") and
ERII and including for purposes of this paragraph, the Agency and
Insurance Services Agreement dated as of January 1, 1997 (the "1997 Agency
Agreement") between Aetna and ERMA) are in full force and effect and
neither the Company nor any of the Subsidiaries is in violation of, or in
default in the performance, observance or fulfillment of, any obligation,
agreement, covenant or condition contained therein, except where the
failure to be in full force and effect and except where any such violation
or default would not have a material adverse effect on the business,
prospects, operations, properties, net worth, results of operations or
financial condition of the Company and the Subsidiaries taken as a whole;
neither the Company nor any of the Subsidiaries has received any notice
from any of the other parties to such treaties, contracts or agreements
which are material to its business that such other party intends not to
perform in any material respect such treaty, contract or agreement, and
the Company and the Subsidiaries have no reason to believe that any of the
other parties to such treaties, contracts or agreements will be unable to
perform such treaty, contract, agreement or arrangement, except where any
such non-performance would not have a material adverse effect on the
business, prospects, operations, properties, net worth, results of
operations or financial condition of the Company and the Subsidiaries
taken as a whole.
(jj) No relationship, direct or indirect, or agreement, arrangement
or understanding (including, without limitation, any voting agreement),
exists between or among the Company or any of the Subsidiaries and any
other party, which is required by the Act to be described or incorporated
by reference in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement which is not described,
filed or incorporated by reference as required.
(kk) Except to the extent that the failure with respect to the
following would not result in a material adverse effect on the business,
prospects, operations, properties, net worth, results of operations, or
financial condition of the Company and the Subsidiaries taken as a whole,
each of the Company and the Subsidiaries has fulfilled its obligations, if
any, under the minimum funding standards of Section 302 of ERISA with
respect to each "plan" (as defined in ERISA and its regulations and
published interpretations) in which employees of the Company or the
Subsidiaries are eligible to participate and each such plan is in
compliance in all material respects with the presently applicable
provisions of ERISA and such regulations and published interpretations,
and has not incurred any unpaid liability to the Pension Benefit Guaranty
Corporation (other than for the payment of premiums in the ordinary
course) or to any such plan under Title IV of ERISA.
(ll) All United States federal income tax returns of, and
assessments to, the Company and the Subsidiaries required by law to be
filed have been filed and have not been audited and all taxes shown by
such returns or otherwise assessed, which are due and payable, have been
paid, except assessments against which appeals have been or will be
promptly taken or which are being contested in good faith and as to which
adequate reserves have been provided. Each of the Company and the
Subsidiaries has filed all other tax returns that are
-12-
<PAGE> 13
required to have been filed by it pursuant to applicable foreign, state,
local or other laws, except insofar as the failure to file such returns
would not have a material adverse effect on the business, prospects,
operations, properties, net worth, results of operations, or financial
condition of the Company and the Subsidiaries taken as a whole, and has
paid all taxes due pursuant to such returns or pursuant to any assessment
received by the Company or any Subsidiary, except for such taxes, if any,
as are being contested in good faith and as to which adequate reserves
have been provided. The charges, accruals and reserves on the books of the
Company and the Subsidiaries in respect of any income and corporation tax
liability for any years not finally determined are adequate in the
Company's reasonable judgment to meet any assessments or re-assessments
for additional income tax for any years not finally determined, except to
the extent of any inadequacy that would not have a material adverse effect
on the business, prospects, operations, properties, net worth, results of
operations, or financial condition of the Company and the Subsidiaries
taken as a whole.
(mm) To the best knowledge of the Company, no labor problem exists
with its employees or with employees of the Subsidiaries or is imminent
that could reasonably be expected to have a material adverse effect on the
Company and the Subsidiaries taken as a whole.
(nn) No part of the proceeds of the sale of the Securities will be
used for any purpose that violates the provisions of any of Regulation G,
T or X of the Board of Governors of the Federal Reserve System or any
other regulation of such Board of Governors.
(oo) Except as disclosed in the Prospectus or the documents
incorporated by reference therein, the Subsidiaries have made no material
changes in their insurance reserving practices during the last two years.
(pp) Any certificate signed by any officer of the Company or any
Subsidiary and delivered at any closing contemplated by Section 5 hereof
to the Underwriters or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to the Underwriters as to the
matters covered thereby.
(qq) Except as disclosed in the Registration Statement and the
Prospectus, the Company does not intend to use any of the proceeds from
the sale of the Securities hereunder to repay any outstanding debt owed to
any affiliate of Chase Securities Inc.
2. PURCHASE BY THE UNDERWRITERS.
On the basis of the representations, warranties and agreements
contained herein, and subject to the terms and conditions set forth herein, the
Company agrees to issue and sell to the Underwriters, and each Underwriter
agrees, severally and not jointly, to purchase from the Company, the principal
amount of Securities set forth opposite the name of such Underwriter in Schedule
1 hereto at a purchase price equal to _____% of the principal amount thereof
plus accrued interest, if any, from __________ __, 199_ to the Closing Date (as
hereinafter defined).
-13-
<PAGE> 14
The Company shall not be obligated to deliver any of the Securities
except upon payment for all the Securities to be purchased as provided herein.
The Company acknowledges and agrees that each Underwriter may sell
Securities to any of its affiliates and that any such affiliate may sell
Securities purchased by it to an Underwriter.
3. DELIVERY OF AND PAYMENT FOR THE SECURITIES.
Delivery of and payment for the Securities shall be made at the
offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., or at such other place as
shall be agreed upon by the Representatives and the Company, at 9:00 A.M., New
York City time, on __________ __, 199 , or at such other date or time, not later
than seven full business days thereafter, as shall be agreed upon by the
Representatives and the Company (such date and time being referred to herein as
the "Closing Date"). On the Closing Date, the Company shall deliver or cause to
be delivered to the Representatives for the account of each Underwriter through
the book-entry facilities of The Depository Trust Company ("DTC") certificates
for the Securities against payment of the purchase price to or upon the order of
the Company by wire or book-entry transfer of same-day funds to such account or
accounts as the Company shall specify prior to the Closing Date. Time shall be
of the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of each Underwriter
hereunder. The Securities so to be delivered will be represented by one or more
permanent global certificates registered in the name of DTC or its nominee. The
Company agrees to make such certificate or certificates evidencing the
Securities available for inspection by the Representatives in New York, New
York, at least 24 hours prior to the Closing Date.
4. FURTHER AGREEMENTS OF THE COMPANY.
The Company agrees with each of the Underwriters:
(a) That, if the Effective Time is prior to the execution and
delivery of this Agreement, to file the Prospectus with the Commission
pursuant to and in accordance with subparagraph (1) (or, if applicable and
if consented to by the Representatives, subparagraph (4)) of Rule 424(b)
within the time period prescribed by such rule and will provide evidence
satisfactory to the Representatives of such timely filing;
(b) To advise the Representatives promptly of any proposal to amend
or supplement the Registration Statement or the Prospectus and not to
effect such amendment or supplementation without the consent of the
Representatives; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Securities; to advise the Representatives promptly of the
receipt of any comments from the Commission and of any amendment or
supplementation of the Registration Statement or the Prospectus, or of any
request by the Commission therefor, and of the issuance by the Commission
of any stop order suspending
-14-
<PAGE> 15
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose of which the Company is aware; to advise the
Representatives promptly of any order preventing or suspending the use of
any prospectus relating to the Securities of which the Company is aware,
of the suspension of the qualification of such Securities for offering or
sale in any jurisdiction and of the initiation or threatening of any
proceeding for any such purpose of which the Company is aware; and to use
its best efforts to prevent the issuance of any stop order or of any such
order preventing or suspending the use of any prospectus relating to the
Securities or suspending any such qualification and, if any such stop
order or order or suspension is issued, to obtain the lifting thereof at
the earliest possible time;
(c) To furnish promptly to each of the Representatives and counsel
for the Underwriters a signed copy of the Registration Statement as
originally filed with the Commission, and each amendment thereto filed
with the Commission, including all consents and exhibits filed therewith;
and to deliver promptly without charge to the Representatives such number
of the following documents as the Representatives may from time to time
reasonably request: (i) conformed copies of the Registration Statement as
originally filed with the Commission and each amendment thereto (in each
case excluding exhibits other than this Agreement and the Indenture); (ii)
each Preliminary Prospectus, the Prospectus and any amended or
supplemented Prospectus; and (iii) any document incorporated by reference
in the Prospectus (excluding exhibits thereto);
(d) If the delivery of a prospectus is required at any time in
connection with the sale of the Securities and if at such time any
condition exists or any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made when such Prospectus is delivered, not
misleading, or if for any other reason it shall be necessary at such time
to amend or supplement the Prospectus or to file under the Exchange Act
any document incorporated by reference in the Prospectus in order to
comply with the Act or the Exchange Act to notify the Representatives
immediately thereof, and to promptly prepare and file with the Commission
an amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission, effect such compliance, or to file such
document for incorporation by reference into the Prospectus;
(e) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the
Representatives, be required by the Act or requested by the Commission or
advisable in connection with the distribution of the Securities;
(f) Prior to filing with the Commission any (i) Preliminary
Prospectus, (ii) amendment to the Registration Statement or supplement to
the Prospectus, (iii) any document incorporated by reference in the
Prospectus, or (iv) any Prospectus pursuant to Rule 424 under the Act, to
furnish a copy thereof to the Representatives and counsel for the
Underwriters, and not to file any such document to which the
Representatives shall reasonably and timely object after having been given
reasonable notice of the proposed filing thereof;
-15-
<PAGE> 16
(g) As soon as practicable, to make generally available to the
Company's security holders and to deliver to the Representatives an
earnings statement of the Company and its Subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder (including, at the option of the Company, Rule
158);
(h) For so long as any of the Securities are outstanding, to furnish
to the Representatives copies of any annual reports, quarterly reports and
current reports filed by the Company with the Commission on Forms 10-K,
10-Q and 8-K, or such other similar forms as may be designated by the
Commission, and such documents, reports and information as shall be
furnished by the Company to the Trustee, to the holders of the Securities,
or to any national securities exchange on which any class of securities of
the Company is listed, pursuant to the Indenture or the Exchange Act or
any rule or regulation of the Commission thereunder;
(i) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Securities for
offering and sale under the securities or Blue Sky laws of such
jurisdictions as the Representatives may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution
of the Securities; provided, that in connection therewith the Company and
the Subsidiaries shall not be required to qualify as foreign corporations
in any jurisdictions in which they are not so qualified or to file a
general consent to service of process in any jurisdiction or to take any
action that would subject it to taxation in any jurisdiction in which it
is not now so subject other than as to matters and transactions relating
to the Prospectus, the Registration Statement, any Preliminary Prospectus
or the offering or sale of the Securities;
(j) To apply the net proceeds from the sale of the Securities being
sold by the Company as set forth in the Prospectus under the caption "Use
of Proceeds;"
(k) To do and perform all things required to be done and performed
by it under this Agreement that are within its control prior to or after
the Closing Date, and to use its best efforts to satisfy all conditions
precedent on its part to the delivery of the Securities; and
(l) To not take any action prior to the execution and delivery of
the Indenture which, if taken after such execution and delivery, would
have violated any of the covenants contained in the Indenture.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS.
The respective obligations of the several Underwriters hereunder are
subject to the accuracy, when made and on the Closing Date, of the
representations and warranties of the Company contained herein, to the accuracy
of the statements of the Company made in any certificates delivered
-16-
<PAGE> 17
pursuant hereto, to the performance by the Company of its obligations hereunder,
and to each of the following additional terms and conditions:
(a) If the Effective Time is not prior to the execution and delivery
of this Agreement, the Registration Statement shall have become effective
and the Indenture shall have been qualified under the Trust Indenture Act,
and the Representatives shall have received notice thereof, not later than
(i) 6:00 p.m. New York City time on the date of determination of the
public offering price, if such determination occurred at or prior to 3:00
p.m. New York City time on such date or (ii) 12:00 noon New York City time
on the business day following the day on which the offering price was
determined if such determination occurred after 3:00 p.m. New York City
time on such date. If the Effective Time is prior to the execution and
delivery of this Agreement, the Prospectus shall have been timely filed
with the Commission in accordance with Section 1(a) of this Agreement,
including the Rule 430A Information. Prior to the Closing Date, no stop
order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or threatened by the
Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement or the Prospectus or otherwise
shall have been complied with to the reasonable satisfaction of the
Representatives.
(b) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Securities,
the Indenture, the Registration Statement and the Prospectus, and all
other legal matters relating to this Agreement and the transactions
contemplated hereby shall be reasonably satisfactory in all material
respects to counsel for the Underwriters, and the Company shall have
furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(c) Dewey Ballantine LLP shall have furnished to the Representatives
their written opinion, as counsel to the Company, addressed to the
Underwriters and dated the Closing Date, in form and substance reasonably
satisfactory to the Representatives, to the effect that:
(i) The Company and each of ERI, ERII and Talcott
(collectively, the "Delaware Subsidiaries") is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware. Each of the Company and the Delaware Subsidiaries has all
requisite power and authority to conduct its business as it is
currently being conducted and to own, lease and operate its
properties. The Company and each of the Delaware Subsidiaries is
duly qualified as a foreign corporation authorized to transact
business in and is in good standing in each jurisdiction in which
the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the business,
prospects, operations, properties, net worth, results of operations
or financial condition of the Company and the Subsidiaries
considered as a whole. The partnership agreement of ERMA has been
duly executed and delivered by the Company and ERI. To the best of
such counsel's knowledge, the only partners of ERMA are the Company
and ERI.
-17-
<PAGE> 18
(ii) All of the outstanding shares of capital stock of, or
other ownership interests in, each Delaware Subsidiary of the
Company and the Trust have been, as applicable, duly authorized and
validly issued and, in the case of shares of capital stock, are
fully paid and non-assessable, and all such shares and other
ownership interests owned of record by the Company or by a Delaware
Subsidiary are owned free and clear of any perfected security
interest and, to the best of such counsel's knowledge, any lien,
claim, encumbrance or adverse interest of any nature.
(iii) Other than as described in the Prospectus (or in the
documents incorporated therein by reference), to the best of such
counsel's knowledge, there are no outstanding warrants, rights or
options to acquire, or instruments convertible into or exchangeable
for, or any obligation of the Company to issue, any shares of
capital stock or other equity interests in the Company or any of the
Subsidiaries, except for stock options granted by the Company since
September 30, 1997 pursuant to plans in effect prior to that date.
(iv) All the outstanding shares of capital stock of the
Company have been duly authorized, validly issued, and are fully
paid and non-assessable.
(v) To the best of such counsel's knowledge, there are no
contracts or agreements between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the
Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Act, except as provided in the Securityholders
Agreement.
(vi) No consent, approval, waiver, license, authorization,
order, filing, registration, qualification or other action of or
with any court, regulatory body, arbitrator, administrative agency
or other governmental agency or body (including, without limitation,
any insurance regulatory agency or body) is required for the
issuance and sale of the Securities or the execution, delivery and
performance of this Agreement or the Indenture by the Company,
compliance by the Company with all the provisions hereof or thereof
or the consummation of the other transactions contemplated hereby or
thereby or by the Registration Statement, except such as have been
obtained and made under the Act, the Exchange Act and the Trust
Indenture Act, all of which have been or will be obtained in
accordance with this Agreement, and as may be required under the
insurance securities laws or securities or Blue Sky laws of various
jurisdictions, provided that counsel need express no opinion as to
the use of proceeds received by the Company in the manner described
under the caption "Use of Proceeds" contained in the Prospectus or
in any Preliminary Prospectus.
(vii) The issuance and sale of the Securities to be sold by
the Company under this Agreement and the execution, delivery and
performance of this Agreement
-18-
<PAGE> 19
and the Indenture by the Company, compliance by the Company with all
the provisions hereof and thereof and the consummation by the
Company of the transactions contemplated hereby and thereby, (A)
will not, to the best of such counsel's knowledge, result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the Subsidiaries
pursuant to the terms of any agreement or instrument to which any of
the Company and its Subsidiaries is a party or by which any of them
may be bound or to which any of the property or assets of any of
them is subject except, in all instances to the extent that any such
creation or imposition would not have a material adverse effect on
the business, prospects, operations, properties, net worth, results
of operations or financial condition of the Company and its
Subsidiaries, taken as a whole, and (B) will not conflict with or
result in a breach or violation of any of the terms and provisions
of, or constitute a default (with notice or the passage of time)
under, (i) to the best of such counsel's knowledge, any statute,
rule, regulation, judgment, order or decree, of any governmental
agency or body (including, without limitation, any insurance
regulatory agency or body) or any court or arbitrator, which is
applicable to the Company or any Subsidiary or any of their
respective properties, (ii) to the best of such counsel's knowledge,
any bond, debenture, note, other evidence of indebtedness,
agreement, indenture, lease or other instrument to which the Company
or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or to which any of the properties of the Company
or any Subsidiary is subject or (iii) the organizational documents
of the Company or any Delaware Subsidiary except, in the case of
clauses (B)(i) and (ii), to the extent that any such breach,
violation or default would not (x) require the Company to secure the
Securities equally and ratably, in accordance with the Indenture, or
(y) have a material adverse effect on the business, prospects,
operations, properties, net worth, results of operations or
financial condition of the Company and the Subsidiaries, taken as a
whole.
(viii) Such counsel has been informed by the staff of the
Commission that the Registration Statement and all post-effective
amendments, if any, have become effective under the Act, the
Prospectus either was filed with the Commission pursuant to the
subparagraph of Rule 424(b) specified in such opinion on the date
specified therein or was included in the Registration Statement (as
the case may be), and to such counsel's knowledge no stop order
suspending the effectiveness of the Registration Statement or any
part thereof has been issued and to such counsel's knowledge no
proceedings for that purpose have been instituted or are pending or
are contemplated under the Act.
(ix) Each document filed pursuant to the Exchange Act and
incorporated by reference in the Prospectus, at the time it was
filed or last amended, complied as to form in all material respects
to the requirements of the Exchange Act and the regulations adopted
in connection therewith, provided that such counsel need express no
view on the financial statements and the notes thereto and the
schedules and other financial, statistical and accounting data
included therein (or in the documents incorporated therein by
reference).
-19-
<PAGE> 20
(x) To the best of such counsel's knowledge, except as
otherwise set forth in the Prospectus (or in the documents
incorporated therein by reference), there are no pending legal or
governmental actions, suits or proceedings to which the Company or
any of the Subsidiaries is a party or of which any of their
respective property is the subject and which are required to be
described or incorporated by reference in the Registration Statement
or the Prospectus, and, to the best of such counsel's knowledge, no
such actions, suits or proceedings are threatened or contemplated,
and no contract, document, statute or regulation of a character
required to be described or incorporated by reference in the
Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement is not so described or filed
or incorporated by reference as required, and the descriptions of
the terms of any such contracts, documents, statutes or regulations
contained or incorporated by reference in the Registration Statement
or the Prospectus are correct in all material respects.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company, enforceable in accordance with its terms except as (i)
rights to indemnity and contribution hereunder may be limited by
applicable law or principles of public policy, (ii) the
enforceability hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (iii) the remedy
of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(xii) The Indenture has been duly qualified under the Trust
Indenture Act and has been duly authorized, executed and delivered
by the Company and, when duly executed and delivered in accordance
with its terms by each of the other parties thereto, will constitute
a valid and legally binding agreement of the Company enforceable
against the Company in accordance with its terms, except to the
extent that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and that the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. At
the Effective Time and on the Closing Date, the Indenture did and
does comply in all material respects with the requirements of the
Trust Indenture Act applicable to an indenture which is qualified
thereunder.
(xiii) The Securities have been duly authorized by the
Company, are in the form contemplated by the Indenture and, when
duly executed, authenticated, issued and delivered as provided in
the Indenture and paid for as provided herein, will be duly and
validly issued and outstanding and will constitute valid and legally
binding obligations of the Company entitled to the benefits of the
Indenture and enforceable against the Company in accordance with
their terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
-20-
<PAGE> 21
moratorium or other similar laws affecting creditors' rights
generally and that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought. To such counsel's knowledge, the
issuance of the Securities is not subject to preemptive rights.
(xiv) The Indenture and the Securities conform in all material
respects to the description thereof contained in the Prospectus.
(xv) The statements under the captions "Risk Factors,"
"Capitalization," "Description of Senior Notes" and "Underwriting"
in the Prospectus and Item 15 of Part II of the Registration
Statement, insofar as such statements constitute a description of
legal matters, documents or proceedings or refer to statements of
regulation, law or legal conclusions, are accurate in all material
respects.
(xvi) Neither the Company nor any of the Delaware Subsidiaries
is (A) in violation of its respective charter or by-laws, or other
organizational documents, or, to the best of such counsel's
knowledge, except as described in the Prospectus (or in the
documents incorporated therein by reference), and except to the
extent that any of the following would not have a material adverse
effect on the business, prospects, operations, properties, net
worth, results of operations or financial condition of the Company
and the Subsidiaries, taken as a whole, (B) in violation of any
judgment, injunction, order or decree of any court, governmental
agency or body (including, without limitation, any insurance
regulatory agency or body) or arbitrator having jurisdiction over
the Company or any of the Subsidiaries, or (C) in default in the
performance of any obligation, agreement or condition contained in
any bond, debenture, note or any other evidence of indebtedness or
in any other agreement, indenture, lease or instrument that is an
exhibit to the Registration Statement.
(xvii) To the best of such counsel's knowledge, all leases to
which the Company or any of the Delaware Subsidiaries is a party are
valid and binding on the Company or such Subsidiary, as the case may
be, and no default has occurred or is continuing thereunder, which
might result in any material adverse change in the business,
prospects, financial condition or results of operation of the
Company and the Subsidiaries taken as a whole.
(xviii) To such counsel's knowledge, each of the Company and
its Delaware Subsidiaries holds such licenses, certificates,
permits, franchises and authorizations from insurance departments
and other governmental or regulatory authorities ("permits")
(including, without limitation, Insurance Licenses) which are
necessary to own, lease and operate its properties and to conduct
its business as described in the Prospectus, except to the extent
the failure to hold any such permits or Insurance Licenses (either
singularly or in the aggregate) would not have a material adverse
effect on the business, prospects, operations, properties, net
worth, results of operations or financial condition of the Company
and the Subsidiaries taken as a
-21-
<PAGE> 22
whole; to the best of such counsel's knowledge, all such permits and
the Insurance Licenses are in full force and effect. Except as
disclosed in the Prospectus, to the best of such counsel's
knowledge, there has been, and there is, no pending or threatened
action, suit, proceeding, investigation or event that may reasonably
be expected to lead to the revocation, termination, suspension or
any other material impairment of the rights of the holder of any
such permit (including, without limitation, the Insurance Licenses);
to the best of such counsel's knowledge, such permits and Insurance
Licenses do not materially restrict the conduct of business of the
Company or any of the Delaware Subsidiaries except as described in
the Prospectus and except for any restrictions customarily found in
insurance licenses generally; and except as disclosed or
incorporated by reference in the Prospectus, to the best of such
counsel's knowledge, no insurance regulatory agency or body has
issued any order or decree impairing, restricting or prohibiting the
payment of dividends by any of the Delaware Subsidiaries of the
Company to its parent.
(xix) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act.
(xx) (i) The Registration Statement and any post-effective
amendment thereto, at the time such Registration Statement or such
post-effective amendment became effective, complied in all material
respects with the provisions of the Act; and (ii) the Prospectus,
and any supplement or amendment thereto, on the date of filing
thereof with the Commission and on the Closing Date, complied and
does comply in all material respects with the provisions of the Act;
provided that such counsel need express no view on the financial
statements and the notes thereto and the schedules and other
financial, statistical and accounting data included therein (or in
the documents incorporated therein by reference).
(xxi) The Company has corporate power and authority to execute
and deliver this Agreement, the Indenture and the Securities and to
issue, sell and deliver the Securities to be sold by it to the
Underwriters as provided herein.
(xxii) To the best of such counsel's knowledge, after due
inquiry, no relationship, direct or indirect, or agreement,
(including, without limitation, any voting agreement), exists
between or among the Company or any of the Subsidiaries and any
other party or any of their respective affiliates, which is required
by the Act to be described or a description of which is required to
be incorporated by reference in the Registration Statement, the
Prospectus or any Preliminary Prospectus to be filed as an exhibit
to the Registration Statement which is not described or incorporated
by reference or filed as required.
Such counsel shall also state that, except to the extent set forth
in clause (xv) above, although such counsel has not undertaken to determine
independently, and therefore does not assume any responsibility explicitly or
implicitly for, the accuracy, completeness or fairness of the statements
-22-
<PAGE> 23
contained in the Registration Statement and in the Prospectus, such counsel has
participated in the preparation of the Registration Statement and the
Prospectus, including review and discussion of the contents thereof, and that
based upon and subject to the foregoing, nothing came to such counsel's
attention that caused them to believe that the Registration Statement, at the
time it became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus, as of its
date and as of the date of such opinion, contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading (except in
each case as to the financial statements and the notes thereto and the schedules
and other financial, statistical and accounting data included therein (or in the
documents incorporated therein by reference), and the Underwriters' Information
as to which such counsel need express no belief).
As to factual matters, such counsel may rely on certificates
obtained from officers of the Company and the Subsidiaries and from public
officials and on such other authority as such counsel deems reasonable. In
rendering such opinion counsel may rely upon an opinion or opinions, each dated
the Closing Date, of other counsel retained by them or the Company as to laws of
any jurisdiction other than the United States or the State of New York and the
General Corporation Law of the State of Delaware, provided that (1) each such
local counsel is reasonably acceptable to the Representatives and their counsel,
(2) such reliance is expressly authorized by each opinion so relied upon and a
copy of each such opinion is delivered to the Representatives and is in form and
substance reasonably satisfactory to the Representatives and their counsel.
(d) The Representatives shall have received an opinion (reasonably
satisfactory to you and counsel for the Underwriters), dated the Closing
Date of Timothy J. Curry, counsel to the Company, on behalf of ERMA, ERSIC
and Quadrant, to the effect that:
(i) Each of ERSIC and Quadrant is a corporation duly
organized, validly existing and in good standing under the laws of
the jurisdiction in which it was organized and has all requisite
power and authority to conduct its business as it is currently being
conducted and to own, lease and operate its properties. ERMA is a
partnership duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it was organized and has
all requisite power and authority to conduct its business as it is
currently being conducted and to own, lease and operate its
properties. Each of ERSIC and Quadrant is duly qualified as a
foreign corporation authorized to transact business in and is in
good standing in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not
have a material adverse effect on the business, prospects,
operations, properties, net worth, results of operations or
financial condition of the Company and the Subsidiaries considered
as a whole.
(ii) All of the outstanding shares of capital stock of, or
other ownership interests in, each of ERSIC, Quadrant and ERMA have
been duly authorized and validly issued and, in the case of shares
of capital stock, are fully paid and non-
-23-
<PAGE> 24
assessable; and all of the outstanding shares of capital stock of,
and other ownership interests in, each of ERSIC, Quadrant, ERMA,
ERNV and Executive Risk Bermuda are owned of record by the Company
or by a Subsidiary of the Company free and clear of any perfected
security interest and any lien, claim, encumbrance or adverse
interest of any nature.
(iii) Except as otherwise set forth in the Prospectus, there
are no pending legal or governmental actions, suits or proceedings
to which ERSIC, ERMA or Quadrant is a party or of which any of their
respective property is the subject and which are required to be
described in the Registration Statement, the Prospectus or any
Preliminary Prospectus, and, to the best of such counsel's
knowledge, no such actions, suits or proceedings are threatened or
contemplated, and no contract or document of a character required to
be described in the Registration Statement, the Prospectus or any
Preliminary Prospectus or to be filed as an exhibit to the
Registration Statement is not so described or filed as required, and
the descriptions of the terms of any such contracts or documents
contained in the Registration Statement, the Prospectus and any
Preliminary Prospectus are correct in all material respects.
(iv) None of ERSIC, ERMA or Quadrant is (A) in violation of
its respective charter or by-laws, or other organizational
documents, or (B) in violation of any judgment, injunction, order or
decree of any court, governmental agency or body (including, without
limitation, any insurance regulatory agency or body) or arbitrator
having jurisdiction over ERSIC, ERMA or Quadrant or (C) in default
in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of
indebtedness or in any other agreement, indenture, lease or
instrument that, in the case of either (B) or (C), is material to
the business of the Company and the Subsidiaries taken as a whole.
(v) All material leases to which either of ERSIC, ERMA or
Quadrant is a party are valid and binding on each such Subsidiary,
as the case may be, and no default has occurred or is continuing
thereunder, which might result in any material adverse change in the
business, prospects, financial condition or results of operation of
the Company and the Subsidiaries taken as a whole.
(vi) Each of ERSIC, ERMA and Quadrant holds such licenses,
certificates, permits, franchises and authorizations from insurance
departments and other governmental or regulatory authorities
("permits") (including, without limitation, Insurance Licenses)
which are necessary to own, lease and operate its properties and to
conduct its business as described in the Prospectus, except to the
extent the failure to hold any such permits or Insurance Licenses
(either singularly or in the aggregate) would not have a material
adverse effect on the business, prospects, operations, properties,
net worth, results of operations or financial condition of the
Company and the Subsidiaries taken as a whole; and all such permits
and the Insurance Licenses are in full force and effect. Except as
disclosed in the Prospectus there has been, and
-24-
<PAGE> 25
there is, no pending or, to the best of such counsel's knowledge,
threatened action, suit, proceeding, investigation or event that
could reasonably be expected to lead to the revocation, termination,
suspension or any other material impairment of the rights of the
holder of any such permit (including, without limitation, the
Insurance Licenses); such permits and Insurance Licenses do not
materially restrict the conduct of business of ERSIC, ERMA or
Quadrant except as described in the Prospectus and any Preliminary
Prospectus and except for any restrictions customarily found in
insurance licenses generally; and except as disclosed in the
Prospectus and any Preliminary Prospectus no insurance regulatory
agency or body has issued any order or decree impairing, restricting
or prohibiting the payment of dividends by any of the Subsidiaries
of the Company to its parent.
(vii) No relationship, direct or indirect, or agreement,
(including, without limitation, any voting agreement), exists
between or among any of ERSIC, ERMA or Quadrant and any other party
or any of their respective affiliates, which is required by the Act
to be described in or a description of which is required to be
incorporated by reference in the Registration Statement, the
Prospectus or any Preliminary Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or
incorporated by reference or filed as required.
References to the Prospectus in this paragraph (e) include any
supplements thereto at the Closing Date.
(e) The Representatives shall have received from LeBoeuf, Lamb,
Greene & MacRae, L.L.P., a limited liability partnership including
professional corporations, as counsel for the Underwriters, such opinion
or opinions, dated the Closing Date, with respect to such matters as the
Representatives may reasonably require, and the Company shall have
furnished to such counsel such documents as they reasonably request for
the purpose of enabling them to pass upon such matters.
The opinions of Dewey Ballantine LLP, counsel to the Company, of
Timothy J. Curry, counsel to the Company on behalf of ERMA, ERSIC and Quadrant,
and of LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel to the Underwriters,
described in paragraphs (c), (d) and (e), respectively, above shall be rendered
to the Representatives at the request and direction and instruction of the
Company and shall so state therein.
(f) The Company shall have furnished to the Representatives a letter
(the "Initial Letter") of Ernst & Young LLP, addressed to the
Representatives and dated the date hereof, in form and substance
reasonably satisfactory to the Representatives, the substance of which has
been agreed upon and confirmed in writing between the Representatives and
Ernst &Young LLP, (i) stating that they are independent public accountants
within the meaning of the Act and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01
of Regulation S-X of the Commission, (ii) stating that, in their opinion,
the audited consolidated financial statements of the Company and the
Subsidiaries included or incorporated by reference in the Registration
Statement comply as
-25-
<PAGE> 26
to form in all material respects with the applicable accounting
requirements of the Exchange Act, (iii) if the Effective Time is prior to
the execution and delivery of this Agreement, confirming they have
performed certain procedures with respect to certain amounts, percentages
and financial information specified by the Representatives and deemed to
be a part of the Registration Statement pursuant to Rule 430A(b) and have
found such amounts, percentages and financial information to be in
agreement with the records of the Company and (iv) based upon a reading of
the latest unaudited consolidated financial statements made available by
the Company, the procedures of the AICPA for a review of interim financial
information as described in Statement of Auditing Standards No. 71, a
reading of minutes and inquiries of certain officials of the Company who
have responsibility for financial and accounting matters and certain other
limited procedures requested by the Underwriters and described in detail
in such letter, nothing has come to their attention that causes them to
believe that (A) any unaudited financial statements included or
incorporated by reference in the Registration Statement do not comply as
to form in all material respects with applicable accounting requirements,
(B) any material modifications should be made to the unaudited
consolidated financial statements included or incorporated by reference in
the Registration Statement for them to be in conformity with generally
accepted accounting principles or (C) the information included in the
Registration Statement under the heading "Selected Consolidated Historical
Financial Data" does not conform in all material respects with the
disclosure requirements set forth in Item 301 of Regulation S-K.
(g) The Company shall have furnished to the Representatives a letter
(as used in this paragraph, the "Bring-Down Letter") of Ernst & Young LLP,
dated the Closing Date confirming as of the date of the Bring-Down Letter
(or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in
the Prospectus, as of a date not more than five days prior to the date of
the Bring-Down Letter), the conclusions and findings of such firm with
respect to the financial information and other matters covered by its
Initial Letter delivered to the Representatives concurrently with the
execution of this Agreement.
(h) The Company shall have furnished to the Representatives a
certificate, dated the Closing Date, of any two of Robert H. Kullas,
Stephen J. Sills or Robert V. Deutsch, solely in their respective
capacities as the Chairman and Chief Executive Officer, the President, and
the Chief Financial Officer of the Company, stating that as of the Closing
Date: (i) the representations and warranties of the Company in this
Agreement are true and correct; (ii) the Company has performed or complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder on or prior to the Closing Date; (iii) no
stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or,
to the best of his knowledge, are contemplated by the Commission; and (iv)
(A) subsequent to the date of the most recent financial statements
contained in the Registration Statement and the Prospectus (or in the
documents incorporated therein by reference), there has been no material
adverse change in the financial condition, business, operations,
properties, prospects, net worth or results of operations of the Company
or any of ERII, ERSIC, ERMA, ERNV or Executive Risk Bermuda, or any
development involving a prospective change which to the knowledge of the
-26-
<PAGE> 27
Company could reasonably be expected to have a material adverse effect on
the financial condition, business, operations, properties, prospects, net
worth or results of operations of the Company and its Subsidiaries taken
as a whole, except as set forth in the Registration Statement and the
Prospectus, and (B) subsequent to the date of the most recent financial
statements contained in the Registration Statement and the Prospectus (or
in the documents incorporated therein by reference), there has not been
any material decrease in stockholders' equity or any material increase in
the long-term debt of the Company from that set forth in the Registration
Statement and the Prospectus (or in the documents incorporated therein by
reference), and (C) since the date of the latest financial statements
included in the Registration Statement and Prospectus (or in the documents
incorporated therein by reference), and except as disclosed therein, none
of the Company or any of the Subsidiaries shall have incurred any
liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), or entered into any transactions, not in the
ordinary course of business, that are material, individually or in the
aggregate, to the business of the Company and the Subsidiaries taken as a
whole .
(i) The Indenture shall have been duly executed and delivered by the
Company and the Trustee, and the Securities shall have been duly executed
and delivered by the Company and duly authenticated by the Trustee.
(j) At the Closing Date, there shall exist no default or event of
default under the Indenture.
(k) Subsequent to the execution and delivery of this Agreement or,
if earlier, the dates as of which information is given in the Registration
Statement (exclusive of any amendment thereof) and the Prospectus
(exclusive of any supplement thereto), there shall not have been any
change in the capital stock or long-term debt of the Company or any of its
Subsidiaries or any change, or any development involving a prospective
change, in or affecting the business, prospects, operations, properties,
financial condition, net worth or results of operations of the Company and
its Subsidiaries taken as a whole, the effect of which, in any such case
described above, is, in the judgment of the Representatives, so material
and adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Securities on the terms and in the
manner contemplated in the Prospectus (exclusive of any supplement).
(l) Subsequent to the execution and delivery of this Agreement (i)
no downgrading shall have occurred in the rating accorded the Securities
or any of the Company's other debt securities by any "nationally
recognized statistical rating organization," as that term is defined by
the Commission for purposes of Rule 436(g)(2) of the Rules and Regulations
and (ii) no such organization shall have publicly announced that it has
under surveillance or review (other than an announcement with positive
implications of a possible upgrading), its rating of the Securities or any
of the Company's other debt securities.
(m) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock
-27-
<PAGE> 28
Exchange, the American Stock Exchange or the over-the-counter market shall
have been suspended or limited, or minimum prices shall have been
established on either of such exchanges or such market by the Commission,
by such exchanges or market or by any other regulatory body or
governmental authority having jurisdiction, or trading in securities of
the Company on any exchange or in the over-the-counter market shall have
been suspended, (ii) a general moratorium on commercial banking activities
shall have been declared by Federal or New York State authorities or (iii)
an outbreak or escalation of hostilities or a declaration by the United
States of a national emergency or war or (iv) such a material adverse
change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the United
States shall be such) as to make it, in the judgment of the
Representatives, impracticable or inadvisable to proceed with the public
offering or the delivery of the Securities on the terms and in the manner
contemplated in the Prospectus.
(n) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency which would, as of the Closing Date, prevent the issuance and sale
of the Securities; and no injunction, restraining order or order of any
other nature by a federal or state court of competent jurisdiction shall
have been issued as of the Closing Date which would prevent the issuance
or sale of the Securities.
(o) The Company shall have furnished or caused to be furnished to
the Representatives and their counsel such further certificates and
documents as they shall have reasonably requested.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
6. EFFECTIVENESS AND TERMINATION.
This Agreement shall become effective (other than Sections 8 and 12,
which shall become effective upon the execution hereof) upon the later of (i)
the receipt by the Company and the Representatives of notification as to the
effectiveness of the Registration Statement and (ii) the execution of this
Agreement. The obligations of the Underwriters hereunder may be terminated by
the Representatives, in their absolute discretion, by notice given to and
received by the Company prior to delivery of and payment for the Securities if,
prior to that time, any of the events described in Sections 5(k), (l), (m)or (n)
shall have occurred.
7. DEFAULTING UNDERWRITERS.
(a) If, on the Closing Date, any Underwriter or Underwriters default
in the performance of its or their obligations under this Agreement, the
Representatives may make arrangements for the purchase of such Securities by
other persons satisfactory to the Company and the Representatives, including any
of the Underwriters, but if no such arrangements are made by the Closing Date,
then each remaining non-defaulting Underwriter shall be severally obligated to
purchase
-28-
<PAGE> 29
the Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase on the Closing Date in the respective proportions which the
principal amount of Securities set forth opposite the name of each remaining
non-defaulting Underwriter on Schedule 1 hereto bears to the aggregate principal
amount of Securities set forth opposite the names of all the remaining
non-defaulting Underwriters in Schedule 1 hereto; provided, however, that the
remaining non-defaulting Underwriters shall not be obligated to purchase any of
the Securities on the Closing Date if the aggregate principal amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase on such date exceeds one-eleventh of the aggregate principal amount of
the Securities to be purchased on the Closing Date, and any remaining
non-defaulting Underwriter shall not be obligated to purchase in total more than
110% of the principal amount of the Securities which it agreed to purchase on
the Closing Date pursuant to the terms of Section 2. If the foregoing maximums
are exceeded and the remaining Underwriters or other underwriters satisfactory
to the Representatives and the Company do not elect to purchase the Securities
which the defaulting Underwriter or Underwriters agreed but failed to purchase,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company, except that the Company will continue
to be liable for the payment of expenses (except with respect to any defaulting
Underwriter) to the extent set forth in Sections 8 and 12 and except that the
provisions of Sections 9 and 10 shall not terminate and shall remain in effect.
As used in this Agreement, the term "Underwriter" includes, for all purposes of
this Agreement unless the context otherwise requires, any party not listed on
Schedule 1 hereto who, pursuant to this Section 7, purchases Securities which a
defaulting Underwriter agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Underwriter
of any liability it may have for damages caused by its default. If other
underwriters are obligated or agree to purchase the Securities of a defaulting
Underwriter, either the Representatives or the Company may postpone the Closing
Date for up to seven full business days in order to effect any changes that in
the opinion of counsel for the Company or counsel for the Underwriters may be
necessary in the Registration Statement, the Prospectus or in any other document
or arrangement, and the Company agrees to file promptly any amendment or
supplement to the Registration Statement or the Prospectus that effects any such
changes.
8. REIMBURSEMENT OF UNDERWRITERS' EXPENSES.
If (a) notice shall have been given pursuant to Section 7
terminating this Agreement, (b) the Company shall fail to tender the Securities
for delivery to the Underwriters for any reason permitted under this Agreement
or (c) the Underwriters shall decline to purchase the Securities for any reason
permitted under this Agreement (including the termination of this Agreement
pursuant to Section 6), the Company shall reimburse the Underwriters for the
reasonable fees and expenses of their counsel and for such other reasonable
out-of-pocket expenses as shall have been reasonably incurred by them in
connection with this Agreement and the proposed purchase of the Securities, and
upon demand the Company shall pay the full amount thereof to the
Representatives. If this Agreement is terminated pursuant to Section 7 by reason
of the default of one or more Underwriters, the Company shall not be obligated
to reimburse any defaulting Underwriter on account of those expenses.
-29-
<PAGE> 30
9. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless each Underwriter,
its affiliates, their respective officers, directors, employees, representatives
and agents, and each person, if any, who controls any Underwriter within the
meaning of the Securities Act (all of such parties being collectively referred
to for the purposes of this Section 9 and Section 10 as the Underwriter) from
and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, without limitation, any loss, claim,
damage, liability or action relating to purchases and sales of the Securities),
to which that Underwriter may become subject, whether commenced or threatened,
under the Securities Act, the Exchange Act, any other federal or state statutory
law or regulation, at common law or otherwise, insofar as such loss, claim,
damage, liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein in the light of the circumstances under which they were
made, not misleading, and shall reimburse each Underwriter for any legal or
other expenses reasonably incurred by that Underwriter in connection with
investigating or preparing to defend or defending against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based upon an untrue statement
or alleged untrue statement in or omission or alleged omission from any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with Underwriters'
Information furnished to the Company through the Representatives by or on behalf
of such Underwriter specifically for use therein; provided, further, that the
indemnification contained in this paragraph (a) with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or to the benefit
of any person controlling such Underwriter) on account of any such loss, claim,
damage, liability or expense arising from the sale of the Securities by such
Underwriter to any person if a copy of the Prospectus shall not have been
delivered or sent to such person within the time required by the Act and the
Rules and Regulations, and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus, provided that the Company has
delivered the Prospectus to the several Underwriters in requisite quantity on a
timely basis to permit such delivery or sending.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, each of its directors, each officer of the Company
who signed the Registration Statement, each of its employees, representatives
and agents and each person, if any, who controls the Company within the meaning
of the Securities Act (all of such persons being collectively referred to for
the purposes of this Section 9 and Section 10 as the Company), from and against
any loss, claim, damage or liability, joint or several, or any action in respect
thereof, to which the Company may become subject, whether commenced or
threatened, under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of or is based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration
-30-
<PAGE> 31
Statement or the Prospectus or in any amendment or supplement thereto or (ii)
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances which they were made, not misleading, but in each case only to the
extent that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with Underwriters'
Information furnished to the Company through the Representatives by or on behalf
of that Underwriter specifically for use therein, and shall reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or preparing to defend or defending against or
appearing as third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 9 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 9. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 9(a) and 9(b), shall use all reasonable efforts to
cooperate with the
-31-
<PAGE> 32
indemnifying party in the defense of any such action or claim. No indemnifying
party shall be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party (which consent shall not be
unreasonably withheld or delayed), effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
The obligations of the Company and the Underwriters in this Section
9 and in Section 10 are in addition to any other liability that the Company or
the Underwriters may otherwise have, including in respect of any breaches of
representations, warranties and agreements made herein by such party.
10. CONTRIBUTION.
If the indemnification provided for in Section 9 is unavailable or
insufficient to hold harmless an indemnified party under Section 9(a) or 9(b),
then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability, or action in respect thereof,
(i) in such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and the Underwriters on
the other with respect to the statements or omissions that resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Securities purchased under this Agreement (before
deducting expenses) received by or on behalf of the Company, on the one hand,
and the total underwriting discounts and commissions received by the
Underwriters with respect to the Securities purchased under this Agreement, on
the other, bear to the total gross proceeds from the sale of the Securities
under this Agreement, in each case as set forth in the table on the cover page
of the Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to the
Company or information supplied by the Company on the one hand or to any
Underwriters' Information on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section 10
were to be determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party
-32-
<PAGE> 33
as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 10 shall be deemed to include, for
purposes of this Section 10, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending or
preparing to defend any such action or claim. Notwithstanding the provisions of
this Section 10, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total underwriting discounts and commissions
received by such Underwriter with respect to the Securities purchased by it
under this Agreement exceeds the amount of any damages which such Underwriter
has otherwise paid or become liable to pay by reason of any untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute as
provided in this Section 10 are several in proportion to their respective
underwriting obligations and not joint.
11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT.
This Agreement shall inure to the benefit of and be binding upon the
Underwriters, the Company, and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Underwriters and the Company and
their respective successors and the controlling persons, officers, directors and
other parties referred to in Sections 9 and 10 hereof, and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 11, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
The term "successors" shall not include a purchaser of any of the Securities
from any of the Underwriters merely because of such purpose.
12. EXPENSES.
The Company agrees with the Underwriters to pay (a) the costs
incident to the authorization, issuance, sale, preparation and delivery of the
Securities and any taxes payable in that connection; (b) the costs incident to
the preparation, printing and filing under the Securities Act of the
Registration Statement and any amendments and exhibits thereto; (c) the costs of
distributing the Registration Statement as originally filed and each amendment
thereto and any post-effective amendments thereof (including, in each case,
exhibits), any Preliminary Prospectus, the Prospectus and any amendment or
supplement to the Prospectus, all as provided in this Agreement; (d) the costs
of printing, reproducing and distributing this Agreement and any other
underwriting and selling group documents by mail, facsimile or other means of
communications; (e) the fees and expenses of qualifying the Securities under the
securities laws of the several jurisdictions as provided in Section 4(i) and of
preparing, printing and distributing Blue Sky Memoranda and Legal Investment
Surveys (including related reasonable fees and expenses of counsel to the
Underwriters); (f) any fees charged by securities rating services for rating the
Securities; (g) all fees and expenses of the Trustee and any paying agent or
registrar; (h) all expenses incurred in connection with the approval of the
Securities for book-entry transfer by DTC; and (i) all other costs and expenses
incident to the performance of the obligations of the Company under this
Agreement; provided that, except as otherwise provided
-33-
<PAGE> 34
in this Section 12 and in Section 9, the Underwriters shall pay their own costs
and expenses, including the costs and expenses of their counsel, any transfer
taxes on the Securities which they may sell and the expenses of advertising any
offering of the Securities made by the Underwriters.
13. SURVIVAL.
The respective indemnities, rights of contribution, representations,
warranties and agreements of the Company and the Underwriters contained in this
Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement or any certificate delivered pursuant hereto, shall survive the
delivery of and payment for the Securities and shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any of them or any of their respective
affiliates, officers, directors, employees, representatives, agents or
controlling persons.
14. NOTICES, ETC.
All statements, requests, notices and agreements hereunder shall be
in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail,
nationally recognized overnight courier or confirmed telecopy transmission
to:
Chase Securities Inc.
270 Park Avenue - 8th Floor
New York, New York 10017
Attention: Louis DeCaro
Telephone: (212) 270-3146
Telecopier: (212) 270-6170
and
(b) if to the Company, shall be delivered or sent by mail,
nationally recognized overnight courier or confirmed telecopy transmission
to:
Executive Risk Inc.
82 Hopmeadow Street
Simsbury, CT 06070
Attention: Chairman
Telephone: (860) 408-2000
Telecopier: (860) 408-2002
provided, however, that any notice to an Underwriter pursuant to Section 9(c)
shall be delivered or sent by mail or confirmed telecopy transmission to such
Underwriter at its address set forth in its acceptance to the Representatives,
which address will be supplied to any other party hereto by the
-34-
<PAGE> 35
Representatives upon request and, in the case of Chase Securities Inc., shall be
sent to 1 Chase Manhattan Plaza - 25th Floor, New York, New York 10081,
Attention: Legal Department. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Underwriters by the Representatives.
15. DEFINITIONS OF CERTAIN TERMS.
For purposes of this Agreement, (a) "business day" means any day on
which the New York Stock Exchange, Inc. is open for trading and (b) the term
"affiliate" has the meaning set forth in Rule 405 under the Securities Act.
16. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAWS
PROVISIONS THEREOF.
17. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, (which
may include counterparts delivered by telecopier), each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.
18. AMENDMENTS.
No amendment or waiver of any provision of this Agreement, nor any
consent or approval to any departure therefrom, shall in any event be effective
unless the same shall be in writing and signed by the parties hereto.
19. HEADINGS.
The headings herein are inserted for convenience of reference only
and are not intended to be part of, or to affect the meaning or interpretation
of, this Agreement.
-35-
<PAGE> 36
If the foregoing is in accordance with your understanding of the agreement
between the Company and the several Underwriters, kindly indicate your
acceptance in the space provided for that purpose below.
Very truly yours,
EXECUTIVE RISK INC.
By
------------------------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: CHASE SECURITIES INC.
By:
------------------------------
Name:
Title:
-36-
<PAGE> 37
SCHEDULE 1
Principal
Amount
Underwriters of Securities
------------ -------------
Chase Securities Inc. $
Donaldson Lufkin & Jenrette
Securities Corporation ___________
Total $75,000,000
===========
<PAGE> 38
SCHEDULE 2
SUBSIDIARIES OF EXECUTIVE RISK INC.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Percentage of Securities/
Name of Entity Type of Entity Legal Owner Interests Owned
-------------- -------------- ----------- ---------------
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Executive Re Inc. Corporation Executive Risk Inc. 100%
- --------------------------------------------------------------------------------------------
Executive Risk Capital Statutory Executive Risk Inc.* 100%
Trust Business Trust of Common Securities*
- --------------------------------------------------------------------------------------------
Sullivan Kelly Inc. Corporation Executive Re Inc. 100%
- --------------------------------------------------------------------------------------------
Executive Risk Corporation Executive Re Inc. 100%
Indemnity, Inc. ("ERII")
- --------------------------------------------------------------------------------------------
Executive Risk Corporation ERII 100%
Speciality Insurance
Company
- --------------------------------------------------------------------------------------------
Talcott Services Corporation Executive Re Inc. 100%
Corporation
- --------------------------------------------------------------------------------------------
Executive Risk Limited English Executive Re Inc. 100%
Corporation
- --------------------------------------------------------------------------------------------
Executive Risk Bermuda Executive Re Inc. 100%
(Bermuda) Ltd. Corporation
- --------------------------------------------------------------------------------------------
Executive Risk General Partnership See below** 100%**
Management Associates
- --------------------------------------------------------------------------------------------
Executive Risk N.V. Netherlands Executive Re Inc. 100%
Corporation
- --------------------------------------------------------------------------------------------
Quadrant Indemnity Corporation ERII 100%
Company
- --------------------------------------------------------------------------------------------
UAP Executive Partners Corporation See below*** 50%***
- --------------------------------------------------------------------------------------------
IDFN of Arizona, Inc. Corporation Sullivan Kelly Inc. 100%
Insurance Brokers
- --------------------------------------------------------------------------------------------
</TABLE>
* 100% of the preferred securities issued by the Trust (Capital Securities)
are publicly owned.
** 70% of the general partnership interests in ERMA are directly owned by the
Company and 30% of the general partnership interests are indirectly owned
by the Company through Executive Re.
*** The remaining 50% of the shares of UPEX are owned by Union des Assurances
de Paris -- Incendie-Accidents
<PAGE> 1
Exhibit 4.1
================================================================================
EXECUTIVE RISK INC.
AND
THE CHASE MANHATTAN BANK,
Trustee
------------------------
SENIOR DEBT SECURITIES
------------------------
INDENTURE
Dated as of December , 1997
================================================================================
<PAGE> 2
EXECUTIVE RISK INC.
CROSS-REFERENCE TABLE(1)
TRUST INDENTURE ACT INDENTURE
SECTION SECTION
- ------------------- ---------
310 (a)(1)....................................... 6.12
(a)(2)....................................... 6.12
(a)(3)....................................... Not applicable
(a)(4)....................................... Not applicable
(a)(5)....................................... 6.12(b)
(b).......................................... 6.3; 6.10(d); 6.12(b)
311 (a).......................................... 6.3
(b).......................................... 6.3
312 (a).......................................... 6.8
(b).......................................... 6.8
(c).......................................... 6.8
313 (a).......................................... 6.7
(b).......................................... Not applicable
(c).......................................... 6.6; 6.7
(d).......................................... 6.7
314 (a).......................................... 9.6; 9.7
(b).......................................... Not Applicable
(c)(1)....................................... 1.2
(c)(2)....................................... 1.2
(c)(3)....................................... Not Applicable
(d).......................................... Not Applicable
(e).......................................... 1.2
(f).......................................... Not applicable
315 (a).......................................... 6.1
(b).......................................... 6.6
(c).......................................... 6.1(b)
(d).......................................... Not applicable
(e).......................................... 5.15
<PAGE> 3
TRUST INDENTURE ACT INDENTURE
SECTION SECTION
- ------------------- ---------
316 (a)(last sentence)........................... 1.1
(a)(1)(A).................................... 5.2; 5.8
(a)(1)(B).................................... 5.7
(b).......................................... 5.9; 5.10
(c).......................................... 1.4(e) and (f)
317 (a)(1)....................................... 5.3
(a)(2)....................................... 5.4
(b).......................................... 9.3
318 (a).......................................... 1.11
(b).......................................... 1.11
(c).......................................... 1.11
- ----------
(1) This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE> 4
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
1.1 Definitions........................................................1
1.2 Compliance Certificates and Opinions..............................11
1.3 Form of Documents Delivered to Trustee............................11
1.4 Acts of Holders...................................................12
1.5 Notices, Etc., to Trustee and Company.............................14
1.6 Notice to Holders; Waiver.........................................14
1.7 Headings and Table of Contents....................................15
1.8 Successor and Assigns.............................................15
1.9 Separability......................................................15
1.10 Benefits of Indenture.............................................15
1.11 Governing Law; Trust Indenture Act................................15
1.12 Legal Holidays....................................................15
ARTICLE II
SECURITY FORMS
2.1 Forms Generally...................................................16
2.2 Form of Face of Security..........................................16
2.3 Form of Reverse of Security.......................................18
2.4 Form of Trustee's Certificate of Authentication...................22
2.5 Securities Issuable in the Form of a Global Security..............22
2.6 Form of Legend for Global Securities..............................22
ARTICLE III
THE SECURITIES
3.1 Amount Unlimited; Issuable in Series..............................23
3.2 Denominations.....................................................26
3.3 Execution, Authentication, Delivery and Dating....................26
3.4 Temporary Securities..............................................29
3.5 Registration, Transfer and Exchange...............................30
<PAGE> 5
Page
----
3.6 Replacement Securities............................................32
3.7 Payment of Interest; Interest Rights Preserved....................33
3.8 Persons Deemed Owners.............................................34
3.9 Cancellation......................................................35
3.10 Computation of Interest...........................................35
3.11 CUSIP Numbers.....................................................35
3.12 Currency and Manner of Payment in Respect of Securities...........35
3.13 Appointment and Resignation of Exchange Rate Agent................39
ARTICLE IV
SATISFACTION, DISCHARGE AND DEFEASANCE
4.1 Termination of Company's Obligations under the Indenture..........40
4.2 Application of Trust Funds........................................41
4.3 Applicability of Defeasance Provisions; Company's Option
to Effect Defeasance or Covenant Defeasance.......................41
4.4 Defeasance and Discharge..........................................41
4.5 Covenant Defeasance...............................................42
4.6 Conditions to Defeasance or Covenant Defeasance...................42
4.7 Deposited Money and Government Obligations to Be Held in Trust....44
4.8 Repayment to Company..............................................44
4.9 Indemnity for Government Obligations..............................44
4.10 Reinstatement.....................................................44
ARTICLE V
DEFAULTS AND REMEDIES
5.1 Events of Default.................................................45
5.2 Acceleration; Rescission and Annulment............................47
5.3 Collection of Indebtedness and Suits for Enforcement by Trustee...47
5.4 Trustee May File Proofs of Claim..................................48
5.5 Trustee May Enforce Claims Without Possession of Securities.......48
5.6 Delay or Omission Not Waiver......................................48
5.7 Waiver of Past Defaults...........................................48
5.8 Control by Majority...............................................48
5.9 Limitation on Suits by Holders....................................49
5.10 Rights of Holders to Receive Payment..............................49
5.11 Application of Money Collected....................................49
5.12 Restoration of Rights and Remedies................................50
5.13 Rights and Remedies Cumulative....................................50
<PAGE> 6
Page
----
5.14 Waiver of Usury, Stay or Extension Laws...........................50
5.15 Undertaking for Costs.............................................51
ARTICLE VI
THE TRUSTEE
6.1 Certain Duties and Responsibilities of the Trustee................51
6.2 Rights of Trustee.................................................51
6.3 Trustee May Hold Securities.......................................52
6.4 Money Held in Trust...............................................52
6.5 Trustee's Disclaimer..............................................52
6.6 Notice of Defaults................................................52
6.7 Reports by Trustee to Holders.....................................53
6.8 Preservation of Information; Securityholder Lists.................53
6.9 Compensation and Indemnity........................................53
6.10 Replacement of Trustee............................................54
6.11 Acceptance of Appointment by Successor............................56
6.12 Eligibility; Disqualification; Conflicting Interests..............57
6.13 Merger, Conversion, Consolidation or Succession to Business.......57
6.14 Appointment of Authenticating Agent...............................57
ARTICLE VII
CONSOLIDATION, MERGER OR SALE OF ASSETS
7.1 Consolidation, Merger or Sale of Assets Permitted.................59
ARTICLE VIII
SUPPLEMENTAL INDENTURES
8.1 Supplemental Indentures Without Consent of Holders................60
8.2 Supplemental Indentures with Consent of Holders...................61
8.3 Compliance with Trust Indenture Act...............................62
8.4 Execution of Supplemental Indentures..............................62
8.5 Effect of Supplemental Indentures.................................62
8.6 Reference in Securities to Supplemental Indentures................62
<PAGE> 7
Page
----
ARTICLE IX
COVENANTS
9.1 Payment of Principal, Premium, If Any, and Interest...............63
9.2 Maintenance of Office or Agency...................................63
9.3 Money for Securities Payments to Be Held in Trust;
Unclaimed Money...................................................64
9.4 Corporate Existence...............................................65
9.5 Payment of Taxes and Other Claims.................................65
9.6 Reports by the Company............................................65
9.7 Annual Review Certificate; Notice of Defaults or
Events of Default.................................................66
9.8 Books of Record and Account.......................................66
9.9 Limitations on Liens..............................................66
9.10 Limitation on Disposition of Stock of Restricted Subsidiaries.....67
ARTICLE X
REDEMPTION
10.1 Applicability of Article..........................................67
10.2 Election to Redeem Notice to Trustee..............................68
10.3 Selection of Securities to Be Redeemed............................68
10.4 Notice of Redemption..............................................68
10.5 Deposit of Redemption Price.......................................69
10.6 Securities Payable on Redemption Date.............................70
10.7 Securities Redeemed in Part.......................................70
ARTICLE XI
SINKING FUNDS
11.1 Applicability of Article..........................................70
11.2 Satisfaction of Sinking Fund Payments with Securities.............71
11.3 Redemption of Securities for Sinking Fund.........................71
<PAGE> 8
INDENTURE, dated as of December , 1997, between EXECUTIVE RISK INC., a
corporation duly organized and existing under the laws of Delaware (the
"Company"), and The Chase Manhattan Bank, a New York banking corporation, as
Trustee (the "Trustee").
RECITALS
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness ("Securities") to be issued
in one or more series as herein provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed as
follows for the equal and ratable benefit of the Holders of the Securities:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL AP
Section 1.1Definitions. (a) For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them
in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(3) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles;
and
(4) 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.
"ACT," when used with respect to any Holder, has the meaning specified in
Section 1.4(a).
<PAGE> 9
"AFFILIATE" of any specified Person means any Person directly or
indirectly controlling or controlled by, or under direct or indirect common
control, with such specified Person. For purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"AGENT" means any Paying Agent or Registrar.
"AUTHENTICATING AGENT" means any authenticating agent appointed by the
Trustee pursuant to Section 6.14.
"BANKRUPTCY LAW" has the meaning specified in Section 5.1.
"BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company, the Executive Committee or any other duly authorized committee thereof.
"BOARD RESOLUTION" means a copy of a resolution of the Board of Directors,
certified by the Secretary or an Assistant Secretary of the Company to have been
duly adopted by the Board of Directors and to be in full force and effect on the
date of the certificate, and delivered to the Trustee.
"BUSINESS DAY," with respect to any Place of Payment means, unless
otherwise specified with respect to any Securities pursuant to Section 3.1, each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment or particular location are
authorized or obligated by law or executive order to close.
"CAPITAL STOCK" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock, including any class or classes of
corporate stock which is preferred as to the payment of dividends, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such corporation, over shares of corporate stock of any other
class of such corporation.
"COMMISSION" means 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, then the body
performing such duties at such time.
"COMPANY" means the party named as the Company in the first paragraph of
this Indenture until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter means such
successor.
"COMPANY ORDER" and "COMPANY REQUEST" mean, respectively, a written order
or request signed in the name of the Company by two Officers, one of whom must
be the
-2-
<PAGE> 10
Chairman of the Board, the President, the Chief Financial Officer, the
Treasurer, the Assistant Treasurer, the Controller or a Vice President of the
Company.
"COMPONENT CURRENCY" has the meaning specified in Section 3.12(h).
"CONVERSION DATE" has the meaning specified in Section 3.12(d).
"CONVERSION EVENT" means the cessation of use of (i) a Foreign Currency
both by the issuer of such currency and for the settlement of transactions by a
central bank or other public institutions of or within the international banking
community, (ii) the ECU both within the European Monetary System and for the
settlement of transactions by public institutions of or within the European
Communities or (iii) any currency unit other than the ECU for the purposes for
which it was established.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee in New
York City, New York, at which at any particular time its corporate trust
business shall be principally administered, which office at the date hereof is
located at 450 West 33rd Street - 15th Floor, New York, New York 10001,
Attention: Global Trust Services.
"CURRENCY UNIT" for all purposes of this Indenture shall include any
composite currency.
"CUSTODIAN" has the meaning specified in Section 5.1.
"DEFAULT" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.
"DEFAULTED INTEREST" has the meaning specified in Section 3.7(b).
"DEPOSITARY," when used with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities means the Person designated as Depositary by the Company pursuant to
Section 3.1 until a successor Depositary shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter shall mean or include
each Person which is then a Depositary hereunder, and if at any time there is
more than one such Person, shall be a collective reference to such Persons.
"DOLLAR" means the currency of the United States as at the time of payment
is legal tender for the payment of public and private debts.
"ECU" means the European Currency Unit as defined and revised from time to
time by the Council of the European Communities.
"ELECTION DATE" has the meaning specified in Section 3.12(h).
-3-
<PAGE> 11
"EUROPEAN COMMUNITIES" means the European Economic Community, the European
Coal and Steel Community and the European Atomic Energy Community.
"EUROPEAN MONETARY SYSTEM" means the European Monetary System established
by the Resolution of December 5, 1978 of the Council of the European
Communities.
"EVENT OF DEFAULT" has the meaning specified in Section 5.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE RATE AGENT," when used with respect to Securities of or within
any series, means, unless otherwise specified with respect to any Securities
pursuant to Section 3.1, a New York Clearing House bank designated pursuant to
Section 3.1 or Section 3.13 (which may include any such bank acting as Trustee
hereunder).
"EXCHANGE RATE OFFICER'S CERTIFICATE" means a certificate setting forth
(i) the applicable Market Exchange Rate or the applicable bid quotation and (ii)
the Dollar or Foreign Currency amounts of principal (and premium, if any) and
interest, if any (on an aggregate basis and on the basis of a Security having
the lowest denomination principal amount in the relevant currency or currency
unit), payable with respect to a Security of any series on the basis of such
Market Exchange Rate or the applicable bid quotation, signed by the Chief
Financial Officer, the Treasurer, the Controller, any Vice President or the
Assistant Treasurer of the Company.
"EXCLUDED LIEN" has the meaning specified in Section 9.9.
"FOREIGN CURRENCY" means any currency issued by the government of one or
more countries other than the United States or by any recognized confederation
or association of such governments.
"GLOBAL SECURITY" means a Security bearing the legend prescribed in
Section 2.4 evidencing all or part of a series of Securities, authenticated and
delivered to the Depositary for such series or its nominee, and registered in
the name of such Depositary or nominee.
"GOVERNMENT OBLIGATIONS" means securities which are (i) direct obligations
of the United States or, if specified as contemplated by Section 3.1, the
government which issued the currency in which the Securities of a particular
series are payable, 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 or, if specified as
contemplated by Section 3.1, such government which issued the foreign currency
in which the Securities of such series are payable, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States or such other government, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depositary receipt issued by a bank or trust company as custodian with respect
to any such Government Obligation or a specific payment of interest on or
principal of any such Government Obligation held by such custodian for the
account of the holder of a depositary receipt, provided, that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the
-4-
<PAGE> 12
holder of such depositary receipt from any amount received by the custodian in
respect of the Government Obligation evidenced by such depositary receipt.
"HOLDER" means a person in whose name a Security is registered on the
Register.
"INDEBTEDNESS" means, with respect to any Person, (i) every obligation of
such Person for money borrowed, or under any reimbursement obligation relating
to a letter of credit (other than letters of credit obtained in the ordinary
course of business), (ii) every obligation evidenced by a bond, note, debenture
or similar instrument (including a purchase money obligation) given in
connection with the acquisition of any businesses, properties or assets of any
kind or with services incurred in connection with capital expenditures (other
than indebtedness to trade creditors arising in the ordinary course of business)
(provided, however, that the deferred purchase price of any business, property
or asset shall not be considered Indebtedness if the purchase price thereof is
payable in full within 90 days from the date on which such indebtedness was
incurred), (iii) every obligation of such Person in respect of lease rentals
which, under generally accepted accounting principles would be shown on a
balance sheet of such Person as a liability (other than a current liability of a
deferred item), (iv) every guarantee, direct or indirect, of any obligation
described in the foregoing clauses (i) through (iii) and (v) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
obligation described in the foregoing clauses (i) through (iii). Indebtedness
also includes any obligation of, or any obligation guaranteed by, any Person for
the payment of amounts due under a swap agreement or similar instrument or
agreement, or under a foreign currency hedge, exchange or similar instrument or
agreement.
"INDENTURE" means this Indenture as originally executed or as amended or
supplemented from time to time and shall include the forms and terms of
particular series of Securities established as contemplated hereunder.
"INDEXED SECURITY" means a Security the terms of which provide that the
principal amount thereof payable at Stated Maturity may be more or less than the
principal face amount thereof at original issuance.
"INTEREST," when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity.
"INTEREST PAYMENT DATE," when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"LIEN" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement and any lease in the nature thereof).
"MARKET EXCHANGE RATE" means, unless otherwise specified with respect to
any Securities pursuant to Section 3.1, (i) for any conversion involving a
currency unit on the one
-5-
<PAGE> 13
hand and Dollars or any Foreign Currency on the other, the exchange rate between
the relevant currency unit and Dollars or such Foreign Currency calculated by
the method specified pursuant to Section 3.1 for the Securities of the relevant
series, (ii) for any conversion of Dollars into any Foreign Currency, the noon
buying rate for such Foreign Currency for cable transfers quoted in New York
City as certified for customs purposes by the Federal Reserve Bank of New York
and (iii) for any conversion of one Foreign Currency into Dollars or another
Foreign Currency, the spot rate at noon local time in the relevant market at
which, in accordance with normal banking procedures, the Dollars or Foreign
Currency into which conversion is being made could be purchased with the Foreign
Currency from which conversion is being made from major banks located in New
York City, London or any other principal market for Dollars or such purchased
Foreign Currency, in each case determined by the Exchange Rate Agent. Unless
otherwise specified with respect to any Securities pursuant to Section 3.1, in
the event of the unavailability of any of the exchange rates provided for in the
foregoing clauses (i), (ii) and (iii), the Exchange Rate Agent shall use, in its
sole discretion and without liability on its part, such quotation of the Federal
Reserve Bank of New York as of the most recent available date, or quotations
from one or more major banks in New York City, London or other principal market
for such currency or currency unit in question (which may include any such bank
acting as Trustee under this Indenture), or such other quotations as the
Exchange Rate Agent shall deem appropriate. If there is more than one market for
dealing in any currency or currency unit by reason of foreign exchange
regulations or otherwise, the market to be used in respect of such currency or
currency unit shall be that upon which a nonresident issuer of securities
designated in such currency or currency unit would purchase such currency or
currency unit in order to make payments in respect of such securities.
"MATURITY," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"NOTICE OF DEFAULT" has the meaning specified in Section 5.1(3).
"OFFICER" means the Chairman of the Board, the President, any Vice
President, the Chief Financial Officer, the Treasurer, the Assistant Treasurer,
the Controller, the Secretary or any Assistant Secretary of the Company.
"OFFICERS' CERTIFICATE," when used with respect to the Company, means a
certificate signed by two Officers, one of whom must be the Chairman of the
Board, the President, the Chief Financial Officer, the Treasurer, the Assistant
Treasurer, the Controller or a Vice President of the Company.
"OPINION OF COUNSEL" means a written opinion from the general counsel of
the Company or other legal counsel who is reasonably acceptable to the Trustee.
Such counsel may be an employee of or counsel to the Company.
-6-
<PAGE> 14
"ORIGINAL ISSUE DISCOUNT SECURITY" means any Security which provides for
an amount less than the stated principal amount thereof to be due and payable
upon declaration of acceleration of the Maturity thereof pursuant to Section
5.2.
"OUTSTANDING," when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, EXCEPT:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money or Government Obligations in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent (other
than the Company) in trust or set aside and segregated in trust by the
Company(if the Company shall act as its own Paying Agent) for the Holders
of such Securities, provided that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture
or provisions therefor satisfactory to the Trustee have been made;
(iii) Securities, except to the extent provided in Sections 4.4 and
4.5, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article 4; and
(iv) Securities which have been paid pursuant to Section 3.6 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities
in respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, or whether
sufficient funds are available for redemption or for any other purpose and for
the purpose of making the calculations required by Section 313 of the Trust
Indenture Act, (A) the principal amount of any Original Issue Discount
Securities that may be counted in making such determination or calculation and
that shall be deemed to be Outstanding for such purpose shall be the amount of
principal thereof that would be due and payable at the time of such
determination upon a declaration of acceleration of the maturity thereof
pursuant to Section 5.2, (B) the principal amount of any Security denominated in
a Foreign Currency that may be counted in making such determination or
calculation and that shall be deemed Outstanding for such purpose shall be equal
to the Dollar equivalent, determined as of the date such Security is originally
issued by the Company as set forth in an Exchange Rate Officer's Certificate
delivered to the Trustee, of the principal amount (or, in the case of an
Original Issue Discount Security, the Dollar equivalent as of such date of
original issuance of the amount determined as provided in clause (A) above) of
such Security, (C) the principal amount of any Indexed Security that may be
-7-
<PAGE> 15
counted in making such determination or calculation and that shall be deemed
Outstanding for such purpose shall be equal to the principal face amount of such
Indexed Security at original issuance, unless otherwise provided with respect to
such Security pursuant to Section 3.1, and (D) Securities owned by the Company
or any other obligor upon the Securities or any Affiliate of the Company or of
such other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in making such
calculation or in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which a Responsible
Officer of the Trustee actually knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.
"PAYING AGENT" means any Person authorized by the Company to pay the
principal of, premium, if any, or interest and any other payments on, any
Securities on behalf of the Company.
"PERIODIC OFFERING" means an offering of Securities of a series from time
to time the specific terms of which Securities, including, without limitation,
the rate or rates of interest or formula for determining the rate or rates of
interest thereon, if any, the Maturity thereof and the redemption provisions, if
any, with respect thereto, are to be determined by the Company upon the issuance
of such Securities.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"PLACE OF PAYMENT," when used with respect to the Securities of or within
any series, means the place or places where the principal of, premium, if any,
and interest and any other payments on, such Securities are payable as specified
as contemplated by Sections 3.1 and 9.2.
"PREDECESSOR SECURITY" of any particular Security means 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 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"PRINCIPAL AMOUNT," when used with respect to any Security, means the
amount of principal, if any, payable in respect thereof at Maturity; provided,
however, that when used with respect to an Indexed Security in any context other
than the making of payments at Maturity, "principal amount" means the principal
face amount of such Indexed Security at original issuance.
-8-
<PAGE> 16
"REDEMPTION DATE," when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"REDEMPTION PRICE," when used with respect to any Security to be redeemed,
in whole or in part, means the price at which it is to be redeemed pursuant to
this Indenture.
"REGISTER" has the meaning specified in Section 3.5.
"REGISTRAR" has the meaning specified in Section 3.5.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment
Date on the Securities of or within any series means the date specified for that
purpose as contemplated by Section 3.1.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, shall mean
any officer within the Corporate Trust Office, including any vice president, any
assistant vice president, the secretary, any assistant secretary, any vice
president, any assistant vice president, the secretary, any assistant treasurer
or any officer of the Trustee customarily performing functions similar to those
performed by the persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of his knowledge of
and familiarity with a particular subject.
"RESTRICTED SUBSIDIARY" means a Subsidiary, including its Subsidiaries,
which meets any of the following conditions (in each case determined in
accordance with generally accepted accounting principles): (i) the Company's and
its other Subsidiaries' investments in and advances to such Subsidiary exceed
ten percent (10%) of the Total Assets of the Company and its Subsidiaries on a
consolidated basis as of the end of the most recently completed fiscal quarter;
(ii) the Company's and its other Subsidiaries' proportionate share of the total
assets (after intercompany eliminations) of such Subsidiary exceeds ten percent
(10%) of the Total Assets of the Company and its Subsidiaries on a consolidated
basis as of the end of the most recently completed fiscal quarter; or (iii) the
Company's and its other Subsidiaries' equity interest in the income from
continuing operations before income taxes, extraordinary items and cumulative
effect of a change in accounting principles of such Subsidiary exceeds ten
percent (10%) of such income of the Company and its Subsidiaries on a
consolidated basis for the most recently completed fiscal quarter.
"SECURITY" or "SECURITIES" has the meaning stated in the first recital of
this Indenture and more particularly means a Security or Securities of the
Company issued, authenticated and delivered under this Indenture.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7.
-9-
<PAGE> 17
"STATED MATURITY," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"SUBSIDIARY" means, with respect to any Person, (a) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other equity interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof) and (b) any partnership (i) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (ii) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination thereof).
"TOTAL ASSETS" means, at any date, the total assets appearing on the most
recently prepared consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of a fiscal quarter of the Company, prepared in
accordance with generally accepted accounting principles.
"TOTAL CAPITALIZATION" means, as of any date of determination, the
Company's consolidated stockholders' equity, plus the aggregate principal amount
of any Company obligated mandatorily redeemable preferred securities then
outstanding, plus the aggregate principal amount of any outstanding indebtedness
for borrowed money of the Company, all as of the end of the most recently
completed fiscal quarter of the Company and as set forth in the Company's
balance sheet as of the last day of such fiscal quarter, plus any equity
securities or Company obligated mandatorily redeemable preferred securities
issued or indebtedness for borrowed money incurred (net of any such securities
or indebtedness retired, redeemed or repaid) since the end of such quarter and
prior to such date of determination, and including any indebtedness for borrowed
money proposed to be incurred at such date of determination.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990, and in effect on the date of this
Indenture, except as provided in Section 8.3.
"TRUSTEE" means the party named as such in the first paragraph of this
Indenture until a successor Trustee replaces it pursuant to the applicable
provisions of this Indenture, and thereafter means such successor Trustee and
if, at any time, there is more than one Trustee, "Trustee" as used with respect
to the Securities of any series shall mean the Trustee with respect to the
Securities of that series.
"UNITED STATES" means, unless otherwise specified with respect to the
Securities of any series as contemplated by Section 3.1, the United States of
America (including the States and the District of Columbia), its territories,
its possessions and other areas subject to its jurisdiction.
-10-
<PAGE> 18
"U.S. PERSON" means, unless otherwise specified with respect to the
Securities of any series as contemplated by Section 3.1, a citizen, national or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate or trust, the income of which is subject to
United States federal income taxation regardless of its source.
"VALUATION DATE" has the meaning specified in Section 3.12(c).
Section 1.2 Compliance Certificates and Opinions. Upon any application or
request by the Company to the Trustee to take any action under any provision of
this Indenture, the Company shall furnish to the Trustee an Officers'
Certificate stating that 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, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or opinion
has read such condition or covenant and the definitions herein relating thereto;
(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 each such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such condition or covenant has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 1.3 Form of Documents Delivered to Trustee. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of any Officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless
-11-
<PAGE> 19
such Officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the matters upon which
his certificate or opinion is based are erroneous. Any such certificate or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an Officer or Officers of
the Company stating that the information with respect to such factual matters is
in the possession of the Company, unless such counsel knows, or in the exercise
of reasonable care should know, that the certificate or opinion or
representations as to such matters are erroneous.
Any certificate, statement or opinion of an Officer of the Company or of
counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of, or representations by, an accountant or firm of
accountants in the employ of the Company, unless such Officer or counsel, as the
case may be, knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the accounting matters
upon which his certificate, statement or opinion is based are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4 Acts of Holders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future holder of the
same Security and the Holder
-12-
<PAGE> 20
of every Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustee or the Company in reliance thereon, whether
or not notation of such action is made upon such Security.
(e) If the Company shall solicit from the Holders of any series any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders of such series entitled
to give such request, demand, authorization, direction, notice, consent, waiver
or other Act, but the Company shall have no obligation to do so; provided, that
the Company may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. If such a
record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other Act may be given before or after such record date, but
only the Holders of record at the close of business on such record date shall be
deemed to be Holders for the purposes of determining whether Holders of the
requisite proportion of Outstanding Securities have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other Act, and for that purpose the Outstanding Securities shall be
computed as of such record date; provided, that no such authorization, agreement
or consent by the Holders on such 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. Nothing in this paragraph shall be
construed to prevent the Company from setting a new record date for any action
for which a record date has previously been set pursuant to this paragraph
(whereupon the record date previously set shall automatically and with no action
by any Person be cancelled and of no effect), and nothing in this paragraph
shall be construed to render ineffective any action taken by Holders of the
requisite principal amount of Outstanding Securities of the relevant series on
the date such action is taken.
(f) The Trustee may set any day as a record date for the purpose of
determining the Holders of any series entitled to join in the giving or making
of (i) any Notice of Default, (ii) any declaration of acceleration referred to
in Section 5.2, (iii) any direction referred to in Section 5.8 or (iv) any
request to institute proceedings referred to in Section 5.9(2), in each case
with respect to Securities of such series. If such a record date is fixed
pursuant to this paragraph, the relevant action may be taken or given before or
after such record date, but only the Holders of record at the close of business
on such record date shall be deemed to be Holders of a series for the purposes
of determining whether Holders of the requisite proportion of Outstanding
Securities of such series have authorized or agreed or consented to such action,
and for that purpose the Outstanding Securities of such series shall be computed
as of such record date; provided, that no such action by Holders on such 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.
Nothing in this paragraph shall be construed to prevent the Trustee from setting
a new record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding
Securities
-13-
<PAGE> 21
of the relevant series on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Trustee, at the Company's
expense, shall cause notice of such record date and the proposed action by
Holders to be given to the Company in writing and to each Holder of Securities
of the relevant series in the manner set forth in Section 1.6.
Section 1.5 Notices, Etc., to Trustee and Company. Any request, demand,
authorization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) in writing
and mailed, first-class postage prepaid, to the Trustee at its Corporate Trust
Office, Attention: Corporate Trust Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) in writing
and mailed, first-class postage prepaid, to the Company addressed to it at
Executive Risk Inc., 82 Hopmeadow Street, Simsbury, Connecticut 06070,
Attention: General Counsel (or at any other address previously furnished in
writing to the Trustee by the Company), with a copy to Dewey Ballantine LLP,
1301 Avenue of the Americas, New York, New York 10019-6092, Attention: James A.
FitzPatrick, Jr.
Section 1.6 Notice to Holders; Waiver. Where this Indenture provides for
notice to Holders of any event such notice to the Holders thereof shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed first-class postage prepaid, to each such Holder affected by such
event, at his address as it appears in the Register within the time prescribed
for the giving of such notice. In any case where notice to Holders is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder shall affect the sufficiency of such notice
with respect to other Holders. Any notice mailed to a Holder in the manner
herein prescribed shall be conclusively deemed to have been received by such
Holder, whether or not such Holder actually receives such notice.
If by reason of the suspension of regular mail service or by reason of any
other cause it shall be impracticable to give such notice as provided above,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Any request, demand, authorization, direction, notice, consent or waiver
required or permitted under this Indenture shall be in the English language,
except that any published notice may be in an official language of the country
of publication.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event and such waiver shall be equivalent of such notice. Waivers
of notice by Holders shall be filed with the
-14-
<PAGE> 22
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
Section 1.7 Headings and Table of Contents. The Article and Section
headings herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
Section 1.8 Successor and Assigns. All covenants and agreements in this
Indenture by the Company shall bind its successor and assigns, whether so
expressed or not.
Section 1.9 Separability. In case any provision of this Indenture or the
Securities shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 1.10 Benefits of Indenture. Nothing in this Indenture or in the
Securities, expressed or implied, shall give to any Person, other than the
parties hereto and their successors hereunder and the Holders, any benefit or
any legal or equitable right, remedy or claim under this Indenture.
Section 1.11 Governing Law; Trust Indenture Act. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. This
Indenture is subject to the Trust Indenture Act and if any provision hereof
limits, qualifies or conflicts with any provision of the Trust Indenture Act,
which is required under such Act to be a part of and to govern this Indenture,
the latter provision shall control. If any provision of this Indenture modifies
or excludes any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be. Whether or not this Indenture is
required to be qualified under the Trust Indenture Act, the provisions of the
Trust Indenture Act required to be included in an indenture in order for such
indenture to be so qualified shall be deemed to be included in this Indenture
with the same effect as if such provisions were set forth herein and any
provisions hereof which may not be included in an indenture which is so
qualified shall be deemed to be deleted or modified to the extent such
provisions would be required to be deleted or modified in an indenture so
qualified.
Section 1.12 Legal Holidays. In any case where any Interest Payment Date,
Redemption Date, sinking fund payment date, Stated Maturity or Maturity of any
Security shall not be a Business Day at any Place of Payment, then
(notwithstanding any other provision of this Indenture or of any Security other
than a provision in the Securities of any series which specifically states that
such provision shall apply in lieu of this Section), payment of principal,
premium, if any, or interest need not be made at such Place of Payment on such
date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on such date; provided, that
no interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date, Redemption Date, sinking fund payment date, Stated
Maturity or Maturity, as the case may be.
-15-
<PAGE> 23
ARTICLE II
SECURITY FORMS
Section 2.1 Forms Generally. The Securities of each series shall be in
substantially such form as shall be established by or pursuant to a Board
Resolution or in one or more indentures supplemental hereto, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or
Depositary therefor or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of the
Securities. If temporary Securities of any series are issued as permitted by
Section 3.4, the form thereof also shall be established as provided in the
preceding sentence. If the forms of Securities of any series are established by,
or by action taken pursuant to, a Board Resolution, a copy of the Board
Resolution together with an appropriate record of any such action taken pursuant
thereto, including a copy of the approved form of Securities shall be certified
by the Secretary or an Assistant Secretary of the Company and delivered to the
Trustee at or prior to the delivery of the Company Order contemplated by Section
3.3 for the authentication and delivery of such Securities.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities, subject, with respect to the Securities of any series, to the
rules of any securities exchange on which the Securities of such series are
listed.
Section 2.2 Form of Face of Security.
This Security is not a deposit and is not insured by the Federal Deposit
Insurance Corporation or any federal or other governmental agency.
[Insert any legend required by the Internal Revenue Code of 1986 as
amended, and the regulations thereunder]
EXECUTIVE RISK INC.
No.______ $_______________
Executive Risk Inc., a corporation duly organized and existing under the
laws of the State of Delaware (herein called 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 __________ Dollars on ___________ [if the Security is
-16-
<PAGE> 24
to bear interest prior to Maturity insert the following: and to pay interest
thereon from ___________ or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually on __________ and
_________ in each year, commencing ___________ , at the rate of % per annum,
until the principal hereof is paid or made available for payment [Insert if
applicable: and (to the extent that the payment of such interest shall be
legally enforceable) at the rate of ___% per annum on any overdue principal and
premium and on any overdue installment of interest]. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be the ______ or
_______ (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular Record Date
and may either 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 for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in said Indenture.]
[If the Security is not to bear interest prior to Maturity replace prior
paragraph with the following: The principal of this Security shall not bear
interest except in the case of a default in payment of principal upon
acceleration, upon redemption or at Stated Maturity and in such case the overdue
principal of this Security shall bear interest at the rate of ____% per annum
(to the extent that the payment of such interest shall be legally enforceable),
which shall accrue from the date of such default in payment to the date payment
of such principal has been made or duly provided for. Interest on any overdue
principal shall be payable on demand. Any interest on any overdue principal
shall bear interest at the rate of ___% per annum (to the extent that the
payment of such interest shall be legally enforceable), which shall accrue from
the date of such default in payment to the date payment of such interest has
been made or duly provided for, and such interest shall also be payable on
demand.]
Payment of the principal of (and premium, if any) and [if applicable,
insert: any such] interest on this Security will be made at the office or agency
of the Company maintained for that purpose in _____________________ in such coin
or currency of [the United States of America] [insert other currency, if
applicable] as at the time of payment is legal tender for payment of public and
private debts [unless otherwise specifically provided with respect to the
Securities of the series insert; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Register, in which
case such payment shall be deemed timely made if mailed to such Person on the
Interest Payment Date with respect to which such payment is made or, if such
Interest Payment Date is not a Business Day, on the first Business Day following
such Interest Payment
-17-
<PAGE> 25
Date or, at the expense of the Company, by wire transfer to an account
maintained by the Person entitled thereto as specified in the Register.].
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: EXECUTIVE RISK INC.
Attest:
By____________________________ By____________________________
Section 2.3 Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of _______________, 1997 (herein called the
"Indenture"), between the Company and ____________, as Trustee (herein called
the "Trustee," which term includes any successor trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof[, limited in aggregate principal amount to, $_________].
[If applicable, insert: The Securities of this series are subject to
redemption upon not less than 30 days' nor more than 60 days' notice by mail,
[if applicable, insert: (1) on _________ _ in any year commencing with the year
_______ and ending with the year _____ through operation of the sinking fund for
this series at a Redemption Price equal to 100% of the principal amount, and
(2)] at any time [on or after ________, 19__], as a whole or in part, at the
election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [on or before _________, __%,
and if redeemed] during the 12-month period beginning ___________ of the years
indicated,
-18-
<PAGE> 26
Year Redemption Price Year Redemption Price
---- ---------------- ---- ----------------
and thereafter at a Redemption Price equal to ___% of the principal amount,
together in the case of any such redemption [if applicable, insert: (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Regular Record Dates referred to on the face hereof, all as provided in
the Indenture.]
[If applicable, insert: The Securities of this series are subject to
redemption upon not less than 30 days' nor more than 60 days' notice by mail,
(1) on _______________ in any year commencing with the year _____ and ending
with the year _______ through operation of the sinking fund for this series at
the Redemption Prices for redemption through operation of the sinking fund
(expressed as percentages of the principal amount) set forth in the table below,
and (2) at any time [on or after __________], as a whole or in part, at the
election of the Company, at the Redemption Prices for redemption otherwise than
through operation of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below: If redeemed during the 12-month period
beginning ____________ of the years indicated,
Redemption Price
Redemption Price For Redemption
For Redemption Otherwise Than
Through Operation Through Operation
Year of the Sinking Fund of the Sinking Fund
---- ------------------- -------------------
and thereafter at a Redemption Price equal to _____ % of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
-19-
<PAGE> 27
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]
[Notwithstanding the foregoing, the Company may not, prior to ________,
redeem any Securities of this series as contemplated by [Clause (2) of] the
preceding paragraph as a part of, or in anticipation of, any refunding operation
by the application, directly or indirectly, of moneys borrowed having an
interest cost to the Company (calculated in accordance with generally accepted
financial practice) of less than _____% per annum.]
[The sinking fund for this series provides for the redemption on ________
in each year beginning with the year ________ and ending with the year ______ of
[not less than $_____ ("mandatory sinking fund") and not more than] $_________
aggregate principal amount of Securities of this series. Securities of this
series acquired or redeemed by the Company otherwise than through [mandatory]
sinking fund payments may be credited against subsequent [mandatory] sinking
fund payments otherwise required to be made [if applicable, insert: in the
inverse order in which they become due].]
[If the Security is subject to redemption, insert: In the event of
redemption of this Security in part only, a new Security or Securities of this
series and of like tenor for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.]
[If applicable, insert: The Indenture contains provisions for defeasance
at any time of [(a)] [the entire indebtedness evidenced by this Security] [and
(b)] (certain restrictive covenants,] [in each case] upon compliance by the
Company with certain conditions set forth therein, which provisions apply to
this Security.]
[If the Security is not an Original Issue Discount Security, insert: If an
Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert: If an
Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to [insert formula for determining the
amount]. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal and overdue interest (in each case
to the extent that the payment of such interest shall be legally enforceable),
all of the Company's obligations in respect of the payment of the principal of
and interest, if any, on the Securities of this series shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in aggregate principal amount of the
-20-
<PAGE> 28
Securities at the time Outstanding of each series to be affected. The Indenture
also contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Securities of each series at the time
outstanding, on behalf of the Holders of all the Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange therefor
or in lieu hereof, whether or not 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 times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registerable in the Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in any place where the principal of (and premium, if any) and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities of this series and of like
tenor, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Securities of this series 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 certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-21-
<PAGE> 29
Section 2.4 Form of Trustee's Certificate of Authentication. The Trustee's
certificate of authentication shall be in substantially the following form:
This is one of the Securities of the series described in the
within-mentioned Indenture.
The Chase Manhattan Bank,
------------------------
as Trustee
By ___________________________________
Authorized Signatory
Section 2.5 Securities Issuable in the Form of a Global Security. If
Securities of any series are issuable in whole or in part in the form of one or
more Global Securities, any such Global Security may provide that it shall
represent the aggregate or specified amount of Outstanding Securities from time
to time endorsed thereon and may also provide that the aggregate amount of
Outstanding Securities represented thereby may from time to time be reduced or
increased to reflect exchanges. Any endorsement of a Global Security to reflect
the amount, or any increase or decrease in the amount, or change in the rights
of Holders, of Outstanding Securities represented thereby, shall be made in such
manner and by such Person or Persons as shall be specified therein or in the
Company Order to be delivered to the Trustee pursuant to Section 3.3 or 3.4.
Subject to the provisions of Section 3.3 and, if applicable, Section 3.4, the
Trustee shall deliver and redeliver any Global Security in the manner and upon
instructions given by the Person or Persons specified therein or in the
applicable Company Order. Any instructions by the Company with respect to
endorsement or delivery or redelivery of a Global Security shall be in writing
but need not comply with Section 1.2 hereof and need not be accompanied by an
Opinion of Counsel.
The provisions of the last paragraph of Section 3.3 shall apply to any
Global Security if such Security was never issued and sold by the Company and
the Company delivers to the Trustee the Global Security together with written
instructions (which need not comply with Section 1.2 and need not be accompanied
by an Opinion of Counsel) with regard to the reduction in the principal amount
of Securities represented thereby, together with the written statement
contemplated by the last paragraph of Section 3.3
Notwithstanding the provisions of Sections 2.1 and 3.7, unless otherwise
specified as contemplated by Section 3.1, payment of principal of, premium, if
any, and interest on, any Global Security shall be made to the Person or Persons
specified therein.
Section 2.6 Form of Legend for Global Securities. Any Global Security
authenticated and delivered hereunder shall bear a legend in substantially the
following form with such changes as may be required by the Depositary:
-22-
<PAGE> 30
"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 IN
CERTIFICATED FORM REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT 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 OR BY
THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITARY."
ARTICLE III
THE SECURITIES
Section 3.1 Amount Unlimited; Issuable in Series. (a) The aggregate
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited. The Securities may be issued from time to time in
one or more series.
(b) The following matters shall be established with respect to each series
of Securities issued hereunder (i) by a Board Resolution, (ii) by action taken
pursuant to a Board Resolution and (subject to Section 3.3) set forth, or
determined in the manner provided, in an Officers' Certificate or (iii) in one
or more indentures supplemental hereto:
(1) the title of the Securities of the series (which title shall
distinguish the Securities of the series from all other series of
Securities);
(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this
Indenture (which limit shall not pertain to Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Securities of the series pursuant to Section 3.4, 3.5, 3.6, 8.6,
or 10.7);
(3) the date or dates on which the principal of and premium, if any,
on the Securities of the series is payable or the method of determination
thereof;
(4) the rate or rates at which the Securities of the series shall
bear interest, if any, or the method of calculating such rate or rates of
interest, the date or dates from which such interest shall accrue or the
method by which such date or dates shall be determined, the Interest
Payment Dates on which any such interest shall be payable and
-23-
<PAGE> 31
the Regular Record Date for the interest payable on any Security on any
Interest Payment Date;
(5) the place or places where the principal of, premium, if any, and
interest, if any, on Securities of the series shall be payable;
(6) the period or periods within which, the price or prices at
which, the currency or currencies (including currency unit or units) in
which, and the other terms and conditions upon which, Securities of the
series may be redeemed, in whole or in part, at the option of the Company
and, if other than as provided in Article 10, the manner in which the
particular Securities of such series (if less than all Securities of such
series are to be redeemed) are to be selected for redemption;
(7) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous
provisions or upon the happening of a specified event or at the option of
a Holder thereof and the period or periods within which, the price or
prices at which, and the other terms and conditions upon which, Securities
of the series shall be redeemed or purchased, in whole or in part,
pursuant to such obligation);
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(9) if other than Dollars, the currency or currencies (including
currency unit or units) in which the principal of, premium, if any, and
interest, if any, on the Securities of the series shall be payable, or in
which the Securities of the series shall be denominated, and the
particular provisions applicable thereto in accordance with, in addition
to, or in lieu, of the provisions of Section 3.12;
(10) if the payments of principal of, premium, if any, or interest,
if any, on the Securities of the series are to be made, at the election of
the Company or a Holder, in a currency or currencies (including currency
unit or units) other than that in which such Securities are denominated or
designated to be payable, the currency or currencies (including currency
unit or units) in which such payments are to be made, the terms and
conditions of such payments and the manner in which the exchange rate with
respect to such payments shall be determined, and the particular
provisions applicable thereto in accordance with, in addition to, or in
lieu of the provisions of Section 3.12;
(11) if the amount of payments of principal of, premium, if any, and
interest, if any, on the Securities of the series shall be determined with
reference to an index, formula or other method (which index, formula or
method may be based, without limitation, on a currency or currencies
(including currency unit or units) other than that in which the Securities
of the series are denominated or designated to be payable), the index,
formula or other method by which such amounts shall be determined;
-24-
<PAGE> 32
(12) if other than the principal amount thereof, the portion of the
principal amount of such Securities of the series which shall be payable
upon declaration of acceleration thereof pursuant to Section 5.2 or the
method by which such portion shall be determined;
(13) if the principal amount payable at the Stated Maturity of any
Securities of the series will not be determinable as of any one or more
dates prior to the Stated Maturity, the amount which shall be deemed to be
the principal amount of such Securities as of any such date for any
purpose thereunder or hereunder, including the principal amount thereof
which shall be due and payable upon any Maturity other than the Stated
Maturity or which shall be deemed to be Outstanding as of any date prior
to the Stated Maturity (or, in any such case, the manner in which such
amount deemed to be the principal amount shall be determined);
(14) if other than as provided in Section 3.7, the Person to whom
any interest on any Security of the series shall be payable;
(15) provisions, if any, granting special rights to the Holders of
Securities of the series upon the occurrence of such events as may be
specified;
(16) any deletions from, modifications of or additions to the Events
of Default set forth in Section 5.1 or covenants of the Company set forth
in Article 9 pertaining to the Securities of the series;
(17) under what circumstances, if any, the Company will pay
additional amounts on the Securities of that series held by a Person who
is not a U.S. Person in respect of taxes or similar charges withheld or
deducted and, if so, whether the Company will have the option to redeem
such Securities rather than pay such additional amounts (and the terms of
any such option);
(18) the date as of which any temporary Global Security representing
Outstanding Securities of the series shall be dated if other than the date
of original issuance of the first Security of the series to be issued;
(19) the forms of the Securities of the series;
(20) the applicability, if any, to the Securities of or within the
series of Sections 4.4 and 4.5, or such other means of defeasance or
covenant defeasance as may be specified for the Securities of such series,
and, if the Securities are payable in a currency other than Dollars,
whether, for the purpose of such defeasance or covenant defeasance, the
term "Government Obligations" shall include obligations referred to in the
definition of such term which are not obligations of the United States or
an agency or instrumentality of the United States;
-25-
<PAGE> 33
(21) if other than the Trustee, the identity of the Registrar and
any Paying Agent;
(22) the designation of the initial Exchange Rate Agent, if any;
(23) if the Securities of the series shall be issued in whole or in
part in the form of Global Securities (i) the Depositary for such Global
Securities, (ii) the form of any legend in addition to or in lieu of that
in Section 2.4 which shall be borne by such Global Security, (iii) whether
beneficial owners of interests in any Global Securities of the series may
exchange such interests for certificated Securities of such series and of
like tenor of any authorized form and denomination, and (iv) if other than
as provided in Section 3.5, the circumstances under which any such
exchange may occur; and
(24) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture) including any terms
which may be required by or advisable under United States laws or
regulations or advisable (as determined by the Company) in connection with
the marketing of Securities of the series.
(c) All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided (i) by a Board
Resolution, (ii) by action taken pursuant to a Board Resolution and (subject to
Section 3.3) set forth, or determined in the manner provided, in the related
Officers' Certificate or (iii) in an indenture supplemental hereto. All
Securities of any one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the
Holders, for issuances of additional Securities of such series.
(d) If any of the terms of the Securities of any series are established by
action taken pursuant to a Board Resolution, a copy of such Board Resolution
shall be certified by the Corporate Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth, or providing the manner for determining,
the terms of the Securities of such series, and an appropriate record of any
action taken pursuant thereto in connection with the issuance of any Securities
of such series shall be delivered to the Trustee prior to the authentication and
delivery thereof.
Section 3.2 Denominations. Unless otherwise provided as contemplated by
Section 3.1 with respect to the Securities of any series, the Securities of that
series shall be issuable in denominations of $1,000 and any integral multiple
thereof, and shall be payable in Dollars.
Section 3.3 Execution, Authentication, Delivery and Dating. The Securities
shall be executed on behalf of the Company by its Chairman of the Board, its
President or one of its Vice Presidents, under its corporate seal reproduced
thereon attested by its Secretary or one of its Assistant Secretaries. The
signatures of any of these Officers on the Securities may be manual or
facsimile.
-26-
<PAGE> 34
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time, the Company may deliver Securities of
any series executed by the Company to the Trustee for authentication, together
with a Company Order for the authentication and delivery of such Securities, and
the Trustee in accordance with the Company Order shall authenticate and deliver
such Securities; provided, however, that in the case of Securities offered in a
Periodic Offering, the Trustee shall authenticate and deliver such Securities
from time to time in accordance with such other procedures (including, without
limitation, the receipt by the Trustee of oral or electronic instructions from
the Company or its duly authorized agents, promptly confirmed in writing)
acceptable to the Trustee as may be specified pursuant to a Company Order
delivered to the Trustee prior to the time of the first authentication of
Securities of such series.
If the form or terms of the Securities of a series have been established
by or pursuant to one or more Board Resolutions as permitted by Sections 2.1 and
3.1, in authenticating such Securities and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 6.1 hereof) shall
be fully protected in relying upon, an Opinion of Counsel stating,
(1) if the forms of such Securities have been established by or
pursuant to a Board Resolution as permitted by Section 2.1, that such
forms have been established in conformity with the provisions of this
Indenture;
(2) if the terms of such Securities have been established by or
pursuant to a Board Resolution as permitted by Section 3.1, that such
terms have been, or in the case of Securities of a series offered in a
Periodic Offering, will be, established in conformity with the provisions
of this Indenture, subject in the case of Securities offered in a Periodic
Offering, to any conditions specified in such Opinion of Counsel; and
(3) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and to
general equity principles and except further as enforcement thereof may be
limited by (A) requirements that a claim with respect to any Securities
denominated other than in Dollars (or a Foreign Currency or currency unit
judgment in respect of such claim) be converted into Dollars at a rate of
exchange prevailing on a date determined pursuant to applicable law or (B)
governmental authority to limit, delay or prohibit the making of payments
in Foreign Currencies or currency units or payments outside the United
States;
-27-
<PAGE> 35
(4) that the Company has the corporate power to issue such
Securities and has duly taken all necessary corporate action with respect
to such issuance;
(5) that the issuance of such Securities will not contravene the
charter or bylaws of the Company or result in any violation of any of the
terms or provisions of any law or regulation or of any indenture, mortgage
or other agreement known to such counsel by which the Company or any of
its Subsidiaries is bound;
(6) that all laws and requirements in respect of the execution and
delivery by the Company of the Securities, and the related supplemental
indenture, if any, have been complied with and that the authentication and
delivery of such Securities and the execution and delivery of the related
supplemental indenture, if any, by the Trustee will not violate the terms
of the Indenture; and
(7) such other matters as the Trustee may reasonably request.
Notwithstanding that such form or terms have been so established, the Trustee
shall have the right to decline to authenticate such Securities if, in the
written opinion of counsel to the Trustee (which counsel may be an employee of
the Trustee) reasonably acceptable to the Company, the issue of such Securities
pursuant to this Indenture will adversely affect the Trustee's own rights,
duties or immunities under this Indenture or otherwise in a manner which is not
reasonably acceptable to the Trustee. Notwithstanding the generality of the
foregoing, the Trustee will not be required to authenticate Securities
denominated in a Foreign Currency if the Trustee reasonably believes that it
would be unable to perform its duties with respect to such Securities.
Notwithstanding the provisions of Section 3.1 and of the two preceding
paragraphs, if all of the Securities of any series are not to be issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Company Order and Opinion of Counsel
otherwise required pursuant to the two preceding paragraphs in connection with
the authentication of each Security of such series if such documents, with
appropriate modifications to cover such future issuances, are delivered at or
prior to the authentication upon original issuance of the first Security of such
series to be issued.
With respect to Securities of a series offered in a Periodic Offering, the
Trustee may rely, as to the authorization by the Company of any of such
Securities, the form and terms thereof and the legality, validity, binding
effect and enforceability thereof, upon the Opinion of Counsel and the other
documents delivered pursuant to Sections 2.1 and 3.1 and this Section, as
applicable, in connection with the first authentication of Securities of such
series.
If the Company shall establish pursuant to Section 3.1 that the Securities
of a series are to be issued in whole or in part in the form of a Global
Security, then the Company shall execute and the Trustee shall, in accordance
with this Section and the Company Order with respect to such series,
authenticate and deliver one or more Global Securities which (i) shall represent
and shall be denominated in an amount equal to the aggregate principal amount of
the Outstanding
-28-
<PAGE> 36
Securities of such series to be represented by such Global Security or
Securities, (ii) shall be registered in the name of the Depositary or the
nominee of such Depositary for such Global Security or Securities, (iii) shall
be delivered by the Trustee to such Depositary or pursuant to such Depositary's
instruction and (iv) shall bear the legends set forth in Section 2.4 and the
terms of the Board Resolution or supplemental indenture relating to such series.
Each Depositary designated pursuant to Section 3.1 for a Security issued
in the form of a Global Security must, at the time of its designation and at all
times while it serves as Depositary, be a clearing agency registered under the
Securities Exchange Act of 1934, as amended, and any other applicable statute or
regulation. The Trustee shall have no responsibility to determine if the
Depositary is so registered. Each Depositary shall enter into an agreement with
the Trustee governing the respective duties and rights of such Depositary and
the Trustee with regard to Global Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefits under this Indenture or be
valid or obligatory for any purpose until authenticated by the manual signature
of one of the authorized signatories of the Trustee or an Authenticating Agent.
Such signature upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered under
this Indenture and is entitled to the benefits of this Indenture.
Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 3.9 together with a written statement (which need not comply
with Section 1.2 and need not be accompanied by an Opinion of Counsel) stating
that such Security has never been issued and sold by the Company, for all
purposes of this Indenture, such Security shall be deemed never to have been
authenticated and delivered hereunder and shall not be entitled to the benefits
of this Indenture.
Section 3.4 Temporary Securities. Pending the preparation of definitive
Securities of any series, the Company may execute and, upon Company Order, the
Trustee shall authenticate and deliver temporary Securities of such series which
are printed, lithographed, typewritten, mimeographed or otherwise produced, in
any authorized denomination, substantially of the tenor and form of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as conclusively evidenced by their
execution of such Securities. In the case of Securities of any series, such
temporary Securities may be issued as Global Securities, representing all or a
portion of the Outstanding Securities of such series.
Except in the case of temporary Securities issued as Global Securities,
each of which shall be exchanged in accordance with the provisions thereof, if
temporary Securities of any series are issued, the Company will cause definitive
Securities of such series to be prepared without unreasonable delay. After
preparation of definitive Securities of such series, the temporary
-29-
<PAGE> 37
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company pursuant to Section 9.2 in a Place of Payment
for such series, without charge to the Holder. Upon surrender for cancellation
of any one or more temporary Securities of any series, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of the same series of authorized
denominations and of like tenor. Until so exchanged, the temporary Securities of
any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series except as otherwise specified
or as contemplated by Section 3.1.
Section 3.5 Registration, Transfer and Exchange. The Company shall cause
to be kept at the Corporate Trust Office of the Trustee or in any office or
agency to be maintained by the Company in accordance with Section 9.2 in a Place
of Payment a register of Holders of Securities (the "Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and the registration of transfers of
Securities. The Register shall be in written form or any other form capable of
being converted into written form within a reasonable time. The Trustee is
hereby appointed "Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of any series
at the office or agency maintained pursuant to Section 9.2 in a Place of Payment
for that series, the Company shall execute and the Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Securities of the same series, of any authorized denominations and of a
like aggregate principal amount containing identical terms and provisions.
At the option of the Holder, Securities of any series (except a Security
issued in the form of a Global Security) may be exchanged for other Securities
of the same series, of any authorized denominations and of a like aggregate
principal amount containing identical terms and provisions, upon surrender of
the Securities to be exchanged at such office or agency. Whenever any Securities
are so surrendered for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver, the Securities which the Holder making the
exchange is entitled to receive.
Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such series or a nominee
thereof and delivered to such Depositary or a nominee thereof or custodian
therefor, and each such Global Security shall constitute a single Security for
all purposes of this Indenture.
Notwithstanding any other provision of this Section, unless and until it
is exchanged in whole or in part for Securities in certificated form in the
circumstances described below, a Global Security representing all or a portion
of the Securities of a series may not be transferred except as a whole by the
Depositary for such series to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary
-30-
<PAGE> 38
or any such nominee to a successor Depositary for such series or a nominee of
such successor Depositary.
If at any time the Depositary for the Securities of a series notifies the
Company that it is unwilling or unable to continue as Depositary for the
Securities of such series or if at any time the Depositary for the Securities of
such series shall no longer be eligible under Section 3.3, the Company shall
appoint a successor Depositary with respect to the Securities of such series. If
a successor Depositary for the Securities of such series is not appointed by the
Company within 90 Business Days after the Company receives such notice or
becomes aware of such ineligibility, the Company's election pursuant to Section
3.1(b)(23) shall no longer be effective with respect to the Securities of such
series and the Company shall execute, and the Trustee, upon receipt of a Company
Order for the authentication and delivery of certificated Securities of such
series of like tenor, shall authenticate and deliver, Securities of such series
of like tenor in certificated form, in authorized denominations and in an
aggregate principal amount equal to the principal amount of the Security or
Securities of such series of like tenor in the form of a Global Security in
exchange for such Global Security or Securities.
The Company may at any time in its sole discretion determine that
Securities shall no longer be represented by such a Global Security or
Securities. In such event the Company shall execute, and the Trustee, upon
receipt of a Company Order for the authentication and delivery of certificated
Securities of such series, shall authenticate and deliver Securities of such
series of like tenor in certificated form, in authorized denominations and in an
aggregate principal amount equal to the principal amount of the Security or
Securities of such series in exchange for such Global Security or Securities.
If specified by the Company pursuant to Section 3.1 with respect to a
series of Securities, the Depositary for such series may surrender a Global
Security of such series in exchange in whole or in part for Securities of such
series in certificated form on such terms as are acceptable to the Company and
such Depositary. Thereupon, the Company shall execute, and the Trustee shall
authenticate and deliver, without service charge,
(i) to each Person specified by such Depositary a new certificated
Security or Securities of the same series of like tenor, of any authorized
denomination as requested by such Person in aggregate principal amount
equal to and in exchange for such Person's beneficial interest in the
Global Security; and
(ii) to such Depositary a new Global Security of like tenor in a
denomination equal to the difference, if any, between the principal amount
of the surrendered Global Security and the aggregate principal amount of
certificated Securities delivered to Holders thereof.
Upon the exchange of a Global Security for Securities in certificated
form, such Global Security shall be cancelled by the Trustee. Securities in
certificated form issued in exchange for a Global Security pursuant to this
Section shall be registered in such names and in such authorized
-31-
<PAGE> 39
denominations as the Depositary for such Global Security, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Securities to the Persons
in whose names such Securities are so registered.
Whenever any Securities are surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or upon any
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company, the Registrar or the Trustee)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company, the Registrar and the Trustee duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or for
any exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration or transfer or exchange of Securities, other
than exchanges pursuant to Section 3.4 or 10.7 not involving any transfer.
If the Securities of any series (or of any series and specified tenor) are
to be redeemed in part, the Company shall not be required (i) to issue, register
the transfer of, or exchange any Securities for a period beginning at the
opening of business 15 Business Days before any selection for redemption of
Securities of like tenor and of such series of which such Security is a part and
ending at the close of business on the earliest date on which the relevant
notice of redemption is deemed to have been given to all Holders of Securities
of like tenor and of such series to be redeemed or (ii) to register the transfer
of or exchange any Security so selected for redemption, in whole or in part,
except the unredeemed portion of any Security being redeemed in part.
The foregoing provisions relating to registration, transfer and exchange
may be modified, supplemented or superseded with respect to any series of
Securities by a Board Resolution or in one or more indentures supplemental
hereto.
Section 3.6 Replacement Securities. If a mutilated Security is surrendered
to the Trustee, together with, in proper cases, such security or indemnity as
may be required by the Company or the Trustee to save each of them harmless, the
Company shall execute and the Trustee shall authenticate and deliver a
replacement Security of the same series and date of maturity, if the Trustee's
requirements are met.
-32-
<PAGE> 40
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver in lieu of any such destroyed, lost or stolen Security, a replacement
Security, of the same series and principal amount, containing identical terms
and provisions and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay any such Security upon provision by the
Holder of such security or indemnity as may be required by the Company and the
Trustee.
Upon the issuance of any new Security under this Section, the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee, its agents and counsel) connected
therewith.
Every new Security of any series issued pursuant to this Section in lieu
of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7 Payment of Interest; Interest Rights Preserved. (a) Unless
otherwise provided as contemplated by Section 3.1 with respect to any series of
Securities, interest, if any, on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest at the office or agency maintained for such purpose pursuant
to Section 9.2; provided, however, that at the option of the Company, interest
on any series of Securities that bear interest may be paid (i) by check mailed
to the address of the Person entitled thereto as it shall appear on the Register
of Holders of Securities of such series or (ii) at the expense of the Company,
by wire transfer to an account maintained by the Person entitled thereto as
specified in the Register of Holders of Securities of such series.
(b) Unless otherwise provided as contemplated by Section 3.1 with respect
to any series of Securities, any interest on Securities of any series which is
payable, but is not punctually paid or duly provided for, on any interest
payment date (herein called "Defaulted Interest") shall
-33-
<PAGE> 41
forthwith cease to be payable to the Holders on the relevant Regular Record Date
by virtue of their having been such Holders, and such Defaulted Interest may be
paid by the Company, at its election in each case, as provided in clause (1) or
(2) below:
(1) The Company may elect to make payment of such Defaulted Interest
to the Persons in whose names such Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security of such series 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 provided in this clause (1). Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 Days and not less than 10 Days
prior to the date of the proposed payment and not less than 10 Business
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 Holder of such Securities at his address as it appears in the
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 so mailed, such Defaulted Interest shall be paid
to the Persons in whose names such Securities (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of such Defaulted Interest to the
Persons in whose names such Securities (or their respective Predecessor
Securities) are registered at the close of business on a specified date 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
(2), such manner of payment shall be deemed practicable by the Trustee.
(c) Subject to the foregoing provisions of this Section and Section 3.5,
each Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
Section 3.8 Persons Deemed Owners. Prior to due presentment of any
Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee
-34-
<PAGE> 42
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of, premium, if
any, and (subject to Section 3.7) interest on, such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
None of the Company, the Trustee or any agent of the Company or the
Trustee shall have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Global Security, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests. Notwithstanding the foregoing,
with respect to any Global Security, nothing herein shall prevent the Company or
the Trustee, or any agent of the Company or the Trustee, from giving effect to
any written certification, proxy or other authorization furnished by any
Depositary (or its nominee), as a Holder, with respect to such Global Security
or impair, as between such Depositary and owners of beneficial interests in such
Global Security, the operation of customary practices governing the exercise of
the rights of such Depositary (or its nominee) as Holder of such Global
Security.
Section 3.9 Cancellation. The Company at any time may deliver Securities
to the Trustee for cancellation. The Registrar and any Paying Agent shall
forward to the Trustee any Securities surrendered to them for replacement, for
registration of transfer, or for exchange or payment. The Trustee shall cancel
all Securities surrendered for replacement, for registration of transfer, or for
exchange, payment, redemption or cancellation and may, but shall not be required
to, dispose of cancelled Securities and issue a certificate of destruction to
the Company. The Company may not issue new Securities to replace Securities that
it has paid or delivered to the Trustee for cancellation.
Section 3.10 Computation of Interest. Except as otherwise specified as
contemplated by Section 3.1, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
Section 3.11 CUSIP Numbers. The Company in issuing the Securities may use
"CUSIP", "ISIN" or Common Code numbers (if then generally in use), and, in such
case, the Trustee shall use such numbers in notices of redemption as a
convenience to Holders; 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 redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.
Section 3.12 Currency and Manner of Payment in Respect of Securities. (a)
Unless otherwise specified with respect to any Securities pursuant to Section
3.1, with respect to Securities of any series not permitting the election
provided for in paragraph (b) below or the Holders of which have not made the
election provided for in paragraph (b) below, payment of the principal of,
premium, if any, and interest, if any, on any Security of such series will be
made in Dollars or in such Foreign Currency or Currencies or currency unit or
units in which such
-35-
<PAGE> 43
Security is payable. The provisions of this Section 3.12 may be modified or
superseded pursuant to Section 3.1 with respect to any Securities.
(b) It may be provided pursuant to Section 3.1, with respect to Securities
of any series, that Holders shall have the option, subject to paragraphs (d) and
(e) below, to receive payments of principal of, premium, if any, or interest, if
any, on such Securities in any of the currencies or currency units which may be
designated for such election by delivering to the Trustee (or the applicable
Paying Agent) a written election with signature guarantees and in the applicable
form established pursuant to Section 3.1, not later than the close of business
on the Election Date immediately preceding the applicable payment date. If a
Holder so elects to receive such payments in any such currency or currency unit,
such election will remain in effect for such Holder or any transferee of such
Holder until changed by such Holder or such transferee by written notice to the
Trustee (or any applicable Paying Agent) for such series of Securities (but any
such change must be made not later than the close of business on the Election
Date immediately preceding the next payment date to be effective for the payment
to be made on such payment date, and no such change of election may be made with
respect to payments to be made on any Security of such series with respect to
which an Event of Default has occurred or with respect to which the Company has
deposited funds pursuant to Article 4 or with respect to which a notice of
redemption has been given by or on behalf of the Company). Any Holder of any
such Security who shall not have delivered any such election to the Trustee (or
any applicable Paying Agent) not later than the close of business on the
applicable Election Date will be paid the amount due on the applicable payment
date in the relevant currency or currency unit as provided in Section 3.12(a).
The Trustee (or the applicable Paying Agent) shall notify the Exchange Rate
Agent as soon as practicable after the Election Date of the aggregate principal
amount of Securities for which Holders have made such written election.
(c) If the election referred to in paragraph (b) above has been provided
for with respect to any Securities of a series pursuant to Section 3.1, then,
unless otherwise specified pursuant to Section 3.1 with respect to any such
Securities, not later than the fourth Business Day after the Election Date for
each payment date for such Securities, the Exchange Rate Agent will deliver to
the Company a written notice specifying, in the currency or currencies or
currency unit or units in which Securities of such series are payable, the
respective aggregate amounts of principal of, premium, if any, and interest, if
any, on such Securities to be paid on such payment date, and specifying the
amounts in such currency or currencies or currency unit or units so payable in
respect of such Securities as to which the Holders of Securities denominated in
any currency or currencies or currency unit or units shall have elected to be
paid in another currency or currency unit as provided in paragraph (b) above. If
the election referred to in paragraph (b) above has been provided for with
respect to any Securities of a series pursuant to Section 3.1, and if at least
one Holder has made such election, then, unless otherwise specified pursuant to
Section 3.1, on the second Business Day preceding such payment date the Company
will deliver to the Trustee (or the applicable Paying Agent) an Exchange Rate
Officers' Certificate in respect of the Dollar, Foreign Currency or Currencies,
ECU, or other currency unit payments to be made on such payment date. Unless
otherwise specified pursuant to Section 3.1, the Dollar, Foreign Currency or
Currencies, ECU or other currency unit amount receivable by Holders of
Securities who have
-36-
<PAGE> 44
elected payment in a currency or currency unit as provided in paragraph (b)
above shall be determined by the Company on the basis of the applicable Market
Exchange Rate in effect on the second Business Day (the "Valuation Date")
immediately preceding each payment date, and such determination shall be
conclusive and binding for all purposes, absent manifest error.
(d) If a Conversion Event occurs with respect to a Foreign Currency, ECU
or any other currency unit in which any of the Securities are denominated or
payable otherwise than pursuant to an election provided for pursuant to
paragraph (b) above, then, with respect to each date for the payment of
principal of, premium, if any, and interest, if any, on the applicable
Securities denominated or payable in such Foreign Currency, ECU or such other
currency unit occurring after the last date on which such Foreign Currency, ECU
or such other currency unit was used (the "Conversion Date"), the Dollar shall
be the currency of payment for use on each such payment date (but such Foreign
Currency, ECU or such other currency unit that was previously the currency of
payment shall, at the Company's election, resume being the currency of payment
on the first such payment date preceded by 15 Business Days during which the
circumstances which gave rise to the Dollar becoming such currency no longer
prevail). Unless otherwise specified pursuant to Section 3.1, the Dollar amount
to be paid by the Company to the Trustee or any applicable Paying Agent and by
the Trustee or any applicable Paying Agent to the Holders of such Securities
with respect to such payment date shall be, in the case of a Foreign Currency
other than a currency unit, the Dollar Equivalent of the Foreign Currency or in
the case of a Foreign Currency that is a currency unit, the Dollar Equivalent of
the Currency Unit, in each case as determined by the Exchange Rate Agent in the
manner provided in paragraph (f) or (g) below.
(e) Unless otherwise specified pursuant to Section 3.1, if the Holder of a
Security denominated in any currency or currency unit shall have elected to be
paid in another currency or currency unit or in other currencies as provided in
paragraph (b) above, and (i) a Conversion Event occurs with respect to any such
elected currency or currency unit, such Holder shall receive payment in the
currency or currency unit in which payment would have been made in the absence
of such election and (ii) if a Conversion Event occurs with respect to the
currency or currency unit in which payment would have been made in the absence
of such election, such Holder shall receive payment in Dollars as provided in
paragraph (d) of this Section 3.12 (but, subject to any contravening valid
election pursuant to paragraph (b) above, the elected payment currency or
currency unit, in the case of the circumstances described in clause (i) above,
or the payment currency or currency unit in the absence of such election, in the
case of the circumstances described in clause (ii) above, shall, at the
Company's election, resume being the currency or currency unit of payment with
respect to Holders who have so elected, but only with respect to payments on
payment dates preceded by 15 Business Days during which the circumstances which
gave rise to such currency or currency unit, in the case of the circumstances
described in clause (i) above, or the Dollar, in the case of the circumstances
described in clause (ii) above, as applicable, becoming the currency or currency
unit of payment, no longer prevail).
(f) The "Dollar Equivalent of the Foreign Currency" shall be determined by
the Exchange Rate Agent and shall be obtained for each subsequent payment date
by the Exchange
-37-
<PAGE> 45
Rate Agent by converting the specified Foreign Currency into Dollars at the
Market Exchange Rate on the Conversion Date.
(g) The "Dollar Equivalent of the Currency Unit" shall be determined by
the Exchange Rate Agent and, subject to the provisions of paragraph (h) below,
shall be the sum of each amount obtained by converting the Specified Amount of
each Component Currency (as each such term is defined in paragraph (h) below)
into Dollars at the Market Exchange Rate for such Component Currency on the
Valuation Date with respect to each payment.
(h) For purposes of this Section 3.12, the following terms shall have the
following meanings:
"Component Currency" shall mean any currency which, on the Conversion
Date, was a component currency of the relevant currency unit, including, but not
limited to, ECU.
"Election Date" shall mean the Regular Record Date for the applicable
series of Securities as specified pursuant to Section 3.1 by which the written
election referred to in Section 3.12(b) may be made.
A "Specified Amount" of a Component Currency shall mean the number of
units of such Component Currency or fractions thereof which such Component
Currency represented in the relevant currency unit, including, but not limited
to, ECU, on the Conversion Date. If after the Conversion Date the official unit
of any Component Currency is altered by way of combination or subdivision, the
Specified Amount of such Component Currency shall be divided or multiplied in
the same proportion. If after the Conversion Date two or more Component
Currencies are consolidated into a single currency, the respective Specified
Amounts of such Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the respective Specified Amounts of such
consolidated Component Currencies expressed in such single currency, and such
amount shall thereafter be a Specified Amount and such single currency shall
thereafter be a Component Currency. If after the Conversion Date any Component
Currency shall be divided into two or more currencies, the Specified Amount of
such Component Currency shall be replaced by specified amounts of such two or
more currencies, the sum of which, at the Market Exchange Rate of such two or
more currencies on the date of such replacement, shall be equal to the Specified
Amount of such former Component Currency and such amounts shall thereafter be
Specified Amounts and such currencies shall thereafter be Component Currencies.
If, after the Conversion Date of the relevant currency unit, including, but not
limited to, ECU, a Conversion Event (other than any event referred to above in
this definition of "Specified Amount") occurs with respect to any Component
Currency of such currency unit and is continuing on the applicable Valuation
Date, the Specified Amount of such Component Currency shall, for purposes of
calculating the Dollar Equivalent of the Currency Unit, be converted into
Dollars at the Market Exchange Rate in effect on the Conversion Date of such
Component Currency.
All decisions and determinations of the Exchange Rate Agent regarding the
Dollar Equivalent of the Foreign Currency, the Dollar Equivalent of the Currency
Unit, the Market
-38-
<PAGE> 46
Exchange Rate and changes in the Specified Amounts as specified above shall be
in its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and irrevocably binding upon the Company, the
Trustee (and any applicable Paying Agent) and all Holders of Securities
denominated or payable in the relevant currency, currencies or currency units.
The Exchange Rate Agent shall promptly give written notice to the Company and
the Trustee of any such decision or determination.
In the event that the Company determines in good faith that a Conversion
Event has occurred with respect to a Foreign Currency, the Company will promptly
give written notice thereof to the Trustee (or any applicable Paying Agent) and
to the Exchange Rate Agent (and the Trustee (or such Paying Agent) will promptly
thereafter give notice in the manner provided in Section 1.6 to the affected
Holders) specifying the Conversion Date. In the event the Company so determines
that a Conversion Event has occurred with respect to ECU or any other currency
unit in which Securities are denominated or payable, the Company will promptly
give written notice thereof to the Trustee (or any applicable Paying Agent) and
to the Exchange Rate Agent (and the Trustee (or such Paying Agent)) will
promptly thereafter give notice in the manner provided in Section 1.6 to the
affected Holders) specifying the Conversion Date and the Specified Amount of
each Component Currency on the Conversion Date. In the event the Company
determines in good faith that any subsequent change in any Component Currency as
set forth in the definition of Specified Amount above has occurred, the Company
will similarly give written notice to the Trustee (or any applicable Paying
Agent) and to the Exchange Rate Agent.
The Trustee of the appropriate series of Securities shall be fully
justified and protected in relying and acting upon information received by it
from the Company and the Exchange Rate Agent and shall not otherwise have any
duty or obligation to determine the accuracy or validity of such information
independent of the Company or the Exchange Rate Agent.
Section 3.13 Appointment and Resignation of Exchange Rate Agent. (a)
Unless otherwise specified pursuant to Section 3.1, if and so long as the
Securities of any series (i) are denominated in a currency other than Dollars or
(ii) may be payable in a currency other than Dollars, or so long as it is
required under any other provision of this Indenture, then the Company will
maintain with respect to each such series of Securities, or as so required, at
least one Exchange Rate Agent. The Company will cause the Exchange Rate Agent to
make the necessary foreign exchange determinations at the time and in the manner
specified pursuant to Section 3.12 for the purpose of determining the applicable
rate of exchange and, if applicable, for the purpose of converting the issued
currency or currencies or currency unit or units into the applicable payment
currency or currency unit for the payment of principal, premium, if any, and
interest, if any, on the Securities pursuant to Section 3.12.
(b) No resignation of the Exchange Rate Agent and no appointment of a
successor Exchange Rate Agent pursuant to this Section shall become effective
until the acceptance of appointment by the successor Exchange Rate Agent as
evidenced by a written instrument delivered to the Company and the Trustee of
the appropriate series of Securities accepting such appointment executed by the
successor Exchange Rate Agent.
-39-
<PAGE> 47
(c) If the Exchange Rate Agent shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Exchange
Rate Agency for any cause, with respect to the Securities of one or more series,
the Company, by or pursuant to a Board Resolution, shall promptly appoint a
successor Exchange Rate Agent or Exchange Rate Agents with respect to the
Securities of that or those series (it being understood that any such successor
Exchange Rate Agent may be appointed with respect to the Securities of one or
more or all of such series and that, unless otherwise specified pursuant to
Section 3.1 at any time there shall only be one Exchange Rate Agent with respect
to the Securities of any particular series that are originally issued by the
Company on the same date and that are initially denominated and/or payable in
the same currency or currencies or currency unit or units).
ARTICLE IV
SATISFACTION, DISCHARGE AND DEFEASANCE
Section 4.1 Termination of Company's Obligations under the Indenture. (a)
This Indenture shall upon a Company Request cease to be of further effect with
respect to Securities of or within any series (except as to any surviving rights
of registration of transfer or exchange of such Securities and replacement of
such Securities which may have been lost, stolen or mutilated as herein
expressly provided for) and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture with respect to such Securities when
(i) either
(A) all such Securities previously authenticated and delivered (other than
(1) such Securities which have been destroyed, lost or stolen and which have
been replaced or paid, as provided in Section 3.6, (2) such Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust as provided in Section 9.3) have been delivered to the Trustee for
cancellation; or
(B) all Securities of such series (1) have become due and payable, or (2)
will become due and payable at their Stated Maturity within one year, or (3) if
redeemable at the option of the Company, are to be called for redemption within
one year under arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of (1), (2) or (3) above, has irrevocably deposited
or caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount in the currency or currencies or currency unit or units in
which the Securities of such series are payable, sufficient to pay and discharge
the entire indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal, premium, if any, and interest, with
respect thereto, to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or Redemption Date, as
the case may be;
-40-
<PAGE> 48
(ii) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(iii) the Company has delivered to the Trustee 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 as to
such series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the obligation
of the Company to the Trustee and any predecessor Trustee under Section 6.9, the
obligations of the Company to any Authenticating Agent under Section 6.14 and,
if money shall have been deposited with the Trustee pursuant to subclause (B) of
clause (i) of this Section, the obligations of the Trustee under Section 4.2 and
the last paragraph of Section 9.3 shall survive.
Section 4.2 Application of Trust Funds. Subject to the provisions of the
last paragraph of Section 9.3, all money deposited with the Trustee pursuant to
Section 4.1 shall be held in trust and applied by it, in accordance with the
provisions of the Securities and this Indenture, to the payment, either directly
or through any Paying Agent (including the Company acting as its own Paying
Agent) as the Trustee may determine, to the persons entitled thereto, of the
principal, premium, if any, and any interest for whose payment such money has
been deposited with or received by the Trustee, but such money need not be
segregated from other funds except to the extent required by law.
Section 4.3 Applicability of Defeasance Provisions; Company's Option to
Effect Defeasance or Covenant Defeasance. If pursuant to Section 3.1, provision
is made for either or both of (i) defeasance of the Securities of or within a
series under Section 4.4 or (ii) covenant defeasance of the Securities of or
within a series under Section 4.5, then the provisions of such Section or
Sections, as the case may be, together with the provisions of Sections 4.6
through 4.9 inclusive, with such modifications thereto as may be specified
pursuant to Section 3.1 with respect to any Securities, shall be applicable to
such Securities, and the Company may at its option by or pursuant to Board
Resolution, at any time, with respect to such Securities, elect to have Section
4.4 (if applicable) or Section 4.5 (if applicable) be applied to such
Outstanding Securities upon compliance with the conditions set forth below in
this Article.
Section 4.4 Defeasance and Discharge. Upon the Company's exercise of the
option specified in Section 4.3 applicable to this Section with respect to the
Securities of or within a series, the Company shall be deemed to have been
discharged from its obligations with respect to such Securities on and after the
date the conditions set forth in Section 4.6 are satisfied (hereinafter
"defeasance"). For this purpose, such defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by such
Securities which shall thereafter be deemed to be "Outstanding" only for the
purposes of Section 4.7 and the other Sections of this Indenture referred to in
clause (ii) of this Section, and to have satisfied all its other obligations
under such Securities and this Indenture insofar as such Securities are
concerned (and the Trustee, at the expense of the Company, shall on a Company
Order execute proper instruments acknowledging the same), except the following
which shall survive until otherwise terminated or
-41-
<PAGE> 49
discharged hereunder: (i) the rights of Holders of such Securities to receive,
solely from the trust funds described in Section 4.6(a) and as more fully set
forth in such Section, payments in respect of the principal of, premium, if any,
and interest, if any, on such Securities when such payments are due; (ii) the
Company's obligations with respect to such Securities under Sections 3.5, 3.6,
9.2 and 9.3 and with respect to the payment of additional amounts, if any,
payable with respect to such Securities as specified pursuant to Section
3.1(b)(17); (iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (iv) this Article 4. Subject to compliance with this
Article 4, the Company may exercise its option under this Section
notwithstanding the prior exercise of its option under Section 4.5 with respect
to such Securities. Following a defeasance, payment of such Securities may not
be accelerated because of an Event of Default.
Section 4.5 Covenant Defeasance. Upon the Company's exercise of the option
specified in Section 4.3 applicable to this Section with respect to any
Securities of or within a series, the Company shall be released from its
obligations under Sections 7.1, 9.9 and 9.10 and, if specified pursuant to
Section 3.1, its obligations under any other covenant, with respect to such
Securities on and after the date the conditions set forth in Section 4.6 are
satisfied (hereinafter, "covenant defeasance"), and such Securities shall
thereafter be deemed to be not "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with Sections 7.1, 9.9 and 9.10 or such other covenant,
but shall continue to be deemed "Outstanding" for all other purposes hereunder.
For this purpose, such covenant defeasance means that, with respect to such
Securities, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such Section or
such other covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such Section or such other covenant or by reason of
reference in any such Section or such other covenant to any other provision
herein or in any other document and such omission to comply shall not constitute
a Default or an Event of Default under Section 5.1(3) or 5.1(7), or otherwise,
as the case may be, but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby.
Section 4.6 Conditions to Defeasance or Covenant Defeasance. The following
shall be the conditions to application of Section 4.4 or Section 4.5 to any
Securities of or within a series:
(a) The Company shall have deposited or caused to be deposited irrevocably
with the Trustee (or another trustee satisfying the requirements of Section 6.12
who shall agree to comply with, and shall be entitled to the benefits of, the
provisions of Sections 4.3 through 4.9 inclusive and the last paragraph of
Section 9.3 applicable to the Trustee, for purposes of such Sections, also a
"Trustee") as trust funds in trust for the purpose of making the payments
referred to in clauses (x) and (y) of this Section 4.6(a), specifically pledged
as security for, and dedicated solely to, the benefit of the Holders of such
Securities, with written instructions to the Trustee as to the application
thereof, (A) money in an amount (in such currency, currencies or currency unit
or units in which such Securities are then specified as payable at Maturity), or
(B) if Securities of such series are not subject to repayment at the option of
Holders, 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 referred to in clause (x)
or (y) of this
-42-
<PAGE> 50
Section 4.6(a), money in an amount or (C) a combination thereof in an amount
sufficient, in the opinion of a nationally recognized firm of independent
certified public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee to pay and discharge, (x) the principal of, premium, if any, and
interest, if any, on such Securities on the Maturity of such principal or
installment of principal or interest and (y) any mandatory sinking fund payments
applicable to such Securities on the day on which such payments are due and
payable in accordance with the terms of this Indenture and such Securities.
Before such a deposit the Company may make arrangements satisfactory to the
Trustee for the redemption of Securities at a future date or dates in accordance
with Article 10 which shall be given effect in applying the foregoing.
(b) Such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a Default or Event of Default under, this Indenture
or result in a breach or violation of, or constitute a default under, any other
material agreement or instrument to which the Company is a party or by which it
is bound.
(c) In the case of an election under Section 4.5, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the Holders of
such Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred.
(d) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance under Section 4.4 or the covenant defeasance under
Section 4.5 (as the case may be) have been complied with.
(e) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that neither such Securities nor any other Securities
of the same series, if then listed on any securities exchange, will be delisted
as a result of such deposit.
(f) No event which is, or after notice or lapse of time or both would
become, an Event of Default with respect to such Securities or any other
Securities shall have occurred and be continuing at the time of such deposit or,
with regard to any such event specified in Sections 5.1(5) and (6), at any time
on or prior to the 90th day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until after such 90th day).
(g) Such defeasance or covenant defeasance shall not (i) cause the Trustee
for the Securities of such series to have a conflicting interest as defined in
Section 6.12(b) hereof or, for purposes of the Trust Indenture Act, with respect
to any securities of the Company or (ii) cause the trust arising from such
deposit to constitute an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, unless such trust shall be
registered under such act or exempt from registration thereunder.
-43-
<PAGE> 51
(h) Such defeasance or covenant defeasance shall be effected in compliance
with any additional or substitute terms, conditions or limitations which may be
imposed on the Company in connection therewith as contemplated by Section 3.1.
Section 4.7 Deposited Money and Government Obligations to Be Held in
Trust. Subject to the provisions of the last paragraph of Section 9.3, all money
and Government Obligations (or other property as may be provided pursuant to
Section 3.1) (including the proceeds thereof) deposited with the Trustee
pursuant to Section 4.6 in respect of any Securities of any series shall be held
in trust and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Holders of such Securities of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, if
any, but such money need not be segregated from other funds except to the extent
required by law.
Unless otherwise specified with respect to any Security pursuant to
Section 3.1, if, after a deposit referred to in Section 4.6(a) has been made,
(i) the Holder of a Security in respect of which such deposit was made is
entitled to, and does, elect pursuant to Section 3.12(b) or the terms of such
Security to receive payment in a currency or currency unit other than that in
which the deposit pursuant to Section 4.6(a) has been made in respect of such
Security, or (ii) a Conversion Event occurs as contemplated in Section 3.12(d)
or 3.12(e) or by the terms of any Security in respect of indebtedness for which
the deposit pursuant to Section 4.6(a) has been made, the indebtedness
represented by such Security shall be deemed to have been, and will be, fully
discharged and satisfied through the payment of the principal of, premium, if
any, and interest, if any, on such Security as the same becomes due out of the
proceeds yielded by converting (from time to time as specified below in the case
of any such election) the amount or other property deposited in respect of such
Security into the currency or currency unit in which such Security becomes
payable as a result of such election or Conversion Event based on the applicable
Market Exchange Rate for such currency or currency unit in effect on the second
Business Day prior to each payment date, except, with respect to a Conversion
Event, for such currency or currency unit in effect (as nearly as feasible) at
the time of the Conversion Event.
Section 4.8 Repayment to Company. The Trustee (and any Paying Agent) shall
promptly pay to the Company upon Company Request any excess money or securities
held by them at any time.
Section 4.9 Indemnity for Government Obligations. The Company shall pay,
and shall indemnify the Trustee against, any tax, fee or other charge imposed on
or assessed against Government Obligations deposited pursuant to this Article or
the principal and interest and any other amount received on such Government
Obligations.
Section 4.10 Reinstatement. If the Trustee or the Paying Agent is unable
to apply any money in accordance with this Article with respect to any
Securities by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting
-44-
<PAGE> 52
such application, then the obligation under this Indenture and such Securities
from which the Company has been discharged or released pursuant to Section 4.4
or 4.5 shall be revived and reinstated as though no deposit had occurred
pursuant to this Article with respect to such Securities, until such time as the
Trustee or Paying Agent is permitted to apply all money held in trust pursuant
to Section 4.7 with respect to such Securities in accordance with this Article;
provided, however, that if the Company makes any payment of principal of or any
premium or interest on any such Security following such reinstatement of its
obligations, the Company shall be subrogated to the rights (if any) of the
Holders of such Securities to receive such payment from the money so held in
trust.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.1 Events of Default. An "Event of Default" occurs with respect
to the Securities of any series if (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):
(1) the Company defaults in the payment of interest on any Security of
that series or any additional amount payable with respect to any Security
of that series as specified pursuant to Section 3.1(b)(16) when the same
becomes due and payable and such default continues for a period of 30
days;
(2) the Company defaults in the payment of the principal of or premium, if
any, on any Security of that series at its Maturity or on redemption or
otherwise, or in the payment of a mandatory sinking fund payment when and
as due by the terms of the Securities of that series;
(3) the Company fails to comply in any respect with any of its agreements
or covenants in, or any of the provisions of, this Indenture with respect
to any Security of that series (other than an agreement, covenant or
provision for which non-compliance is elsewhere in this Section
specifically dealt with), and such non-compliance continues for a period
of 60 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 of the series, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder;
(4) (a) a failure by the Company or any Subsidiary to pay any portion of
the principal of any Indebtedness having an aggregate principal amount of
$15,000,000 or more when due and payable after the expiration of any
applicable grace period with respect thereto or
-45-
<PAGE> 53
(b) the acceleration of the maturity of any Indebtedness of the Company or
any Subsidiary in excess of $15,000,000, and such acceleration shall not
be rescinded or annulled, or such Indebtedness shall not be paid in full
within a period of 10 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 of that series a written notice specifying such
event of default and requiring the Company to cause such acceleration to
be rescinded or annulled or to pay in full such Indebtedness and stating
that such notice is a "Notice of Default" hereunder; (it being understood
however, that the Trustee shall not be deemed to have knowledge of such
default under such agreement or instrument unless either (i) a Responsible
Officer of the Trustee shall have actual knowledge of such default or (ii)
a Responsible Officer of the Trustee shall have received written notice
thereof from the Company, from any Holder, from the holder of any such
Indebtedness or from the trustee under any such agreement or other
instrument); provided, however, that if such default is remedied or cured
by the Company or waived by the holders of such Indebtedness, then the
Event of Default hereunder by reason thereof shall be deemed likewise to
have been thereupon remedied, cured or waived without further action upon
the part of either the Trustee or any of such Holders;
(5) the Company, pursuant to or within the meaning of any Bankruptcy Law,
(A) commences a voluntary case or proceeding, (B) consents to the entry of
an order for relief against it in an involuntary case or proceeding, (C)
consents to the appointment of a Custodian of it or for all or
substantially all of its property, (D) makes a general assignment for the
benefit of its creditors, (E) makes an admission in writing of its
inability to pay its debts generally as they become due or (F) takes
corporate action in furtherance of any such action;
(6) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (A) is for relief against the Company, in an
involuntary case, (B) adjudges the Company as bankrupt or insolvent, or
approves as properly filed a petition seeking reorganization, arrangement,
and adjustment or composition of or in respect of the Company, or appoints
a Custodian of the Company, or for all or substantially all of its
property, or (C) orders the liquidation of the Company, and the order or
decree remains unstayed and in effect for 60 days; or
(7) any other Event of Default provided as contemplated by Section 3.1
with respect to Securities of that series.
As used in this Indenture, the term "Bankruptcy Law" means Title 11, U.S.
Code, or any similar federal or state bankruptcy, insolvency, reorganization or
other law for the relief of debtors. As used in the Indenture, the term
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
-46-
<PAGE> 54
Section 5.2 Acceleration; Rescission and Annulment. If an Event of Default
with respect to the Securities of any series at the time Outstanding occurs and
is continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of all of the Outstanding Securities of that series by written notice to
the Company (and if given by the Holders, to the Trustee), may declare the
principal (or, if the Securities of that series are Original Issue Discount
Securities or Indexed Securities, such portion of the original principal amount
as may be specified in the terms of that series) of and accrued interest, if
any, on the Securities of that series to be due and payable and upon any such
declaration such principal (or, in the case of Original Issue Discount
Securities or Indexed Securities, such specified amount) and interest, if any,
shall be immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in aggregate principal amount of the
Outstanding Securities of that series, by written notice to the Trustee, may
rescind and annul such declaration and its consequences if all existing Defaults
and Events of Default with respect to Securities of that series, other than the
non-payment of the principal of Securities of that series which has become due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 5.7. No such rescission shall affect any subsequent default
or impair any right consequent thereon.
Section 5.3 Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if
(1) default is made in the payment of any interest on any Security when
such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit
of the Holders of such Securities the whole amount then due and payable on
such Securities for principal, premium, if any, and interest and, to the
extent that payment of such interest shall be legally enforceable,
interest on any overdue principal, premium, if any, and on any overdue
interest, at the rate or rates prescribed therefor in such Securities and,
in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
-47-
<PAGE> 55
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to secure any other proper remedy.
Section 5.4 Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents and take such actions authorized
under the Trust Indenture Act as may be necessary or advisable in order to have
the claims of the Trustee and the Holders of Securities allowed in any judicial
proceedings relating to the Company, its creditors or its property. In
particular, the Trustee shall be authorized to collect and receive any moneys or
other property payable or deliverable on any such claims and to distribute the
same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder 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 Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.9.
Section 5.5 Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may be
prosecuted and enforced by the Trustee, in its own name as an express trust,
without the possession of any of the Securities or the production thereof in any
proceeding relating thereto and any recovery of judgment shall, after provision
for the reasonable fees and expenses of the Trustee and its counsel, be for the
ratable benefit of the Holders of the Securities in respect to which judgment
was recovered.
Section 5.6 Delay or Omission Not Waiver. No delay or omission by the
Trustee or any Holder of any Securities to exercise any right or remedy accruing
upon an Event of Default shall impair any such right or remedy or constitute a
waiver of or acquiescence in any such Event of Default.
Section 5.7 Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of Outstanding Securities of any series by written
notice to the Trustee may waive on behalf of the Holders of all Securities of
such series a past Default or Event of Default with respect to that series and
its consequences except (i) a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on, any Security of such series or
(ii) in respect of a covenant or provision hereof which pursuant to Section 8.2
cannot be amended or modified without the consent of the Holder of each
Outstanding Security of such series affected. Upon any such waiver, such Default
shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured, for every purpose of this Indenture.
Section 5.8 Control by Majority. The Holders of a majority in aggregate
principal amount of the Outstanding Securities of each series affected (with
each such series voting as a class) 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 it with respect to
Securities of that series; provided, however, that (i) the Trustee may refuse to
follow any direction that conflicts with law or this Indenture, (ii) the Trustee
may refuse to follow any
-48-
<PAGE> 56
direction that is unduly prejudicial to the rights of the Holders of Securities
of such series not consenting or that would in the good faith judgment of the
Trustee have a substantial likelihood of involving the Trustee in personal
liability and (iii) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 5.9 Limitation on Suits by Holders. No Holder of any Security of
any series shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless:
(1) the Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities of that series have made a written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense to be,
or which may be, incurred by the Trustee in pursuing the remedy;
(4) the Trustee for 60 days after its receipt of such notice,
request and the offer of indemnity has failed to institute any such
proceedings; and
(5) during such 60-day period, the Holders of a majority in
aggregate principal amount of the Outstanding Securities of that series
have not given to the Trustee a direction inconsistent with such written
request.
No one or more Holders 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 of such Holders, or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all of such Holders.
Section 5.10 Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, but subject to Section 9.2, the right of any
Holder of a Security to receive payment of principal of, premium, if any, and,
subject to Sections 3.5 and 3.7, interest on the Security, on or after the
respective due dates expressed in the Security (or, in case of redemption, on
the redemption dates), or, subject to Section 5.9, to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
Section 5.11 Application of Money Collected. If the Trustee collects any
money pursuant to this Article, it shall pay out the money in the following
order, at the date or dates
-49-
<PAGE> 57
fixed by the Trustee and, in case of the distribution of such money on account
of principal, premium, if any, or interest, upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: to the Trustee for amounts due under Section 6.9;
SECOND: to Holders of Securities in respect of which or for the
benefit of which such money has been collected for amounts due and unpaid
on such Securities for principal of, premium, if any, and interest,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium, if any,
and interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 5.11. At least 15 Business Days before such
record date, the Trustee shall mail to each Holder and the Company a notice that
states the record date, the payment date and the amount to be paid.
Section 5.12 Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every such case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
Section 5.13 Rights and Remedies Cumulative. Except as otherwise provided
with respect to the replacement or payment of mutilated, destroyed, lost or
stolen Securities in the last paragraph of Section 3.6, no right or remedy
herein conferred upon or reserved to the Trustee or the Holders is intended to
be exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.14 Waiver of Usury, Stay or Extension Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury, stay or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
-50-
<PAGE> 58
Section 5.15 Undertaking for Costs. 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, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit
having due regard to the merits and good faith of the claims or defenses made by
the party litigant; provided, that the provisions of this Section 5.15 shall not
apply to any suit instituted by the Trustee.
ARTICLE VI
THE TRUSTEE
Section 6.1 Certain Duties and Responsibilities of the Trustee. (a) Except
during the continuance of an Event of Default, the Trustee's duties and
responsibilities under this Indenture shall be governed by Section 315(a) of the
Trust Indenture Act.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture, and
shall 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.
Section 6.2 Rights of Trustee. Subject to the provisions of the Trust
Indenture Act:
(a) The Trustee may rely and shall be protected in acting or refraining
from acting upon any document believed by it to be genuine and to have been
signed or presented by the proper party or parties. The Trustee need not
investigate any fact or matter stated in the document.
(b) Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company Order
(other than delivery of any Security to the Trustee for authentication and
delivery pursuant to Section 3.3 which shall be sufficiently evidenced as
provided therein) and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution.
(c) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate. The Trustee shall not be liable for any action it takes
or omits to take in good faith in reliance on a Board Resolution or a
certificate of an Officer or Officers delivered pursuant to Section 1.2 or an
Officers' Certificate.
(d) The Trustee may act through agents, attorneys, custodians or nominees
and shall not be responsible for the misconduct or negligence of any agent,
attorney, custodian or nominee appointed with due care.
-51-
<PAGE> 59
(e) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers or for any action it takes or omits to take in accordance with the
direction of the Holders in accordance with Section 5.8 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.
(f) The Trustee may consult with counsel of its selection and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted to be taken by it hereunder in good faith and in reliance thereon.
(g) 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 Holders, or to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or in the
exercise of its rights or powers, unless such Holder shall have offered to the
Trustee security or indemnity satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in compliance with such request, order
or direction.
(h) 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, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney.
(i) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section
6.2.
(j) If the Trustee is acting as Paying Agent and Registrar hereunder, the
rights and protections afforded to the Trustee pursuant to this Article VI
shall also be afforded to such Paying Agent and Registrar.
Section 6.3 Trustee May Hold Securities. The Trustee, any Paying Agent,
any Registrar or any other agent of the Company in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
310(b) and 311 of the Trust Indenture Act, may otherwise deal with the Company,
an Affiliate or Subsidiary with the same rights it would have if it were not
Trustee, Paying Agent, Registrar or such other agent.
Section 6.4 Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed upon in writing with the
Company.
Section 6.5 Trustee's Disclaimer. The recitals contained herein and in the
Securities, except the Trustee's certificate of authentication, shall be taken
as the statements of the Company, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representation as to the validity or
accuracy of this Indenture or the Securities. The Trustee shall not be
accountable for the Company's use of the proceeds from the Securities or for
monies paid over to the Company pursuant to the Indenture.
Section 6.6 Notice of Defaults. If a Default occurs and is continuing with
respect to the Securities of any series and if it is known to the Trustee, the
Trustee shall, within 90 days after it occurs, transmit by mail to the
Holders of Securities of such series, in the manner and to the extent provided
in Section 313(c) of the Trust Indenture Act, notice of all Defaults known to it
unless such Default shall have been cured or waived; provided, however, that
except in the case of a Default in payment on the Securities of any series, the
Trustee shall be protected in withholding such
-52-
<PAGE> 60
notice if and so long as the board of directors, the executive committee or a
committee of its Responsible Officers in good faith determines that withholding
such notice is in the interests of Holders of Securities of that series. For
the purpose of this Section 6.6, the term "default" means any event which is,
or after notice or lapse of time or both would become, an Event of Default with
respect to Securities of such series.
Section 6.7 Reports by Trustee to Holders. On or before July 15 of each
year following the date hereof so long as any Securities are Outstanding, the
Trustee shall transmit by mail to all Holders of Securities as provided in
Section 313(c) of the Trust Indenture Act a brief report dated as of the
preceding May 15 if required by and in compliance with Section 313(a) of the
Trust Indenture Act. A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange, if
any, upon which the Securities are listed, with the Commission and with the
Company. The Company will promptly notify the Trustee in writing when the
Securities are listed on any stock exchange.
Section 6.8 Preservation of Information; Securityholder Lists. (a) The
Trustee shall preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of Holders of
Securities of each series. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee (i) semiannually, but not more than 15 days after
each Regular Record Date, a list, in such form and as of such date as the
Trustee may reasonably require, containing the names and addresses of Holders of
Securities of each such series as of such Regular Record Date; and (ii) at such
times as the Trustee may request in writing, within 30 days after the receipt by
the Company of any such request, a list in similar form and content as of a date
not more than 15 days prior to the time such list is furnished.
(b) The rights of the Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) 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 agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
Section 6.9 Compensation and Indemnity. (a) The Company shall pay to the
Trustee from time to time such reasonable compensation for its services as the
Company and the Trustee shall agree in writing from time to time. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred by it in connection with the
performance of its duties under this Indenture, except any such expense as may
be attributable to its negligence, willful misconduct or bad faith. Such
expenses shall include the reasonable compensation and expenses of the Trustee's
agents and counsel.
-53-
<PAGE> 61
(b) The Company shall indemnify the Trustee, its officers, directors,
employees and agents for, (and any predecessor Trustee), and hold it and them
harmless against, any loss or liability, damage, claim or reasonable expense,
including reasonable legal fees and expenses and taxes (other than taxes based
upon or determined or measured by the income of the Trustee), incurred by it or
them arising out of or in connection with the acceptance or administration of
this Indenture and the Securities or the issuance of the Securities or a series
thereof or the trust or trusts hereunder, including the reasonable costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder. The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. The Company shall defend the claim and the Trustee shall cooperate in
the defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for any
settlement made without its consent.
(c) The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee, its officers, directors, employees or
agents through negligence, willful misconduct or bad faith.
(d) To secure the payment obligations of the Company pursuant to this
Section, the Trustee shall have a lien prior to the Securities of any series on
all money or property held or collected by the Trustee, except that held in
trust to pay principal, premium, if any, and any interest on, particular
Securities.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 5.1(5) or Section 5.1(6), 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 Bankruptcy Law.
The obligations of the Company under this Section 6.9 to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for expenses, disbursements and advances
shall constitute additional indebtedness hereunder and shall survive the
satisfaction and discharge of this Indenture or the rejection or termination of
this Indenture under Bankruptcy Law or the earlier resignation or removal of the
Trustee. Such additional indebtedness shall be a senior claim 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.
Section 6.10 Replacement of Trustee. (a) The resignation or removal of the
Trustee and the appointment of a successor Trustee shall become effective only
upon the successor Trustee's acceptance of appointment as provided in Section
6.11.
(b) The Trustee may resign at any time with respect to the Securities of
any series by giving written notice thereof to the Company.
(c) The Holders of a majority in aggregate principal amount of the
Outstanding Securities of any series may remove the Trustee with respect to that
series by so notifying the Trustee and the Company and may appoint a successor
Trustee for such series with the Company's consent.
(d) If at any time:
(1) the Trustee fails to comply with Section 310(b) of the Trust
Indenture Act after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months; or
-54-
<PAGE> 62
(2) the Trustee shall cease to be eligible under Section 6.12 of
this Indenture or Section 310(a) of the Trust Indenture Act and shall fail
to resign after written request therefor by the Company or by any Holder
of a Security who has been a bona fide Holder of a Security for at least
six months; or
(3) the Trustee becomes incapable of acting, is adjudged a bankrupt
or an insolvent or a receiver or public officer takes charge of the
Trustee or its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company by or pursuant to a Board Resolution may
remove the Trustee with respect to all Securities, or (ii) subject to Section
315(e) of the Trust Indenture Act, any Holder 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 with respect to all Securities and the appointment of a successor
Trustee or Trustees.
(e) If the instrument of acceptance by a successor Trustee required by
Section 6.11 shall not have been delivered to the Trustee within 30 Business
Days after the giving of such notice of resignation or removal, the Trustee
resigning or being removed may petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(f) If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, with respect to Securities of one or more
series, the Company, by or pursuant to Board Resolution, shall promptly appoint
a successor Trustee with respect to the Securities of that or those series (it
being understood that any such successor Trustee may be appointed with respect
to the Securities of one or more or all of such series and that at any time
there shall be only one Trustee with respect to the Securities of any particular
series) and shall comply with the applicable requirements of Section 6.11. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the Securities
of any series shall be appointed by Act of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 6.11, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 6.11, any
Holder who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
-55-
<PAGE> 63
Section 6.11 Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment. Thereupon, the resignation or removal of the
retiring Trustee shall become effective, and the successor Trustee, without
further act, deed or conveyance, shall become vested with all the rights, powers
and duties of the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
including, without limitation, the payment of any and all amounts then due and
owing to the retiring Trustee, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring Trustee
and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and such successor Trustee shall execute and deliver an
indenture supplemental hereto wherein such successor Trustee shall accept such
appointment and which (i) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, such successor Trustee all
the rights, powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series to which the appointment of such
successor Trustee relates, (ii) if the retiring Trustee is not retiring with
respect to all Securities, shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
as to which the retiring Trustee is not retiring shall continue to be vested in
the retiring Trustee, and (iii) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee, after the payment
of all moneys due and owing to it with respect to those Securities or that
series thereof, shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments to more fully and certainly vest in and confirm to such
successor Trustee all such rights, powers and trusts referred to in paragraph
(a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
the Trust Indenture Act.
-56-
<PAGE> 64
(e) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series in the manner
provided for notices to the Holders of Securities in Section 1.6. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.
Section 6.12 Eligibility; Disqualification; Conflicting Interests. (a)
There shall at all times be a Trustee hereunder which shall be eligible to act
as Trustee under Section 310(a)(1) of the Trust Indenture Act and shall have a
combined capital and surplus of at least $100,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or the
requirements of Federal, State, Territorial or District of Columbia supervising
or examining authority, then, for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
(b) If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
Section 6.13 Merger, Conversion, Consolidation or Succession to Business.
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 the corporate trust business of the
Trustee, shall be the successor to the 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. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
Section 6.14 Appointment of Authenticating Agent. The Trustee may appoint
an Authenticating Agent or Agents with respect to one or more series of
Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon original issue, exchange or
registration of transfer or partial redemption thereof, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Any such appointment shall be evidenced by an instrument in writing
signed by a Responsible Officer of the Trustee, a copy of which instrument shall
be promptly furnished to the Company. Whenever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf
-57-
<PAGE> 65
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and, except as may
otherwise be provided pursuant to Section 3.1, shall at all times be a bank or
trust company or corporation organized and doing business and in good standing
under the laws of the United States of America or of any State or the District
of Columbia, authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of not less than $50,000,000 and subject to
supervision or examination by Federal or State authorities. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or the requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. In case at any
time an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or further act
on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Securities may at any time
resign by giving written notice of resignation to the Trustee for such series
and to the Company. The Trustee for any series of Securities may at any time
terminate the agency of an Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Company. Upon receiving such
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee for such series may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve in the manner set forth in
Section 1.6. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation including reimbursement of its reasonable expenses for
its services under this Section.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to or in lieu of the Trustee's
-58-
<PAGE> 66
certificate of authentication, an alternate certificate of authentication
substantially in the following form:
This is one of the Securities of the series described in the
within-mentioned Indenture.
------------------------------
as Trustee
By
------------------------------
as Authenticating Agent
By
------------------------------
Authorized Signatory
ARTICLE VII
CONSOLIDATION, MERGER OR SALE OF ASSETS
Section 7.1 Consolidation, Merger or Sale of Assets Permitted. The Company
shall not consolidate or merge with or into any other Person, or transfer, sell,
convey or lease its properties and assets substantially as an entirety, nor may
the Company permit any other Person to consolidate or merge into the Company or
transfer, sell, convey or lease its properties and assets substantially as an
entirety to the Company, unless:
(1) the Person formed by or surviving any such consolidation or any merger
(if other than the Company), or the Person which acquires the Company's
properties and assets is organized and existing under the laws of the United
States, any State thereof or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if
other than the Company), or the Person which acquires the Company's properties
and assets assumes by supplemental indenture all the obligations of the Company
under the Securities and this Indenture;
(3) immediately after giving effect to the transaction no Default or Event
of Default shall have happened and be continuing; and
(4) if, as a result of any such consolidation or merger or such
conveyance, transfer or lease, properties or assets of the Company would become
subject to a Lien which would not be an Extended Lien with respect to the
Securities of any series, the Company or such successor Person, as the case may
be, shall take such steps as shall be necessary effectively to secure such
Securities equally and ratably with all indebtedness secured thereby.
-59-
<PAGE> 67
The Company shall deliver to the Trustee prior to the proposed
transaction an Officers' Certificate to the foregoing effect and an Opinion of
Counsel stating that the proposed transaction and such supplemental indenture
comply with this Indenture and that all conditions precedent to the consummation
of the transaction under this Indenture have been met.
In the event of the assumption by a successor corporation as
provided in clause (2) above, such successor corporation shall succeed to and be
substituted for the Company hereunder and under the Securities with the same
effect as if it had been named hereunder and thereunder and all such obligations
of the Company, except in the case of a lease, shall terminate.
ARTICLE VIII
SUPPLEMENTAL INDENTURES
Section 8.1 Supplemental Indentures Without Consent of Holders. Without
the consent of any Holders, the Company, when authorized by a Board Resolution,
and the Trustee at any time and from time to time, may enter into indentures
supplemental hereto, in form reasonably satisfactory to the Trustee, for any of
the following purposes:
(1) to evidence the succession of another corporation to the Company and
the assumption by any such successor of the covenants and obligations of the
Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the Holders
of all or any series of Securities (and if such covenants are to be for the
benefit of less than all series of Securities, stating that such covenants are
expressly being included solely for the benefit of such series) or to surrender
any right or power herein conferred upon the Company; or
(3) to add any additional Events of Default with respect to all or any
series of Securities (and if such Events of Default are to be for the benefit of
less than all series of Securities, stating that such Events of Default are
expressly included solely for the benefit of such series); or
(4) to add to or change any of the provisions of this Indenture to such
extent as shall be necessary to facilitate the issuance of Global Securities; or
(5) to change or eliminate any of the provisions of this Indenture,
provided, that any such change or elimination shall become effective only when
there is no Security Outstanding of any series created prior to the execution of
such supplemental indenture which is entitled to the benefit of such provision;
or
(6) to secure the Securities; or
-60-
<PAGE> 68
(7) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 and 3.1; or
(8) to evidence and provide for the acceptance of appointment hereunder by
a successor Trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 6.11; or
(9) to correct or supplement any provision herein which may be
inconsistent with any other provision herein or to make any other provisions
with respect to matters or questions arising under this Indenture, provided such
action shall not materially adversely affect the interests of the Holders of
Securities of any series; or
(10) to cure any ambiguity or correct any mistake, provided such action
shall not materially adversely affect the interests of the Holders of Securities
of any series.
Section 8.2 Supplemental Indentures with Consent of Holders. With the
written consent of the Holders of a majority of the aggregate principal amount
of the Outstanding Securities of each series adversely affected by such
supplemental indenture (with the Securities of each series voting as a class),
the Company, when authorized by a Board Resolution, and the Trustee may enter
into an indenture or indentures supplemental hereto to add any provisions to or
to change or eliminate any provisions of this Indenture or of any other
indenture supplemental hereto or to modify the rights of the Holders of such
Securities; provided, however, that without the consent of the Holder of each
Outstanding Security affected thereby, a supplemental indenture under this
Section may not:
(1) change the Stated Maturity of the principal of, or premium, if
any, on, or any installment of principal of or premium, if any, or
interest on, any Security, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the manner in which the amount of any principal thereof
or premium, if any, or interest thereon is determined or reduce the amount
of the principal of any Original Issue Discount Security or Indexed
Security that would be due and payable upon a declaration of acceleration
of the Maturity thereof pursuant to Section 5.2, or change the Place of
Payment where or the currency in which any Securities or any premium or
the interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption Date);
(2) reduce the percentage in principal amount of the Outstanding
Securities affected thereby, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences) provided
for in this Indenture;
-61-
<PAGE> 69
(3) change any obligation of the Company to maintain an office or
agency in the places and for the purposes specified in Section 9.2; or
(4) make any change in Section 5.7 or this Section 8.2(a) except to
increase any percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived with the consent of the
Holders of each Outstanding Security affected thereby.
(5) A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has expressly
been included solely for the benefit of one or more particular
series of Securities, or which modifies the rights of the Holders of
Securities of such series with respect to such covenant or other
provision shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It is not necessary under this Section 8.2 for the Holders to consent to
the particular form of any proposed supplemental indenture, but it is sufficient
if they consent to the substance thereof.
Section 8.3 Compliance with Trust Indenture Act. Every amendment to this
Indenture or the Securities of one or more series shall be set forth in a
supplemental indenture that complies with the Trust Indenture Act as then in
effect.
Section 8.4 Execution of Supplemental Indentures. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modification thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Section 8.5 Effect of Supplemental Indentures. Upon the execution of any
supplemental indenture under this Article, this Indenture shall be modified in
accordance therewith and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
Section 8.6 Reference in Securities to Supplemental Indentures. Securities
of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities.
-62-
<PAGE> 70
ARTICLE IX
COVENANTS
Section 9.1 Payment of Principal, Premium, If Any, and Interest. The
Company covenants and agrees for the benefit of the Holders of each series of
Securities that it will duly and punctually pay the principal of, premium, if
any, and interest, together with additional amounts, if any, on the Securities
of that series in accordance with the terms of the Securities of such series and
this Indenture. An installment of principal, premium, if any, or interest shall
be considered paid on the date it is due if the Trustee or Paying Agent holds on
that date money designated for and sufficient to pay the installment.
Section 9.2 Maintenance of Office or Agency. The Company will maintain in
each Place of Payment for such series an office or agency where Securities of
that series may be presented or surrendered for payment, where Securities of
that series may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Company in respect of the Securities of
that series and this Indenture may be served. Unless otherwise provided in any
supplemental indenture in respect of the Securities of any series, the Company
will maintain, (A) in the Borough of Manhattan, The City of New York, an office
or agency where any Securities of that series may be presented or surrendered
for payment, where any Securities of that series may be surrendered for
registration of transfer, where Securities of that series may be surrendered for
exchange, where notices and demands to or upon the Company in respect of the
Securities of that series and this Indenture may be served, and (B) subject to
any laws or regulations applicable thereto, in a Place of Payment for that
series which is located outside the United States, an office or agency where
Securities of that series (including payment of any additional amounts payable
on Securities of that series pursuant to Section 3.1(b)(17)); provided, however,
that if the Securities of that series are listed on any stock exchange located
outside the United States and such stock exchange shall so require, the Company
will maintain a Paying Agent for the Securities of that series in any required
city located outside the United States, so long as the Securities of that series
are listed on such exchange. The Company will give prompt written notice to the
Trustee and the Holders of the location, and any change in the location, of any
such office or agency. If at any time the Company shall fail to maintain any
such required office or agency in respect of any series of Securities or shall
fail to furnish the Trustee with the address thereof, such presentations and
surrenders of Securities of that series may be made and notices and demands may
be made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the same as its agent to receive such respective presentations,
surrenders, notice and demands.
The Company may also from time to time designate one or more other offices
or agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in accordance with the requirements set forth above for Securities of any series
for such purposes. The Company will give prompt written notice to the Trustee
and the Holders
-63-
<PAGE> 71
of any such designation or rescission and of any change in the location of any
such other office or agency.
Section 9.3 Money for Securities Payments to Be Held in Trust; Unclaimed
Money. If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of, premium, if any, or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal, premium, if any, or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and will promptly notify the Trustee in writing of its
action or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities of that series in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee written notice of any default by the Company
(or any other obligor upon the Securities of that series) in the making of
any payment of principal, premium, if any, or interest on the Securities;
and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same terms as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of any principal, premium or interest on
any Security of any series and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company on Company Request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the
-64-
<PAGE> 72
Company cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in The City of New York, or cause to be mailed to such Holder, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 Business Days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
Section 9.4 Corporate Existence. Subject to Article VII, the Company will
at all times do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and its rights and franchises;
provided, that nothing in this Section 9.4 shall prevent the abandonment or
termination of any right or franchise of the Company if, in the opinion of the
Company, such abandonment or termination is in the best interests of the Company
and not prejudicial in any material respect to the Holders of the Securities.
Section 9.5 Payment of Taxes and Other Claims. The Company will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, and (b) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a Lien upon the
property of the Company or any Subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.
Section 9.6 Reports by the Company. The Company covenants:
(a) to file with the Trustee, within 30 Business Days after 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) 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; and
-65-
<PAGE> 73
(c) to transmit to all Holders of Securities, within 30 Business
Days after the filing thereof with the Trustee, in the manner and to the
extent provided in section 313(c) of the Trust Indenture Act, such
summaries of any information, documents and reports required to be filed
by the Company pursuant to subsections (a) and (b) of this Section 9.6, as
may be required by rules and regulations prescribed from time to time by
the Commission.
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 information
concerning the Company's compliance with any of its covenants hereunder (as to
which the Trustee shall be entitled to rely on Officers' Certificates).
Section 9.7 Annual Review Certificate; Notice of Defaults or Events of
Default. (a) The Company covenants and agrees to deliver to the Trustee, within
10 Business Days after the end of each fiscal year of the Company, a certificate
from the principal executive officer, principal financial officer or principal
accounting officer as to his or her knowledge of the Company's compliance with
all conditions and covenants under this Indenture. For purposes of this Section
9.7, such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Indenture.
(b) The Company covenants and agrees to deliver to the Trustee, within a
reasonable time after the Company becomes aware of the occurrence of a Default
or an Event of Default of the character specified in Section 5.1(4) hereof,
written notice of the occurrence of such Default or Event of Default.
Section 9.8 Books of Record and Account. The Company will keep appropriate
books of record and account, either on a consolidated or individual basis. The
Company shall cause its books of record and account to be examined either on a
consolidated or individual basis, by one or more firms of independent public
accountants not less frequently than annually. The Company shall prepare its
financial statements in accordance with generally accepted accounting
principles.
Section 9.9 Limitations on Liens. Except as provided below, neither the
Company nor any Subsidiary of the Company may incur, issue, assume or guarantee
any Indebtedness secured by a Lien on any property or assets of the Company or
any Subsidiary of the Company, or any shares of Capital Stock of any Subsidiary
of the Company, without effectively providing that the Securities of any series
(together with, if the Company shall so determine, any other Indebtedness which
is not subordinated to the Securities of any series) shall be secured equally
and ratably with (or prior to) such Indebtedness, so long as such Indebtedness
shall be so secured; provided, however, that this covenant shall not apply to
Indebtedness secured by (i) Liens existing on the date of the Indenture; (ii)
Liens on property or assets of, or on any shares of stock of, any entity
existing at the time such entity becomes a Subsidiary of the Company or merges
into or consolidates with the Company or a Subsidiary of the Company; (iii)
Liens on property or assets or on shares of stock existing at the time of
acquisition thereof by the Company or any Subsidiary
-66-
<PAGE> 74
of the Company (including acquisition through acquisition or merger or
consolidation or by a sale, lease or other disposition of the properties of a
corporation as an entirety or substantially as an entirety to the Company or a
Subsidiary); (iv) Liens to secure the financing of the acquisition, construction
or improvement of property, or the acquisition of shares of stock by the Company
or any Subsidiary of the Company, provided, that such Liens cover only the
property or shares so acquired, constructed or improved and are created not
later than one year after such acquisition or, in the case of property, not
later than one year after completion of construction, improvement or
commencement of commercial operation, whichever is later; (v) Liens in favor of
the Company or any Subsidiary of the Company; (vi) Liens in favor of, or
required by, governmental authorities; (vii) Liens in favor of the Trustee for
the benefit of the Holders of the Securities; (viii) Liens securing Indebtedness
in an aggregate principal amount not in excess of 10% of the Company's Total
Capitalization; and (ix) any extension, renewal or replacement as a whole or in
part, of any Lien referred to in the foregoing clauses (i) to (viii) inclusive;
provided, however, that (a) such extension, renewal or replacement Lien shall be
limited to the same property, assets or shares of stock that secured the Lien
extended, renewed or replaced and (b) in the case of clauses (i), (ii), (iii)
and (iv), the Indebtedness secured by such Lien at such time is not so increased
(other than an increase in such Indebtedness equal to the amount of any premium
required to be paid in connection with, or reasonably determined by the Company
to be necessary to accomplish, any extension, renewal or replacement of such
Indebtedness and the expenses of the Company and its Subsidiaries incurred in
any such extension, renewal or replacement of such Indebtedness) and in the case
of clause (viii), any increases shall be subject to the limit contained therein
(the Liens permitted by clauses (i) through (ix) being referred to,
collectively, as the "Excluded Liens").
Section 9.10 Limitation on Disposition of Stock of Restricted
Subsidiaries. So long as any Securities are Outstanding, the Company shall not,
and shall not permit any Subsidiary to, issue, sell, transfer or otherwise
dispose of, directly or indirectly, any shares of Capital Stock (other than
preferred stock having no voting rights of any kind) of any Restricted
Subsidiary (or of any Subsidiary having direct or indirect control of any
Restricted Subsidiary) except for, subject to Article VII, (i) directors'
qualifying shares, (ii) any issuance, sale, transfer or other disposition of any
Capital Stock of any Restricted Subsidiary (or of any Subsidiary having direct
or indirect control of any Restricted Subsidiary) to the Company or to a
wholly-owned Subsidiary of the Company or (iii) any issuance, sale, transfer or
other disposition of any Capital Stock of any Restricted Subsidiary (or of any
Subsidiary having direct or indirect control of any Restricted Subsidiary) made
for at least a fair value consideration as determined by the Board of Directors
of the Company pursuant to a Board Resolution adopted in good faith.
ARTICLE X
REDEMPTION
Section 10.1 Applicability of Article. Securities of any series which are
redeemable before their Stated Maturity shall be redeemable in accordance with
their terms and (except as
-67-
<PAGE> 75
otherwise specified as contemplated by Section 3.1 for Securities of any series)
in accordance with this Article.
Section 10.2 Election to Redeem Notice to Trustee. The election of the
Company to redeem any Securities shall be evidenced by or pursuant to a Board
Resolution. In the case of any redemption at the election of the Company of less
than all the Securities of any series, the Company shall, at least 60 Business
Days prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee in writing of such
Redemption Date, of the principal amount of Securities of such series to be
redeemed and, if applicable, of the tenor of the Securities to be redeemed. In
the case of any redemption of Securities (i) prior to the expiration of any
restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture or (ii) pursuant to an election of the Company which
is subject to a condition specified in the terms of such Securities, the Company
shall furnish the Trustee with an Officers' Certificate evidencing compliance
with such restriction or condition.
Section 10.3 Selection of Securities to Be Redeemed. Unless otherwise
specified as contemplated by Section 3.1, if less than all the Securities of a
series with the same terms are to be redeemed, the Trustee, not more than 45
Business Days prior to the redemption date, shall select the Securities of the
series to be redeemed in such manner as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of a portion
of the principal amount of any Security of such series, provided, that the
unredeemed portion of the principal amount of any Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security. The Trustee shall make the selection from
Securities of the series that are Outstanding and that have not previously been
called for redemption and may provide for the selection for redemption of
portions (equal to the minimum authorized denomination for Securities of that
series or any integral multiple thereof) of the principal amount of Securities
of such series of a denomination larger than the minimum authorized denomination
for Securities of that series. The Trustee shall promptly notify the Company in
writing of the Securities selected by the Trustee for redemption and, in the
case of any Securities selected for partial redemption, the principal amount
thereof to be redeemed. If the Company shall so direct, Securities registered in
the name of the Company, any Affiliate or any Subsidiary thereof shall not be
included in the Securities selected for redemption. If less than all the
Securities of any series with differing issue dates, interest rates and stated
maturities are to be redeemed, the Company in its sole discretion shall select
the particular Securities to be redeemed and shall notify the Trustee in writing
thereof at least 45 Business Days prior to the relevant redemption date.
For purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Securities redeemed or to be redeemed only in part, to the portion of the
principal amount of such Securities which has been or is to be redeemed.
Section 10.4 Notice of Redemption. Unless otherwise specified as
contemplated by Section 3.1, notice of redemption shall be given in the manner
provided in Section 1.6 not less
-68-
<PAGE> 76
than 30 Business Days nor more than 60 Business Days prior to the Redemption
Date to the Holders of the Securities to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if less than all the Outstanding Securities of a series are to be
redeemed, the identification (and in the case of partial redemption, the
principal amounts) of the particular Security or Securities to be redeemed;
(4) in case any Security is to be redeemed in part only, the notice which
relates to such Security shall state that on and after the Redemption Date, upon
surrender of such Security, the Holder will receive, without a charge, a new
Security or Securities of authorized denominations for the principal amount
thereof remaining unredeemed;
(5) the Place or Places of Payment where such Securities maturing after
the Redemption Date are to be surrendered for payment for the Redemption Price;
(6) that Securities of the series called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price;
(7) that, on the Redemption Date, the Redemption Price will become due and
payable upon each such Security, or the portion thereof, to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after said date;
(8) that the redemption is for a sinking fund, if such is the case; and
(9) the CUSIP number, if any, of the Securities.
Notice of redemption of Securities to be redeemed shall be given by the
Company or, at the Company's written request, by the Trustee in the name and at
the expense of the Company.
Section 10.5 Deposit of Redemption Price. On or prior to any Redemption
Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, which it may not do in the case
of a sinking fund payment under Article XI, segregate and hold in trust as
provided in Section 9.3) an amount of money in the currency or currencies
(including currency unit or units) in which the Securities of such series are
payable (except as otherwise specified pursuant to Section 3.1 for the
Securities of such series) sufficient to pay on the Redemption Date the
Redemption Price of, and (unless the Redemption Date shall be an Interest
Payment Date) interest accrued to the Redemption Date on, all Securities or
portions thereof which are to be redeemed on that date.
-69-
<PAGE> 77
Unless any Security by its terms prohibits any sinking fund payment
obligation from being satisfied by delivering and crediting Securities
(including Securities redeemed otherwise than through a sinking fund), the
Company may deliver such Securities to the Trustee for crediting against such
payment obligation in accordance with the terms of such Securities and this
Indenture.
Section 10.6 Securities Payable on Redemption Date. Notice of redemption
having been given as aforesaid, the Securities so to be redeemed shall, on the
Redemption Date, become due and payable at the Redemption Price therein
specified, and from and after such date (unless the Company shall default in the
payment of the Redemption Price and accrued interest) such Securities shall
cease to bear interest. Except as provided in the next succeeding paragraph,
upon surrender of any such Security for redemption in accordance with said
notice, such Security shall be paid by the Company at the Redemption Price,
together with accrued interest to the Redemption Date; provided, however, that
unless otherwise specified as contemplated by Section 3.1, installments of
interest on Securities whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
3.7.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium if any) shall, until paid,
bear interest from the Redemption Date at the rate prescribed therefor in the
Security.
Section 10.7 Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part at any Place of Payment therefor (with, if the Company
or the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing), the Company
shall execute and the Trustee shall authenticate and deliver to the Holder of
that Security, without service charge a new Security or Securities of the same
series, having the same form, terms and Stated Maturity, in any authorized
denomination equal in aggregate principal amount to the unredeemed portion of
the principal amount of the Security surrendered.
ARTICLE XI
SINKING FUNDS
Section 11.1 Applicability of Article. The provisions of this Article
shall be applicable to any sinking fund for the retirement of Securities of a
series except as otherwise specified as contemplated by Section 3.1 for
Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms
of Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein
-70-
<PAGE> 78
referred to as an "optional sinking fund payment". If provided for by the terms
of Securities of any series, the cash amount of any sinking fund payment may be
subject to reduction as provided in Section 11.2. Each sinking fund payment
shall be applied to the redemption of Securities of any series as provided for
by the terms of Securities of such series.
Section 11.2 Satisfaction of Sinking Fund Payments with Securities. The
Company (i) may deliver Outstanding Securities of a series (other than any
previously called for redemption) and (ii) may apply as a credit Securities of a
series which have been redeemed either at the election of the Company pursuant
to the terms of such Securities or through the application of permitted optional
sinking fund payments pursuant to the terms of such Securities, in each case in
satisfaction of all or any part of any sinking fund payment with respect to the
Securities of such series required to be made pursuant to the terms of such
Securities as provided for by the terms of such series; provided that such
Securities have not been previously so credited. Such Securities shall be
received and credited for such purpose by the Trustee at the Redemption Price
specified in such Securities for redemption through operation of the sinking
fund and the amount of such sinking fund payment shall be reduced accordingly.
Section 11.3 Redemption of Securities for Sinking Fund. Not less than 60
Business Days prior to each sinking fund payment date for any series of
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for that series
pursuant to the terms of that series, the portion thereof, if any, which is to
be satisfied by payment of cash and the portion thereof, if any, which is to be
satisfied by delivering and crediting Securities of that series pursuant to
Section 11.2 and will also deliver to the Trustee any Securities to be so
delivered. Not less than 30 Business Days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 10.3 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 10.4. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 10.6 and 10.7.
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 instrument.
-71-
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
EXECUTIVE RISK INC.
By:
------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Trustee
By:
-------------------------------
Name:
Title:
-72-
<PAGE> 1
Exhibit 5.1
December 8,1997
Executive Risk Inc.
82 Hopmeadow Street
Simsbury, CT 06070
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-3 (Registration No.
333-40657) (the "Registration Statement") filed by Executive Risk Inc. (the
"Company") with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Act"), relating to $75 million
aggregate principal amount of ____% Senior Notes due 20__ ("Securities") to be
offered as set forth in the Registration Statement.
We have examined and are familiar with originals or copies,
certified or otherwise identified to our satisfaction, of the Registration
Statement, such corporate records of the Company, certificates of officers of
the Company and of public officials and such other documents as we have deemed
appropriate as a basis for the opinions expressed below. In such examination, we
have assumed the authenticity of all documents presented to us as originals, the
conformity to the originals of all documents presented to us as copies, and the
authenticity of the originals of such latter documents.
Based upon the foregoing, we are of the opinion that:
1. the Company is duly incorporated and existing under the laws
of the State of Delaware; and
2. assuming the effectiveness of this Registration Statement
under the Act and the qualification of the Indenture
hereinafter referred to under the United States Trust
Indenture Act of 1939, as amended, the due execution and
delivery of the Securities on behalf of the Company, the due
authentication of the Securities by The Chase Manhattan Bank,
the Trustee under the proposed form of the Indenture relating
to the Securities (the "Indenture") to be entered into between
the Company and The Chase Manhattan Bank, the sale and
delivery of the Securities at the price and in accordance with
the terms set forth in the Registration Statement, insofar as
the laws of the State of New York are applicable the
Securities will thereupon be legal, valid and binding
obligations
<PAGE> 2
of the Company enforceable in accordance with their terms
(subject to applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance or other similar laws
relating to or affecting creditors' rights generally from time
to time in effect and to general principles of equity as they
relate to enforcement of remedies).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Opinions" in the Prospectus constituting a part of such Registration
Statement. In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Dewey Ballantine LLP
2
<PAGE> 1
EXHIBIT 15.1
ACKNOWLEDGMENT LETTER
To the Stockholders and Board of Directors
Executive Risk Inc.
We are aware of the incorporation by reference in the Registration Statement
(Form S-3 No. 333-40657) of Executive Risk Inc. for the registration of
$75,000,000 Senior Notes of our reports dated May 2, 1997; August 1, 1997 and
November 3, 1997 relating to the unaudited consolidated interim financial
statements of Executive Risk Inc. that are included in its Forms 10-Q for the
quarters ended March 31, 1997; June 30, 1997 and September 30, 1997.
ERNST & YOUNG LLP
Stamford, Connecticut
December 8, 1997
<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-3 No. 333-40657) and related Prospectus of
Executive Risk Inc. for the registration of $75,000,000 Senior Notes and to the
incorporation by reference therein of our report 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
December 8, 1997
