<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE PMI GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-3199675
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
601 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 788-7878
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PHYLLIS A. WILSON
VICE PRESIDENT AND DEPUTY GENERAL COUNSEL
THE PMI GROUP, INC.
601 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 788-7878
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
LESLIE P. JAY ANDREW S. ROWEN
GEOFFREY P. LEONARD JOHN SAVVA
ORRICK, HERRINGTON & SUTCLIFFE LLP SULLIVAN & CROMWELL
400 SANSOME STREET 444 SOUTH FLOWER STREET, 12TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111 LOS ANGELES, CALIFORNIA 90071
(415) 392-1122 (213) 955-8000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Notes........................ $100,000,000 (1) $100,000,000 $30,303(2)
============================================================================================================
</TABLE>
(1) In no event will the maximum aggregate offering price of all securities
issued pursuant to this Registration Statement exceed $100,000,000.
(2) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act.
------------------------
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 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE 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 STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 5, 1996
$100,000,000
THE PMI GROUP, INC.
% NOTES DUE , 2006
------------------------
Interest on the Notes is payable on and of each
year, commencing , 1997. No sinking fund is provided for the
Notes, and the Notes are not redeemable prior to maturity. The Company is a
holding company which conducts its operations through its subsidiaries.
Accordingly, the Notes will effectively be subordinated to the present and
future liabilities of the Company's subsidiaries and the Company will be
dependent on dividends from its subsidiaries to meet its obligations with
respect to the Notes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Dividend Limitations".
The Notes initially will be represented by one or more global Notes
registered in the name of the nominee of The Depository Trust Company.
Beneficial interests in the global Notes will be shown on, and transfers thereof
will be effected only through, records maintained by DTC and its participants.
Except as described herein, Notes in definitive form will not be issued. The
Notes will be issued only in registered form in denominations of $1,000 and
integral multiples thereof. The Notes will trade in DTC's Same-Day Funds
Settlement System until maturity, and secondary market trading activity in the
Notes will therefore settle in immediately available funds. All payments of
principal and interest will be made by the Company in immediately available
funds so long as the Notes are represented by global Notes. See "Description of
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>
INITIAL PUBLIC
OFFERING UNDERWRITING PROCEEDS TO
PRICE(1) DISCOUNT(2) COMPANY(1)(3)
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per Note............................... % % %
Total.................................. $ $ $
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from , 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $310,000 payable by the Company.
------------------------
The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the Notes
will be ready for delivery in book-entry form only through the facilities of DTC
in New York, New York, on or about , 1996, against payment
therefor in immediately available funds.
GOLDMAN, SACHS & CO. MORGAN STANLEY & CO.
INCORPORATED
------------------------
The date of this Prospectus is , 1996.
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING, NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
------------------------
AVAILABLE INFORMATION
The PMI Group, Inc. ("TPG", and on a consolidated basis, the "Company") has
filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form S-3 (of which this Prospectus is a part)
(together with all amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Notes offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the Notes, reference is hereby made to the
Registration Statement and the exhibits and schedules thereto which may be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.
TPG is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Commission. The
Registration Statement, the exhibits and schedules forming a part thereof and
the reports, proxy statements and other information filed by TPG with the
Commission in accordance with the Exchange Act can be inspected and copied at
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington D.C. 20549, and at the following regional offices of the Commission:
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information that are filed through the Commission's
Electronic Data Gathering, Analysis and Retrieval System. This Web site can be
accessed at http://www.sec.gov. In addition, TPG's common stock is listed on the
New York Stock Exchange and similar information concerning the Company can be
inspected and copied at the New York Stock Exchange, 20 Broad Street, New York,
New York 10005.
2
<PAGE> 4
INCORPORATION BY REFERENCE
The following documents filed by TPG with the Commission are incorporated
by reference in this Prospectus:
(a) Annual Report on Form 10-K for the year ended December 31, 1995;
and
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996.
All documents filed by TPG pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the termination
of the offering of the Notes shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the respective dates of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or so 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 Notes, to whom this Prospectus is delivered, upon written or
oral request of such person, a copy of any or all of the documents that have
been incorporated by reference in this Prospectus (not including exhibits to
such documents unless such exhibits are specifically incorporated by reference
into such documents). Requests should be directed to The PMI Group, Inc., 601
Montgomery Street, San Francisco, CA 94111, Attention: Corporate Relations;
telephone: (800) 876-4764.
THE COMPANY
TPG is a holding company which conducts its business through its direct
wholly-owned subsidiaries, PMI Mortgage Insurance Co. ("PMI"), an Arizona
corporation, and American Pioneer Title Insurance Company ("APTIC"), a Florida
insurance company, and various other direct or indirect reinsurance and service
subsidiaries. PMI also owns 45% of the outstanding shares of common stock of CMG
Mortgage Insurance Company, a Wisconsin insurance company.
The Company, through PMI, is the third largest private mortgage insurer in
the United States with new primary insurance written of $13.9 billion and $14.5
billion for the first nine months of 1996 and for the year ended December 31,
1995, respectively, and direct primary insurance in force of $76.0 billion at
September 30, 1996. In addition to primary mortgage insurance, the Company,
through its subsidiaries, provides title insurance and various services and
products for the home mortgage finance industry.
PMI was founded in 1972 and was acquired by Allstate Insurance Company
("Allstate") in 1973. In April 1995, Allstate sold a majority of TPG in an
initial public offering. Allstate continues to own approximately 30% of the
outstanding capital stock of TPG. The principal executive offices of TPG are
located at 601 Montgomery Street, San Francisco, California 94111, telephone
(415) 788-7878.
3
<PAGE> 5
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby, after deducting
an assumed underwriting discount and estimated offering expenses, will be
approximately $99,040,000. Such proceeds will be used for general corporate
purposes, which may include repurchase of TPG's outstanding common stock,
repayment of outstanding indebtedness under one of TPG's credit agreements used
to finance such repurchases and investments in debt and equity securities. On
July 25, 1996, TPG authorized the repurchase of up to $150 million of its
outstanding common stock. Outstanding borrowings under the credit agreement
totalled $15 million as of October 31, 1996. These borrowings are due on or
before December 31, 2001 unless extended as provided in the agreement, and
currently bear interest at 5.6975% per annum.
CAPITALIZATION
The following table sets forth the actual capitalization of the Company at
September 30, 1996, and the capitalization as adjusted to give effect to the
issuance of the Notes offered hereby.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------
AS
ACTUAL ADJUSTED
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt ( % Notes due , 2006).................... $ -- $ 100,000
-------- ----------
Shareholders' equity:
Preferred stock, par value $0.01 per share -- 5,000,000 shares
authorized, no shares issued and outstanding.................. -- --
Common stock, par value $0.01 per share -- 125,000,000 shares
authorized, 35,035,039 shares issued.......................... 350 350
Additional paid-in capital....................................... 257,329 257,329
Unrealized net gains on investments.............................. 41,075 41,075
Retained earnings................................................ 671,209 671,209
Treasury stock, 81,800 shares.................................... (4,252) (4,252)
-------- ----------
Total shareholders' equity.................................... 965,711 965,711
-------- ----------
Total capitalization..................................... $965,711 $1,065,711
======== ==========
</TABLE>
4
<PAGE> 6
INDUSTRY OVERVIEW
Private mortgage insurance is typically used by mortgage lenders to reduce
their credit risk in low down payment, high loan-to-value mortgage loans as well
as to enhance their ability to sell the loans into the secondary mortgage
market, principally to the Federal National Mortgage Association ("Fannie Mae")
and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). Fannie Mae and
Freddie Mac are the predominant purchasers and sellers of conventional mortgage
loans in the United States, providing a direct link between the primary mortgage
origination markets and the capital markets.
Mortgage insurance is purchased by mortgage bankers, savings institutions,
commercial banks and other mortgage lenders. Home purchasers who make down
payments of less than 20% of the value of their home are usually required by the
mortgage lender to qualify and pay for primary mortgage insurance on their
mortgage loans. If the homeowner defaults on the mortgage loan, mortgage
insurance reduces and, in some cases, eliminates any loss to the insured lender.
The role of Fannie Mae and Freddie Mac has increased in part because
risk-based capital regulations, adopted in recent years by the various federal
bank and savings institution regulatory agencies, assign lower asset risk
weights to mortgage-related securities issued or guaranteed by Fannie Mae or
Freddie Mac than to the underlying mortgage loans themselves. Consequently,
banks and savings institutions have a financial incentive to sell mortgage loans
to Fannie Mae and Freddie Mac and to acquire such mortgage-related securities as
portfolio investments. Fannie Mae's and Freddie Mac's importance has also
increased due to the increase in the level of mortgage loans being originated by
mortgage bankers, which sell substantially all of their mortgage loan production
into the secondary market. Loans insured by PMI are eligible for purchase by
Fannie Mae and Freddie Mac. In 1995, Fannie Mae and Freddie Mac purchased
approximately 60% of the loans insured by PMI, compared to approximately 63%
purchased by these agencies in 1994.
BUSINESS
The Company, through PMI, is the third largest private mortgage insurer in
the United States with new primary insurance written of $13.9 billion and $14.5
billion for the first nine months of 1996 and for the year ended December 31,
1995, respectively, and direct primary insurance in force of $76.0 billion at
September 30, 1996. At September 30, 1996, PMI had over 690,000 policies in
force. In addition to mortgage insurance, the Company, through APTIC and PMI
Mortgage Services Co. ("MSC"), provides title insurance and various services and
products for the home mortgage finance industry. Management believes PMI is a
leader in the mortgage insurance industry due to its focus on customer service,
value-added products and services, disciplined risk management techniques,
experienced sales and management teams, as well as its financial strength. PMI
pioneered the use of automated underwriting systems in the mortgage insurance
industry, having implemented its proprietary automated underwriting model in
1987. The Company has also used its proprietary automated residential appraisal
analysis system since late 1991.
PMI is licensed in all 50 states of the United States and the District of
Columbia. At September 30, 1996 the Company's total assets were $1,389 million
and its shareholders' equity was $966 million. At September 30, 1996, 87.6% of
the Company's $1,168 million investment portfolio was invested in fixed income
securities, 98.4% of which were investment grade. PMI's claims-paying ability is
currently rated "AA+" (Very Strong) by Fitch Investors Service, Inc. ("Fitch"),
"Aa2" (Excellent) by Moody's Investors Service, Inc. ("Moody's") and "AA+"
(Excellent) by Standard & Poor's Corporation ("S&P"). The claims-paying ratings
assigned by Fitch, Moody's and S&P are based upon factors relevant to
policyholders and are not applicable to the Notes.
5
<PAGE> 7
PRODUCTS
Primary mortgage insurance provides mortgage default protection to lenders
or investors on individual loans. Mortgage insurance does not cover losses that
result from casualty damage to the property. PMI's obligation to an insured with
respect to a claim is determined by applying the appropriate coverage percentage
to the claim amount (the outstanding loan principal, plus delinquent interest
and certain expenses). In lieu of paying the coverage percentage of the claim
amount, PMI has the option of: (i) paying the entire claim amount and taking
title to the mortgage property, or (ii) in the case of certain sales, paying the
difference between the sales proceeds received by the insured and the claim
amount up to a maximum of the coverage percentage.
PMI issues primary insurance for first mortgage loans on owner occupied,
one-to-four unit residential properties, including condominiums. Primary
coverage can be used on any type of residential mortgage loan instrument
approved by PMI and is generally underwritten on a loan-by-loan basis. PMI
offers coverage generally ranging from 6% to 35% of the claim amount, with new
coverage having been predominantly in the 25% to 30% range as of September 30,
1996. The coverage percentage insured by PMI is determined by the lender,
usually in order to comply with Fannie Mae's and Freddie Mac's requirements to
reduce the loss exposure on loans purchased by them. At September 30, 1996,
PMI's average coverage percentage on insurance in force was 22.1%.
PMI's premium rates are based upon the expected risk of a claim on the
insured loan and take into account the loan-to-value ratio, loan type, mortgage
term, occupancy status and coverage percentage. In addition, PMI's premium rates
take into account persistency, operating expenses and reinsurance costs, assets
pledged by the borrower in lieu of a down payment, as well as company profit and
capital needs, and the prices offered by competitors. PMI is pursuing various
risk-sharing arrangements for certain of its customers, including offering
various premium rates based on the risk characteristics, loss performance or
class of business of the loans to be insured, or the costs associated with doing
such business. While all of the foregoing factors are generally considered in
determining rates, there can be no assurance that the premiums charged will be
adequate to compensate PMI for the risks and costs associated with the coverage
provided to its customers.
Mortgage insurance coverage cannot be canceled by PMI, except for
nonpayment of premiums or certain material violations of PMI's master policy
(the contract of primary insurance issued to a lender) and remains renewable at
the option of the insured for the life of the loan at a rate fixed when the
insurance on the loan was initially issued. As a result, the impact of increased
claims and increased losses from policies originated in a particular year
generally cannot be offset by renewal premium increases on policies in force or
mitigated by nonrenewal of insurance coverage.
CUSTOMERS
PMI's customers are mortgage originators. Mortgage originators include (i)
mortgage bankers, savings institutions, commercial banks and other mortgage
lenders and (ii) mortgage brokers, who originate loans on behalf of mortgage
lenders but do not themselves permanently fund the loans. The mortgage
origination industry continues to experience significant consolidation,
resulting in the market share for mortgage originators being concentrated among
a smaller number of higher volume financial institutions. For the nine months
ended September 30, 1996, mortgage bankers, savings institutions, commercial
banks and other mortgage lenders accounted for 53.9%, 21.8%, 14.4% and 9.9%,
respectively, of PMI's new insurance written.
6
<PAGE> 8
SELECTED FINANCIAL AND OPERATING DATA
The following table sets forth selected financial and operating data for
the periods indicated. The selected consolidated statement of operations and
balance sheet data, at or for each of the years presented below, was derived
from consolidated financial statements of the Company, which were audited by
Deloitte & Touche LLP, independent auditors. The selected financial information
for the nine month periods ended and as of September 30, 1996 and 1995 has been
derived from unaudited consolidated financial statements, which financial
statements, in the opinion of management of the Company, have been prepared on
the same basis as the annual financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of the results for the interim periods. Certain PMI operating and statutory
data, which has been derived from PMI's statutory financial statements, is also
presented.
The selected financial and operating data set forth below should be read in
conjunction with the Company's consolidated financial statements and the related
notes thereto incorporated by reference in this Prospectus. See also
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
7
<PAGE> 9
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT AS OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net premiums written................... $ 274,519 $ 228,828 $ 314,021 $ 277,747 $291,089 $208,602 $143,305
========== ========== ========== ========== ======== ======== ========
Premiums earned........................ $ 293,237 $ 241,285 $ 328,756 $ 296,345 $268,554 $173,039 $120,195
Investment income, less investment
expense.............................. 49,937 46,442 62,041 56,774 45,733 40,847 40,402
Realized capital gains, net............ 14,174 10,164 11,934 3,064 1,229 686 1,335
Other income........................... 5,064 1,744 2,309 3,802 -- -- --
---------- ---------- ---------- ---------- -------- -------- --------
Total revenues......................... 362,412 299,635 405,040 359,985 315,516 214,572 161,932
Total losses and expenses(1)........... 194,370 164,785 224,499 221,434 202,543 119,912 39,879
---------- ---------- ---------- ---------- -------- -------- --------
Income from continuing operations
before income taxes.................. 168,042 134,850 180,541 138,551 112,973 94,660 122,053
Income tax expense (benefit)(2)........ 48,552 33,459 45,310 32,419 24,305 (10,911) 69,661
---------- ---------- ---------- ---------- -------- -------- --------
Income from continuing
operations(1)(2)..................... 119,490 101,391 135,231 106,132 88,668 105,571 52,392
Income (loss) from discontinued
operations........................... -- -- -- -- (28,863) 6,726 3,709
---------- ---------- ---------- ---------- -------- -------- --------
Net income............................. $ 119,490 $ 101,391 $ 135,231 $ 106,132 $ 59,805 $112,297 $ 56,101
========== ========== ========== ========== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES(3).... 98.0x 91.4x 89.3x 88.5x 73.5x 73.4x 119.2x
========== ========== ========== ========== ======== ======== ========
MORTGAGE INSURANCE OPERATING RATIOS:
Loss ratio(1).......................... 38.8% 38.6% 38.5% 40.5% 41.4% 33.2% 3.1%
Expense ratio.......................... 21.2 25.0 24.9 30.1 28.2 27.0 25.3
---------- ---------- ---------- ---------- -------- -------- --------
Combined ratio......................... 60.0% 63.6% 63.4% 70.6% 69.6% 60.2% 28.4%
========== ========== ========== ========== ======== ======== ========
CONSOLIDATED BALANCE SHEET DATA (AT
PERIOD END):
Total assets........................... $1,389,146 $1,228,378 $1,304,440 $1,097,421 $985,129 $815,136 $663,215
Reserve for losses and loss adjustment
expenses............................. 199,497 185,001 192,087 173,885 135,471 94,002 78,045
Long-term obligations.................. -- -- -- -- -- -- --
Shareholders' equity................... 965,711 818,530 870,503 687,178 575,300 513,583 399,489
PMI OPERATING AND STATUTORY DATA (AT
PERIOD END):
Number of policies in force............ 690,480 647,074 657,800 612,806 543,924 428,745 347,232
Default rate........................... 2.03% 1.88% 1.98% 1.88% 1.81% 2.03% 2.38%
Persistency............................ 82.8 87.2 86.4 83.6 70.0 74.6 85.2
Direct primary insurance in force (in
millions)............................ $ 75,988 $ 70,120 $ 71,430 $ 65,982 $ 56,991 $ 43,698 $ 31,982
Direct primary risk in force
(in millions)........................ 16,828 14,626 15,130 13,243 11,267 8,676 6,481
Statutory capital...................... 934,208 770,045 824,156 659,402 494,621 456,931 372,568
Risk-to-capital ratio.................. 15.0:1 16.4:1 15.8:1 17.7:1 20.8:1 19.0:1 18.8:1
</TABLE>
- ---------------
(1) In 1991, the Company significantly revised its estimate of the reserve for
losses and loss adjustment expenses. The effect of this re-estimate
significantly decreased 1991 losses and, therefore, improved the loss ratio.
The reserve re-estimate decreased the loss ratio of 1991 by approximately 34
percentage points more than the largest such re-estimate in any of the other
years in the five year period ended December 31, 1995. This 34 percentage
point decrease in the loss ratio represented $40.9 million of losses and
loss adjustment expenses and $26.6 million of income from continuing
operations.
(2) During 1991, the Company increased its tax liabilities and income tax
expense by $40.9 million in light of an unfavorable judgment by the U.S. Tax
Court. In 1992, the 1991 judgment was overturned, and the Company
reevaluated its tax balances and reduced its tax liabilities and income tax
expense by $30.9 million.
(3) For purposes of computing the ratio of earnings to fixed charges, "earnings"
represent consolidated earnings from continuing operations before income
taxes, cumulative effect adjustments and extraordinary items plus fixed
charges. "Fixed charges" consist of interest (and the portion of rental
expense deemed representative of the interest factor).
8
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF CONSOLIDATED OPERATIONS
Nine months ended September 30, 1996 and 1995
Net income in the nine months ended September 30, 1996 was $119.5 million,
a 17.9% increase over net income of $101.4 million in the nine months ended
September 30, 1995. The increase was primarily attributable to increases in
premiums earned and investment income (including capital gains) of 21.5% and
13.3%, respectively, partially offset by increases in losses and loss adjustment
expenses and operating expenses of 20.7% and 15.2%, respectively. Revenues in
the nine months ended September 30, 1996 were $362.4 million, a 21.0% increase
over revenues of $299.6 million in the corresponding period of 1995.
New mortgage insurance written totaled $13.9 billion in the nine months
ended September 30, 1996, compared with $10.4 billion in the corresponding
period of 1995, a 33.7% increase. The increase in new insurance written resulted
from the number of new mortgage insurance policies issued increasing by 28.7%,
to 111,350 policies in the nine months ended September 30, 1996, from 86,550
policies in the corresponding period in 1995, and an increase in the average
loan size to $125,000 from $120,000. Net mortgage insurance written (after quota
share reinsurance) increased by 50.0% to $13.2 billion in the nine months ended
September 30, 1996 from $8.8 billion in the nine months ended September 30,
1995. A contributing factor in this increase was the reduction in certain quota
share reinsurance on new insurance writings. Effective for new policies written
in 1996, PMI reduced its percentage of quota share cessions from approximately
15% in 1995 to 5% in 1996.
One of the factors contributing to the increase in new policies issued was
the growth in market share in the nine months ended September 30, 1996 compared
with the nine months ended September 30, 1995. PMI's market share of new
insurance written increased to 14.2% in the first nine months of 1996 from 13.2%
in the corresponding period of 1995 (as reported in Inside Mortgage Finance). A
second factor contributing to the increase in new policies issued was the growth
in the total number of loan originations in the mortgage insurance industry in
1996 compared with the corresponding period of 1995, which was caused in part by
increased refinancing activity in the first half of 1996. Refinancing as a
percentage of PMI's new insurance written increased by 9.5 percentage points, to
18.6% in the nine months ended September 30, 1996 from 9.1% in the corresponding
period of 1995.
PMI's persistency rate (percentage of insurance remaining in force from one
year prior) decreased 4.4 percentage points as of September 30, 1996 from the
September 30, 1995 rate, to 82.8% from 87.2%. This decrease is primarily
attributable to the increase in policy cancellations from mortgage refinancing
activity. The decreased persistency contributed to a slower growth of insurance
in force, to a total of $76.0 billion at September 30, 1996, from $70.1 billion
at September 30, 1995. The growth rate of insurance in force from one year prior
decreased to 8.4% at September 30, 1996 from 10.1% at September 30, 1995.
Mortgage insurance net premiums written were $236.7 million in the nine
months ended September 30, 1996, compared with $199.6 million in the
corresponding period of 1995, an increase of 18.6%. The increase is attributable
to the increase in new insurance written over the 1995 level, higher average
premiums resulting from the increasing shift to deeper coverage loans, higher
average loan sizes and the growth of insurance in force. New premiums written
decreased by 25.2% to $15.1 million in the nine months ended September 30, 1996
from $20.2 million in the corresponding period of 1995, while renewal premiums
increased by 22.0% to $251.4 million in the nine months ended September 30, 1996
from $206.1 million in the corresponding period of 1995. The decrease in new
premiums written during 1996 resulted primarily from the continuing shift to the
monthly premium product.
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The increase in average premiums was caused by an increasing shift to
policies with deeper coverage, partially offset by a decline in the use of
adjustable rate mortgages ("ARMs"). 95s (mortgages with loan-to-value ratios
greater than 90% and equal to or less than 95%) with 30% coverage increased to
41.0% of new insurance written in the nine months ended September 30, 1996
compared with 32.4% in the corresponding period of 1995. Similarly, 90s
(mortgages with loan-to-value ratios greater than 85% and equal to or less than
90%) with 25% coverage increased to 42.1% in the nine months ended September 30,
1996 compared with 30.0% in the corresponding period of 1995. ARMs decreased to
12.5% of new insurance written in the nine months ended September 30, 1996
compared with 24.9% in the corresponding period of 1995.
PMI's monthly premium plan has experienced significant growth since its
inception in March of 1994, which is a principal factor in the continuing
decline in new premiums written. The monthly plan represented 94.7% of new
insurance written in the nine months ended September 30, 1996, up 11.8
percentage points from 82.9% in the corresponding period of 1995. This trend
toward the monthly premium product has significantly shifted PMI's premium mix
from new to renewals. The monthly product spreads the receipt of premiums over
12 equal monthly payments (which initially reduces the amount of premiums
written), compared to the annual prepayment method (where the entire annual
premium is recorded as written at the effective date of the policy). For the
monthly premium plan, PMI recognizes only the first month's premium as new
premium written while subsequent monthly premium payments are recognized as
renewal premiums. The monthly premium products have been priced to compensate
for the different timing of cash flows (as compared to annual premium products)
and the related impact on investment income and, accordingly, have not had a
significant effect on the Company's results of operations.
Refunded premiums increased in the nine months ended September 30, 1996 to
$12.3 million from $8.7 million in the nine months ended September 30, 1995 due
primarily to the increase in policy cancellations related to the increase in
mortgage refinancing volume during the first half of 1996. Ceded premiums
written as a percentage of net new, renewal and refunded premiums decreased to
7.0% in the nine months ended September 30, 1996 compared with 10.2% in the
corresponding period of 1995, primarily due to the increased amount of new
insurance written in 1996 falling under the 5% quota share treaty, rather than
the 15% quota share treaty in effect in 1995.
Mortgage insurance premiums earned increased 20.5% to $255.4 million in the
nine months ended September 30, 1996 from $212.0 million in the nine months
ended September 30, 1995. This increase is due primarily to the growth in
insurance in force in 1996 over 1995, the impact of higher premium rates
resulting from the shift to deeper coverage products and the reduction in quota
share cessions during 1996.
The Company's net investment income in the nine months ended September 30,
1996 was $49.9 million compared with $46.4 million in the corresponding period
of 1995, an increase of 7.5%. The increase was primarily attributable to the
growth in the average amount of invested assets, which resulted from positive
cash flows generated by operating activities, partially offset by a decrease in
the average investment yield (pretax) to 6.2% in the nine months ended September
30, 1996 from 6.4% in the corresponding period of 1995. Realized capital gains
(net of losses) reported a significant increase over 1995, up 39.2% to $14.2
million in the nine months ended September 30, 1996 from $10.2 million in the
corresponding period of 1995.
Mortgage insurance losses and loss adjustment expenses increased to $99.0
million in the nine months ended September 30, 1996 from $81.7 million in the
corresponding period of 1995, an increase of 21.2%. This increase was primarily
the result of the growth in insurance in force in recent years, increased claim
amounts associated with the higher loan sizes and increased default rates in
certain areas of the country.
The majority of claims under PMI policies have historically occurred during
the third through the sixth years after issuance of the policies. Insurance
written by PMI since January 1, 1993,
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represented 76.0% of PMI's insurance in force at September 30, 1996, with the
1993 book of business alone representing 24.0%. This substantial volume of PMI's
business is beginning to reach its expected peak claim period. Consistent with
increasing mortgage principal amounts, claim amounts have risen in recent years.
Also, PMI has been experiencing an acceleration in its claim payment process.
This acceleration is a result of Fannie Mae's and Freddie Mac's loss mitigation
efforts to make earlier determinations regarding claims. Management believes
that this is only an acceleration of the timing of payments, and will not
increase the number of claims ultimately paid by PMI. In addition to claim
increases, PMI's default rate has increased to 2.03% at September 30, 1996 from
the September 30, 1995 rate of 1.88%.
Default rates on PMI's California policies decreased to 3.63% at September
30, 1996, from 3.81% at September 30, 1995. Policies written in southern
California in the years 1989 through 1993, which are in the historically highest
claim period, are also generally believed to have been written at the high point
of southern California real estate prices. The California economy continues to
recover more slowly than anticipated when those policies were issued, and, as a
result, California defaults for each of the policy years since 1989 may continue
to experience an average default rate higher than the national average default
rate.
Mortgage insurance underwriting and other expenses increased slightly to
$50.3 million in the nine months ended September 30, 1996, from $50.0 million in
the nine months ended September 30, 1995, or 0.6%. This marginal increase, in
contrast to the higher growth rate in new insurance written, is primarily the
result of management's focus on controlling expenses.
The mortgage insurance loss ratio (ratio of incurred losses to net premiums
earned) increased to 38.8% in the nine months ended September 30, 1996, compared
with 38.6% in the corresponding period of 1995 due, in part, to the increase in
losses and loss adjustment expenses as discussed above. The expense ratio (ratio
of underwriting expenses to net premiums written) reported an improvement over
1995, dropping to 21.2% in the nine months ended September 30, 1996 from 25.0%
in the corresponding period of 1995, resulting in a combined ratio of 60.0% in
1996, 3.6 percentage points better than the 1995 ratio of 63.6%.
Title insurance premiums earned increased 29.0% to $37.8 million in the
nine months ended September 30, 1996, compared with $29.3 million in the
corresponding period of 1995. This improvement was due to expansion efforts of
the title business, as well as the overall improvement in the volume of
residential mortgage originations. Underwriting and other expenses increased
26.7% to $33.7 million in the nine months ended September 30, 1996, compared to
$26.6 million in the corresponding period of 1995. This increase is directly
attributable to the increase in premiums earned. The title insurance combined
ratio decreased to 92.5% in 1996 from 95.6% in 1995. The title insurance
industry expense ratios are much higher than those experienced in the mortgage
insurance industry primarily because the commission rates paid to title agencies
and attorneys are substantially higher than those paid to mortgage insurance
sales personnel, and because of the lack of renewal business to help absorb
underwriting costs.
Other income, primarily revenues generated by MSC, increased to $5.1
million in the nine months ended September 30, 1996 from $1.7 million in the
corresponding period of 1995. This growth is primarily due to increased mortgage
services operations resulting from higher refinancing activity and expansion of
its contract underwriting services.
The Company's effective tax rate increased to 28.9% in the nine months
ended September 30, 1996, compared to 24.8% in the corresponding period of 1995.
The benefits of tax-preference investment income and other permanent differences
reduced the effective rates below the statutory rate of 35% during both periods.
The increase in the effective rate in 1996 over 1995 was due to a greater
portion of operating income generated from insurance operations rather than
tax-free bond income, the state tax effect of PMI's $25.0 million dividend and
transfer of APTIC to TPG, and a shift in the mix of the investment portfolio to
a greater portion of taxable fixed income bonds.
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<PAGE> 13
Years ended December 31, 1995 and 1994
Net income in 1995 was $135.2 million, a 27.4% increase over 1994 net
income of $106.1 million. The increase was primarily attributable to increases
in premiums earned and investment income (including capital gains) of 10.9% and
23.6%, respectively, and a decrease in operating expenses of 5.0%, partially
offset by an increase in losses and loss adjustment expenses of 8.6%. Revenues
in 1995 were $405.0 million, a 12.5% increase over revenues of $360.0 million in
1994.
New mortgage insurance written totaled $14.5 billion in 1995, compared with
$18.4 billion in 1994, a 21.2% decrease. The decrease in new insurance written
resulted from the number of new mortgage insurance policies written declining by
23.3%, to 119,600 policies in 1995 from 156,000 policies in 1994. One of the
factors contributing to this decrease was the drop in refinancing activity in
1995 versus 1994. Refinancings showed a significant decrease of 56.4% to 12,300
policies in 1995 from 28,200 policies in 1994. Refinancing as a percentage of
new insurance written decreased by 6.8 percentage points, to 11.5% in 1995 from
18.3% in 1994. The number of policies written for new purchases also dropped in
1995 from the 1994 level, to 107,300 from 127,800, a 16.0% decline. Management
believes that a second contributing factor to the decline in total new insurance
written was PMI's reluctance to aggressively participate in a market which
displayed a deteriorating trend in borrower credit quality beginning in late
1994 and continuing into 1995. PMI's market share of new insurance written in
1995 declined to 13.2%, compared to 14.0% in 1994 (as reported in Inside
Mortgage Finance).
PMI's persistency rate increased 2.8 percentage points in 1995 over the
1994 rate, to 86.4% from 83.6%. This increase is primarily attributable to the
decrease in refinancing activity in 1995. The increased persistency contributed
to the growth of insurance in force to $71.4 billion at December 31, 1995, from
$66.0 billion at December 31, 1994. Growth in insurance in force continued
during 1995 at a slower pace than the 1994 growth level, 8.2% in 1995 versus
15.8% in 1994, primarily due to the decrease in new insurance written.
Mortgage insurance net premiums written in 1995 were $273.7 million,
compared with $232.3 million in 1994, an increase of 17.8%. The increase is
primarily attributable to higher renewal premiums due to improved persistency
and to a decline in ceded and refunded premiums, partially offset by a decline
in new premiums written. The decline in new premiums written in 1994 was due to
the decrease in new insurance written in 1995 from 1994, and the increasing
usage of the monthly premium plan in 1995, which represented 85.2% of new
insurance written in 1995, up 48.2 percentage points from the 1994 level of
37.0%. The increase in net premiums written is also attributable to higher
average premiums for new insurance written during 1995 compared with 1994. The
higher average premiums were caused by an increasing shift to 95s with deeper
coverage, partially offset by a decline in the use of ARMs. 95s with 30%
coverage increased to 34.7% of new insurance written in 1995 compared with 1.2%
in 1994, while ARMs decreased to 21.3% of new insurance written in 1995 compared
with 29.7% in 1994.
Refunded premiums in 1995 decreased by 15.0% to $12.5 million from $14.7
million in 1994 due primarily to the decrease in refinancing volume during 1995.
Ceded premiums written as a percentage of net new, renewal and refunded premiums
has decreased to 9.2% in 1995 compared to 10.4% in 1994, due primarily to
reduced ceding percentages under quota share reinsurance treaties.
Mortgage insurance premiums earned increased 15.0% to $288.5 million in
1995 from $250.9 million in 1994. This increase is due primarily to the growth
in insurance in force in 1995 over 1994 and the impact of higher premium rates
from the shift to deeper coverage products.
The Company's net investment income in 1995 was $62.0 million compared with
$56.8 million in 1994, an increase of 9.2%. The increase was primarily
attributable to the growth in the average amount of invested assets, which
resulted from positive cash flows generated by operating activities, partially
offset by a decrease in the effective yield. The average effective yield
(pretax) on
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<PAGE> 14
the portfolio's invested value during 1995 decreased to 6.5% from 6.9% in 1994,
primarily due to an increasing portion of the portfolio being invested in lower
yielding, tax-exempt municipal bonds. Realized capital gains (net of losses)
reported a significant increase over 1994, up $8.8 million to $11.9 million in
1995 from $3.1 million in 1994. This increase is consistent with the 1995 stock
market performance.
Mortgage insurance losses and loss adjustment expenses increased to $111.0
million in 1995 from $101.6 million in 1994, an increase of 9.3%. This increase
was primarily the result of the growth in insurance in force in recent years and
the increased default rates and claim amounts in certain areas of the country,
particularly California where the default on PMI's California policies increased
to 4.08% at December 31, 1995, from 3.72% at December 31, 1994.
Consistent with increasing mortgage principal amounts, claim amounts have
risen in recent years, while PMI's book of business continues to mature into the
higher-frequency claim period. Insurance written by PMI since January 1, 1993,
represented 69.2% of PMI's insurance in force at December 31, 1995. In addition,
PMI's default rate has increased over the 1994 level by 10 basis points, from
1.88% to 1.98% at December 31, 1995.
Mortgage insurance underwriting and other expenses decreased 2.7% to $68.0
million in 1995 from $69.9 million in 1994. This decrease is primarily the
result of the decrease in new insurance written in 1995.
The mortgage insurance loss ratio decreased to 38.5% in 1995, compared with
40.5% in 1994 due, in part, to a $20.7 million decrease in prior year reserves
recorded in 1995. The expense ratio also reported an improvement over 1994,
dropping to 24.9% in 1995 from 30.1% in 1994, resulting in a combined ratio of
63.4% in 1995, 7.2 percentage points better than the 1994 ratio of 70.6%.
Title insurance premiums earned decreased 11.2% to $40.3 million in 1995,
compared with $45.4 million in 1994. Underwriting and other expenses decreased
9.9% to $36.5 million in 1995, compared to $40.5 million in 1994. These
decreases are attributable to an overall decline in the volume of residential
mortgage originations. The title insurance combined ratio increased slightly to
95.4% in 1995 from 94.1% in 1994.
Other income, primarily revenues generated by MSC, decreased to $2.3
million in 1995 from $3.8 million in 1994, a 39.5% decline. This decrease is
primarily due to reduced mortgage services operations resulting from lower
refinancing activity.
The Company's effective tax rate was 25.1% in 1995, compared to 23.4% in
1994. The benefits of tax-preference investment income and other permanent
differences reduced the effective rates below the statutory rate of 35% during
both periods. The increase in the effective rate in 1995 over 1994 was primarily
due to a greater portion of operating income generated from insurance operations
rather than tax-free bond income.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Liquidity and capital resource considerations are different for TPG and
PMI, its principal insurance operating subsidiary, as discussed below.
TPG's principal sources of funds are dividends from PMI and APTIC, cash and
investment income thereon and funds that may be raised from time to time in the
capital markets. TPG does not expect that Residential Guaranty Co. ("RGC"),
TPG's reinsurance subsidiary, will be in a position to pay dividends to TPG for
at least the foreseeable future. Also, in February 1996, TPG executed two credit
agreements totaling $50.0 million. At September 30, 1996, $5.0 million in
borrowings and at October 31, 1996, $15.0 million in borrowings were outstanding
under one of the credit agreements. On July 1, 1996, PMI transferred its
ownership in APTIC to TPG through a dividend.
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<PAGE> 15
TPG's principal uses of funds are the payment of dividends to shareholders,
payment of operating expenses, repurchase of TPG's common stock and any
additional investments in the Company's current or future subsidiaries.
As of September 30, 1996, TPG had approximately $39.1 million of
unrestricted funds available for the payment of future dividends to
shareholders, corporate expenses and other costs. This amount has increased
substantially from the December 31, 1995 amount due to the receipt of the $25.0
million dividend from PMI, less a $7.0 million capital contribution to RGC. See
"Dividend Limitations" below.
The principal sources of funds for PMI and RGC are premiums received on
new, renewal and assumed business, commissions on ceded business and
reimbursement of losses from reinsurers, and amounts earned from the investment
of this cash flow. The principal uses of funds by PMI and RGC are the payment of
claims and related expenses, reinsurance premiums, other operating expenses and,
for PMI, dividends to TPG.
In the mortgage guaranty insurance industry, liquidity refers to the
ability of an enterprise to generate adequate amounts of cash from its normal
operations, including premiums received and investment income, in order to meet
its financial commitments, which are principally obligations under the insurance
policies it has written. Liquidity requirements are influenced significantly by
the level and severity of claims. The Company's operations generally do not
require significant amounts of capital expenditures.
PMI generates substantial cash flows from operations as a result of
premiums being received in advance of the time when claim payments are required.
Cash flows generated from PMI's operating activities totaled $54.9 million and
$71.1 million in the nine months ended September 30, 1996 and 1995,
respectively. Operating cash flows decreased during 1996 due to the increased
usage of the monthly premium product. These positive operating cash flows, along
with that portion of the investment portfolio that is held in cash and
highly-liquid securities, have historically met the liquidity requirements of
PMI, as evidenced by the growth in its investment portfolio. PMI's investment
portfolio was $1,083.4 million at September 30, 1996, compared with $1,026.7
million at September 30, 1995. Significant increases in claims, which could
result from adverse economic conditions, could create increased liquidity
requirements for PMI. Should PMI experience any temporary cash flow shortfall
due to significantly higher than anticipated claims, or for other reasons,
management anticipates funding such shortfall through sales of investments. In
addition to claim requirements, management has committed approximately $10
million over a three year period for systems development and enhancement. This
cash requirement will be provided by operating activities.
The Company's investment strategy is the result of various interrelated
investment considerations including protection of principal, appreciation
potential, tax consequences, and yield. The Company typically maintains its
investment portfolio with a longer average duration than its anticipated claims
development in order to achieve higher yields. The Company has found this
strategy to be cost effective because any cash mismatch would be met by cash
generated from operations or sales of investments.
Consolidated reserve for losses and loss adjustment expenses increased from
$192.1 million at December 31, 1995, to $199.5 million at September 30, 1996, an
increase of $7.4 million, or 3.9%, primarily due to increasing defaults
resulting from the growth in mortgage insurance in force discussed above.
Consolidated unearned premiums decreased from $140.3 million at December
31, 1995, to $117.7 million at September 30, 1996, a decrease of $22.6 million,
or 16.1%. This decrease was primarily a result of the increase of mortgage
insurance in force written under the monthly premium plan, which does not
generate significant unearned premiums.
Consolidated shareholders' equity increased from $870.5 million at December
31, 1995, to $965.7 million at September 30, 1996, an increase of $95.2 million,
or 10.9%. This increase consisted
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<PAGE> 16
of $119.5 million of net income and stock options exercised of $1.0 million,
offset by a decrease of $15.7 million in net unrealized gains on investments
available for sale (net of tax), dividends declared of $5.3 million and treasury
stock purchases of $4.3 million during the nine months ended September 30, 1996.
PMI's risk-to-capital ratio at September 30, 1996, was 15.0:1, compared to
15.8:1 at December 31, 1995. On October 1, 1996, PMI notified Centre Reinsurance
Company of New York and Centre Reinsurance International Company (collectively,
"Centre Re") that PMI was terminating and commuting its quota share reinsurance
agreement with Centre Re (the "Centre Re Agreement") effective December 31,
1996. Had the Centre Re Agreement not been in effect as of September 30, 1996,
PMI's risk-to-capital ratio at such date would have been 16.3:1.
DIVIDEND LIMITATIONS
TPG is largely dependent on dividends from PMI to meet TPG's debt service
obligations, including its obligations with respect to the Notes. The ability of
PMI to pay dividends to TPG is dependent on business conditions, income, cash
requirements of PMI and other relevant factors. Limitations on PMI's
risk-to-capital ratio imposed by its runoff support agreement and certain state
insurance regulatory authorities also effectively limit PMI's ability to pay
dividends, because the payment of dividends reduces statutory capital. Under the
most restrictive of these risk-to-capital limitations, PMI would be precluded
from paying a dividend if, after the payment of such dividend, its
risk-to-capital ratio would equal or exceed 23:1.
PMI's ability to pay dividends is also limited under Arizona law and, as
PMI is currently commercially domiciled in California, under California law. Due
to a change in California law, effective as of January 1, 1997, PMI will no
longer be deemed to be commercially domiciled in California. The insurance laws
of Arizona provide that (i) PMI may pay dividends out of available surplus and
(ii) without prior approval of the Arizona Insurance Director, such dividends
during any 12-month period shall not exceed the lesser of 10% of policyholders'
surplus as of the preceding year-end or the last calendar year's net investment
income. Available surplus includes paid-in surplus and accordingly, at December
31, 1995, the most constraining limitation of Arizona law was the limitation
based on 10% of policyholders' surplus. In accordance with Arizona law, PMI was
permitted to pay ordinary dividends to TPG of $29.3 million in 1996, all of
which has been paid.
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<PAGE> 17
DESCRIPTION OF NOTES
The % Notes Due , 2006 (the "Notes") will be issued
under an Indenture (the "Indenture"), to be entered into by TPG and The Bank of
New York, as trustee (the "Trustee"). The following summaries of certain
provisions of the Indenture do not purport to be complete and are subject to the
detailed provisions of the Indenture, a copy of the form of which is filed as an
exhibit to the Registration Statement and to which reference is hereby made for
a full description of such provisions and for other information regarding the
Notes. Section references below are to the Indenture. Capitalized terms used but
not defined herein have the meanings ascribed to them in the Indenture. Whenever
particular provisions of the Indenture are referred to, such provisions are
incorporated by reference as part of the statements made and the statements are
qualified in their entirety by such reference.
GENERAL
The Notes will be unsecured obligations of TPG, ranking equally with all
other unsecured and unsubordinated indebtedness of TPG, will be limited to an
aggregate principal amount of $100,000,000 and will mature on ,
2006. The Indenture does not limit the amount of additional unsecured
indebtedness that TPG may incur.
Interest will be payable semi-annually on and
of each year commencing , 1997, to the registered
Holders of Notes on the preceding and ,
respectively. The Notes will bear interest from , 1996 at the
rate per annum set forth on the cover page of this Prospectus. (Section 301)
Initially, the Notes will be issued in the form of one or more Global Notes
registered in the name of The Depository Trust Company ("DTC" or the
"Depositary") or its nominee. In certain limited circumstances, such Global
Notes may be exchanged for individual certificated Notes in fully registered
form without coupons in denominations of $1,000 and integral multiples thereof.
See "Book-Entry System" below. (Sections 301, 302, 303 and 305)
The principal of and interest on the Notes will be payable, the transfer of
Notes will be registrable and the Notes may be presented for exchange, at the
office of the Trustee in the Borough of Manhattan, The City of New York. If the
Notes are no longer represented by Global Notes, payment of interest may, at the
option of TPG, be made by check mailed to the address of the Person entitled
thereto. No service charge will be made for any transfer or exchange of Notes,
but TPG may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (Sections 301, 305 and
1002)
No sinking fund is provided for the Notes, and the Notes are not redeemable
prior to maturity. (Section 301)
TPG is a holding company and is dependent upon dividends from its
subsidiaries to provide funds to permit the payment of TPG's obligations under
the Notes. In addition, the claims of creditors of TPG, including the claims of
Holders of Notes, are effectively subordinated to the claims of creditors, who
may include policyholders, of TPG's present and future subsidiaries, including
PMI.
RESTRICTIVE COVENANTS
Limitations on Liens
Under the Indenture, so long as any Notes are outstanding, TPG will not,
and will not permit any Subsidiary to, directly or indirectly, create, issue,
assume, incur or guarantee any indebtedness for money borrowed which is secured
by a lien, mortgage, pledge, security interest or other encumbrance of any
nature ("Lien") on any of the present or future capital stock of any Designated
Subsidiary (or any Subsidiary of TPG having direct or indirect control of any
Designated Subsidiary)
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<PAGE> 18
which capital stock is owned directly or indirectly by TPG unless the Notes
(and, if TPG so elects, any other indebtedness of TPG ranking at least pari
passu with the Notes) shall be secured equally and ratably with or prior to such
other secured debt so long as it is outstanding. The term "Designated
Subsidiary" means PMI, so long as it remains a Subsidiary, or any Subsidiary
which is a successor thereto. (Section 1008(a))
Limitations on Disposition of Stock of a Designated Subsidiary
Under the Indenture, so long as any Notes are Outstanding, TPG will not,
and will not permit any Subsidiary to, sell, transfer or otherwise dispose of
any shares of capital stock of any Designated Subsidiary (or of any corporation
having direct or indirect control of any Designated Subsidiary) except (subject
to the covenant relating to consolidations, mergers, transfers and leases
described in the following paragraph) for (i) a sale, transfer or other
disposition of any capital stock of any Designated Subsidiary to a wholly-owned
Subsidiary of TPG; (ii) a sale, transfer or other disposition of the entire
capital stock of any Designated Subsidiary for at least fair value (as
determined by the Board of Directors of TPG acting in good faith); or (iii) a
sale, transfer or other disposition of the capital stock of any Designated
Subsidiary for at least fair value (as determined by the Board of Directors of
TPG acting in good faith) if, after giving effect thereto, TPG and its
Subsidiaries would own more than 80% of the issued and outstanding voting stock
of such Designated Subsidiary. (Section 1008(b))
Mergers, Consolidations and Certain Sales of Assets
TPG shall not, in a single transaction or a series of related transactions,
consolidate with or merge with or into any other Person or sell, assign,
transfer or lease or otherwise dispose of all or substantially all of its
properties and assets to any Person or group of affiliated Persons, or permit
any of its Subsidiaries to enter into any such transaction or transactions if
such transaction or transactions, in the aggregate, would result in a sale,
assignment, transfer, lease or disposal of all or substantially all of the
properties and assets of TPG and its Subsidiaries on a consolidated basis to any
other Person or group of affiliated Persons, unless: (i) in a transaction in
which TPG does not survive or in which TPG sells, leases or otherwise disposes
of all or substantially all of its assets, the successor entity to TPG is
organized under the laws of the United States of America or any State thereof or
the District of Columbia and shall expressly assume, by a supplemental indenture
executed and delivered to the Trustee in form satisfactory to the Trustee, all
of TPG's obligations under the Indenture; (ii) after giving effect to such
transaction, no Event of Default or event that with the passing of time or the
giving of notice, or both, would constitute an Event of Default shall have
occurred and be continuing; (iii) if, as a result of any such transaction,
capital stock of any Designated Subsidiary (or any Subsidiary of TPG having
direct or indirect control of any Designated Subsidiary) would become subject to
a Lien prohibited by the covenant described under "-- Limitations on Liens"
above, TPG or the successor entity to TPG shall have secured the Notes as
required by such covenant; and (iv) certain other conditions are met. (Section
801)
EVENTS OF DEFAULT AND NOTICE
An Event of Default is defined in the Indenture to be (i) a default for 30
days in the payment of any interest upon any of the Notes when due; (ii) a
default in the payment of the principal of any of the Notes when due; (iii) a
default by the Company in the performance, or breach, of any of its other
covenants in the Indenture which has not been remedied by the end of a period of
60 days after written notice to TPG by the Trustee or to TPG and the Trustee by
the Holders of at least 25% in principal amount of the Outstanding Notes; (iv) a
default under any indebtedness for money borrowed by TPG or any Designated
Subsidiary if (A) such default either (1) results from the failure to pay the
principal of any such indebtedness at its stated maturity or (2) relates to an
obligation other than the obligation to pay the principal of such indebtedness
at its stated maturity and results in such indebtedness becoming or being
declared due and payable prior to the date on
17
<PAGE> 19
which it would otherwise have become due and payable, (B) the principal amount
of such indebtedness, together with the principal amount of any other such
indebtedness in default for failure to pay principal at stated maturity or the
maturity of which has been so accelerated, aggregates $15,000,000 or more at any
one time outstanding and (C) such indebtedness is not discharged, or such
acceleration is not rescinded or annulled, within 10 business days after written
notice as provided in the Indenture; and (v) certain events of bankruptcy,
insolvency or reorganization relating to TPG. (Section 501)
If an Event of Default (other than an Event of Default described in clause
(v) of the preceding paragraph) shall occur and be continuing, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Outstanding Notes may accelerate the maturity of all Notes; provided, however,
that after such acceleration, but before a judgment or decree based on
acceleration, the Holders of a majority in aggregate principal amount of
Outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the non-payment of accelerated
principal, have been cured or waived as provided in the Indenture. If an Event
of Default specified in clause (v) of the preceding paragraph occurs, the
Outstanding Notes will ipso facto become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. (Section 502)
For more information as to waiver of defaults, see "Modification and Waiver".
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the Holders of at least 25% in aggregate principal
amount of the Outstanding Notes shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as Trustee,
and the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of the Outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. (Section 507) However, such limitations do not apply to a suit instituted
by a Holder of a Note for enforcement of payment of the principal of or interest
on such Note on or after the respective due dates expressed in such Note.
(Section 508)
TPG will be required to furnish to the Trustee annually a statement as to
the performance by TPG of its obligations under the Indenture and as to any
default in such performance. (Section 1004)
MODIFICATION AND WAIVER
The Indenture provides that TPG and the Trustee may, without the consent of
any Holders of the Notes, enter into supplemental indentures for the purposes,
among other things, of evidencing the succession of another Person to TPG, of
adding to TPG's covenants, of adding additional Events of Default, or of curing
ambiguities or inconsistencies in the Indenture if such action will not
adversely affect the interests of the Holders of the Outstanding Notes in any
material respect. (Section 901)
The Indenture also contains provisions permitting TPG and the Trustee, with
the consent of the Holders of not less than a majority in principal amount of
the Outstanding Notes, to enter into one or more supplemental indentures for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Indenture or modifying in any manner the rights of the
Holders of the Notes, except that no such modification or amendment may, without
the consent of the Holders of each of the Outstanding Notes affected thereby,
among other things, (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note; (ii) reduce the principal amount of, or
the rate of interest on, any Note; (iii) change the place of payment where, or
the coin or currency in which, the principal of any Note or any interest thereon
is payable; (iv) impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof; (v) reduce the percentage
in principal amount of the Outstanding Notes, the consent of
18
<PAGE> 20
whose Holders is required for any such modification or amendment of the
Indenture or for any waiver of compliance with certain provisions of, or of
certain defaults under, the Indenture; or (vi) modify the foregoing
requirements. (Section 902)
The Holders of a majority in principal amount of the Outstanding Notes may
on behalf of the Holders of all the Notes waive compliance by TPG with certain
restrictive provisions of the Indenture. (Section 1009) The Holders of a
majority in principal amount of the Outstanding Note may on behalf of the
Holders of all the Notes waive any past default under the Indenture and its
consequences, except a default in the payment of the principal of or any
interest on any Note or in respect of a provision which under the Indenture
cannot be modified or amended without the consent of the Holder of each
Outstanding Note affected. (Section 513)
DEFEASANCE
TPG, at TPG's option, (i) will be discharged from any and all obligations
in respect of the Notes (except for certain obligations to register the transfer
of Notes or the exchange of Notes to replace destroyed, stolen, lost or
mutilated Notes, and to maintain Paying Agents and hold moneys for payment in
trust) or (ii) will be released from its obligations with respect to the Notes
under the covenants described under "Restrictive Covenants", and the occurrence
of an event described in clause (iii) under "Events of Default and Notice" above
with respect to any such covenant shall no longer be an Event of Default if, in
either case, TPG deposits with the Trustee, in trust, money or U.S. Government
Obligations that through the payment of interest thereon and principal thereof
in accordance with their terms will provide money in an amount sufficient to pay
all the principal of and interest on the Outstanding Notes on the dates such
payments are due in accordance with the terms of the Notes. Such a defeasance
under clause (i) or (ii) above may only be effected if, among other things, (a)
no Event of Default or event which with notice or lapse of time or both would
become an Event of Default shall have occurred and be continuing on the date of
such deposit, (b) no Event of Default described under clause (v) under "Events
of Default and Notice" above or event which with the giving of notice or lapse
of time or both would become an Event of Default described under such clause (v)
shall have occurred and be continuing at any time during the period ending on
the 90th day following such date of deposit, (c) TPG shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Holders will not recognize
gain or loss for Federal income tax purposes as a result of such defeasance and
will be subject to Federal income tax on the same amount in the same manner and
at the same times as if such defeasance had not occurred, (d) TPG shall have
delivered to the Trustee an Opinion of Counsel to the effect that such deposit
shall not cause the Trustee or the trust so created to be subject to the
Investment Company Act of 1940, and (e) certain other customary conditions
precedent are satisfied. Such opinion, in the case of a defeasance as described
under clause (i) above, must refer to and be based upon a ruling of the Internal
Revenue Service or a change in applicable federal income tax law occurring after
the date of the Indenture. In the event TPG omits to comply with its remaining
obligations under the Indenture after a defeasance of the Indenture as described
under clause (ii) above and the Notes are declared due and payable because of
the occurrence of any undefeased Event of Default, the amount of money and U.S.
Government Obligations on deposit with the Trustee may be insufficient to pay
amounts due on the Notes at the time of the acceleration resulting from such
Event of Default. However, TPG will remain liable in respect of such payments.
(Article Eleven)
BOOK-ENTRY SYSTEM
The Notes will be issued in the form of one or more registered securities
(each a "Global Note") which will be deposited with, or on behalf of, the
Depositary and registered in the name of the Depositary or the Depositary's
nominee. Except as set forth below, the Global Note may be transferred, in whole
and not in part, only to the Depositary, a nominee of the Depositary, a
successor to the Depositary or a nominee of that successor. (Sections 303, 305)
19
<PAGE> 21
The Depositary has advised TPG as follows: 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 pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of institutions that have accounts
with the Depositary ("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 (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
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.
Upon the issuance of the Global Note, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Notes represented by such Global Note to the accounts of participants. The
accounts to be credited will be designated by the Underwriters of the Notes.
Ownership of beneficial interests in the Global Note will be limited to
participants or persons that may hold beneficial interests through participants.
Ownership of beneficial interests in the Global Note will be shown on, and the
transfer of those ownership interests will be effected only through, records
maintained by the Depositary (with respect to participants' interests) or such
participants (with respect to the owners of beneficial interests in the Global
Note who own such interests through participants). The laws of some
jurisdictions 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 the Global Note.
So long as the Depositary, or its nominee, is the registered Holder and
owner of the Global Note, the Depositary or such nominee, as the case may be,
will be considered the sole owner and Holder of the related Notes for all
purposes of such Notes and for all purposes under the Indenture. Except as set
forth below, owners of beneficial interests in the Global Note will not be
entitled to have the Notes represented by such Global Note registered in their
names, will not receive or be entitled to receive physical delivery of
certificated Notes in definitive form and will not be considered to be the
owners or Holders of any Notes under the Indenture or the Global Note.
Accordingly, each person owning a beneficial interest in the Global 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 beneficial interest, to exercise any rights of a Holder of Notes under the
Indenture or the Global Note. TPG understands that under existing industry
practice in the event TPG requests any action of Holders of Notes or an owner of
a beneficial interest in the Global Note desires to take any action that the
Depositary, as the Holder of the Global Note, is entitled to take, the
Depositary would authorize the participants to take such action, and the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them. Payment of principal of and interest on Notes
represented by the Global Note 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 Note.
TPG expects that the Depositary, upon receipt of any payment of principal
or interest in respect of the Global Note, will immediately credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Note as shown on the records of
the Depositary. TPG also expects that payments by participants to owners of
beneficial interests in the Global Note held through such participants will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such
20
<PAGE> 22
participants. Neither TPG nor the Trustee will have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, beneficial ownership interests in the Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests or for any other aspect of the relationship between the Depositary and
its participants or the relationships between such participants and the owners
of beneficial interests in the Global Note owning through such participants.
The Notes represented by the Global Note may be exchanged for individual
certificated Notes in definitive form in denominations of $1,000 and any
integral multiple thereof if (i) the Depositary notifies TPG that it is
unwilling or unable to continue as depositary for the Global Note or if at any
time the Depositary ceases to be a clearing agency registered under the Exchange
Act, (ii) TPG in its sole discretion at any time determines not to have all of
the Notes represented by the Global Note and notifies the Trustee thereof, or
(iii) an Event of Default has occurred and is continuing with respect to the
Notes. Any Global Note that is exchangeable pursuant to the preceding sentence
will be exchanged for certificated Notes issued in authorized denominations and
registered in such names as the Depositary shall direct. (Sections 302 and 305)
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made in immediately available funds. All
payments of principal and interest will be made by TPG in immediately available
funds so long as the Notes are represented by Global Notes.
CONCERNING THE TRUSTEE
The Bank of New York will act as Trustee under the Indenture. The Trustee
maintains an office at 101 Barclay Street, New York, New York 10286 for the
transfer and exchange of and the payment of principal of and interest on the
Notes.
21
<PAGE> 23
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, TPG has agreed to sell to each of the Underwriters named below, and
each of the Underwriters has severally agreed to purchase, the principal amount
of Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
--------------------------------------------------------------------- ----------------
<S> <C>
Goldman, Sachs & Co.................................................. $
Morgan Stanley & Co. Incorporated....................................
-----------
Total...................................................... $100,000,000
===========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and to pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus and in part to certain securities dealers at such price less a
concession of % of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a concession not to exceed % of the
principal amount of the Notes to certain brokers and dealers. After the Notes
are released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Underwriters.
Settlement for the Notes will be made in immediately available funds, and
secondary trading in the Notes will settle in immediately available funds. See
"Description of Notes -- Same-Day Settlement and Payment".
The Notes are a new issue of securities with no established trading market.
TPG has been advised by the Underwriters that the Underwriters intend to make a
market in the Notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Notes.
TPG has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
VALIDITY OF THE NOTES
The validity of the Notes will be passed upon for TPG by Orrick, Herrington
& Sutcliffe LLP, San Francisco, California, and for the underwriters by Sullivan
& Cromwell, New York, New York.
EXPERTS
The financial statements and related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in auditing and
accounting.
22
<PAGE> 24
- ---------------------------------------------------------
- ---------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR 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 AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................... 2
Incorporation by Reference.............. 3
The Company............................. 3
Use of Proceeds......................... 4
Capitalization.......................... 4
Industry Overview....................... 5
Business................................ 5
Selected Financial and Operating Data... 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 9
Description of Notes.................... 16
Underwriting............................ 22
Validity of the Notes................... 22
Experts................................. 22
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
$100,000,000
THE PMI GROUP, INC.
% NOTES DUE
, 2006
------------------
[LOGO]
------------------
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 25
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses, other than underwriting discounts and commissions,
in connection with this offering are estimated as follows:
<TABLE>
<S> <C>
SEC Registration Fee..................................................... $ 30,303
Rating Agency Fees....................................................... 90,000
Blue Sky fees and expenses............................................... 17,500
Printing and engraving expenses.......................................... 20,000
Legal fees............................................................... 75,000
Accounting fees.......................................................... 50,000
Trustee fees............................................................. 20,000
Miscellaneous............................................................ 7,197
--------
Total.......................................................... $310,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, inter alia, empowers a
Delaware corporation to 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 (other than an action by or in the right of the corporation)
by reason of the fact that such 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 or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she 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 reasonable cause to believe his or her conduct was unlawful.
Similar indemnity is authorized for such person against expenses (including
attorneys' fees) actually and reasonably incurred in connection with the defense
or settlement of any such threatened, pending or completed action or suit if
such person acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and provided
further that (unless a court of competent jurisdiction otherwise provides) such
person shall not have been adjudged liable to the corporation. Any such
indemnification may be made only as authorized in each specific case upon a
determination by the stockholders or disinterested directors or, if there are no
disinterested directors, or if such disinterested directors so direct, by
independent legal counsel in a written opinion that indemnification is proper
because the indemnitee has met the applicable standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who 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 or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145. The Company
maintains policies insuring its and its subsidiaries' officers and directors
against certain liabilities for actions taken in such capacities, including
liabilities under the Securities Act of 1933.
Article V of the By-laws of the Company provides for indemnification of the
directors and officers of the Company to the fullest extent permitted by law, as
now in effect or later amended. In addition, the By-laws provide for
indemnification against expenses incurred by a director or officer
II-1
<PAGE> 26
to be paid by the Company in advance of the final disposition of such action,
suit or proceeding; provided, however, that if required by the Delaware General
Corporation Law, an advancement of expenses will be made only upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall be ultimately determined that he is not entitled to be indemnified by
the Company. The By-laws further provide for a contractual cause of action on
the part of directors and officers of the Company with respect to
indemnification claims which have not been paid by the Company.
The Company also has provided liability insurance for each director and
officer for certain losses arising from claims or charges made against them
while acting in their capacities as directors or officers of the Company.
The Company has entered into indemnification agreements with its directors
and executive officers that require the Company to indemnify such persons
against all expenses (including attorneys' fees and amounts paid in settlement),
judgments, fines and penalties which are actually incurred in connection with
any threatened, pending or completed action, suit or other proceeding (including
an action by or in the right of the Company) to which such person is, was or is
threatened to be made a party, by reason of the fact that such person is or was
a director or officer of the Company, or is or was serving at the request of the
Company as a director, officer, employee or other agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise, to
the fullest extent permitted by applicable law and the Company's Restated
Certificate of Incorporation and By-laws. The indemnification agreements also
set forth certain procedures that will apply in the event of a claim for
indemnification thereunder.
Article Nine of the Company's Restated Certificate of Incorporation limits
to the fullest extent permitted by the Delaware General Corporation Law, as the
same exists or may have been amended, the personal liability of the Company's
directors to the Company or its stockholders for monetary damages for a breach
of their fiduciary duty as directors. Section 102(b)(7) of the Delaware General
Corporation Law currently provides that such provisions do not eliminate or
limit the liability of a director (i) for a breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law (relating
to the declaration of dividends and purchase or redemption of shares in
violation of the Delaware General Corporation Law), or (iv) for any transaction
from which the director derived an improper personal benefit.
Reference is made to the form of Underwriting Agreement filed as Exhibit
1.1 to the Registration Statement for the Company's and the Underwriters'
respective agreements to indemnify each other, and to provide contribution in
circumstances where indemnification is unavailable.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
4.1 Form of Indenture.
4.2 Form of Notes (included in Exhibit 4.1).
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP as to the validity of the Notes.
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Orrick, Herrington & Sutcliffe LLP (included in Exhibit 5.1).
24.1 Power of Attorney (contained on page II-4).
25.1 Statement of Eligibility and Qualification of Trustee on Form T-1.
</TABLE>
II-2
<PAGE> 27
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Securities Act"), each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) 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 such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act 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 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.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, 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.
(2) For the purpose of determining any liability under the Securities
Act, 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-3
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California, on the 5th day of
November, 1996.
THE PMI GROUP, INC.
BY: /s/ W. Roger Haughton
--------------------------------------
W. Roger Haughton
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints George G. Breed, Bradley
M. Shuster, William A. Seymore and Phyllis A. Wilson and each of them, as his or
her true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement or any subsequent registration
statements pursuant to Rule 462 (including any amendments thereto), and to file
the same, with all exhibits thereto, and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the foregoing, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them or their substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- -------------------------- ------------------
<S> <C> <C>
/s/ W. Roger Haughton President, Chief Executive November 5, 1996
- --------------------------------------------- Officer and Director
W. Roger Haughton (Principal Executive
Officer)
/s/ John M. Lorenzen, Jr. Executive Vice President, November 5, 1996
- --------------------------------------------- Chief Financial Officer
John M. Lorenzen, Jr. and Assistant Secretary
(Principal Financial
Officer)
/s/ William A. Seymore Vice President, Controller November 5, 1996
- --------------------------------------------- (Controller and Principal
William A. Seymore Accounting Officer)
</TABLE>
II-4
<PAGE> 29
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- -------------------------- ------------------
<S> <C> <C>
/s/ Edward M. Liddy Chairman and Director November 5, 1996
- ---------------------------------------------
Edward M. Liddy
/s/ Donald C. Clark Director November 5, 1996
- ---------------------------------------------
Donald C. Clark
/s/ Wayne E. Hedien Director November 5, 1996
- ---------------------------------------------
Wayne E. Hedien
/s/ Kenneth T. Rosen Director November 5, 1996
- ---------------------------------------------
Kenneth T. Rosen
/s/ Mary Lee Widener Director November 5, 1996
- ---------------------------------------------
Mary Lee Widener
/s/ Richard L. Thomas Director November 5, 1996
- ---------------------------------------------
Richard L. Thomas
</TABLE>
II-5
<PAGE> 30
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
4.1 Form of Indenture.
4.2 Form of Notes (included in Exhibit 4.1).
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP as to the validity of the Notes.
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Orrick, Herrington & Sutcliffe LLP (included in Exhibit 5.1).
24.1 Power of Attorney (contained on page II-4).
25.1 Statement of Eligibility and Qualification of Trustee on Form T-1.
</TABLE>
<PAGE> 1
EXHIBIT 1.1
THE PMI GROUP, INC.
___% NOTES DUE ____________, 2006
UNDERWRITING AGREEMENT
......................, 1996
Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
The PMI Group, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
$100,000,000 principal amount of its ___% Notes Due ____________, 2006 (the
"Securities").
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-....) (the
"Initial Registration Statement") in respect of the Securities has been
filed with the Securities and Exchange Commission (the "Commission");
the Initial Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, have been
declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement or document incorporated by reference therein
has heretofore been filed with the Commission; and no stop order
suspending the effectiveness of the Initial Registration Statement, any
post-effective amendment thereto or the Rule 462(b) Registration
Statement, if any, has been issued and no proceeding for that purpose
has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with
the Commission pursuant to Rule 424(a) of the rules and regulations of
the Commission under the Act is hereinafter called a "Preliminary
Prospectus"; the various parts of the Initial Registration Statement
and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto but excluding Form T-1 and including (i) the
information contained in the form of final prospectus filed with the
Commission
<PAGE> 2
pursuant to Rule 424(b) under the Act in accordance with Section 5(a)
hereof and deemed by virtue of Rule 430A under the Act to be part of
the Initial Registration Statement at the time it was declared
effective and (ii) the documents incorporated by reference in the
prospectus contained in the Initial Registration Statement at the time
such part of the Initial Registration Statement became effective or
such part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, each as amended at the time such part of
the registration statement became effective, are hereinafter
collectively called the "Registration Statement"; such final
prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus"; and any reference herein
to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be; any reference
to any amendment or supplement to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include any documents filed
after the date of such Preliminary Prospectus or Prospectus, as the
case may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any reference to any
amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Company filed pursuant to Section
13(a) or 15(d) of the Exchange Act after the effective date of the
Initial Registration Statement that is incorporated by reference in the
Registration Statement);
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by an Underwriter expressly for use therein;
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case
may be, conformed in all material respects to the requirements of the
Act or the Exchange Act, as applicable, and the rules and regulations
of the Commission thereunder, and none of such documents contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and any further documents so filed and
incorporated by reference in the Prospectus or any further amendment or
supplement thereto, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder,
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter expressly for use
therein;
2
<PAGE> 3
(d) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements
of the Act and the Trust Indenture Act and the rules and regulations of
the Commission thereunder and do not and will not, as of the applicable
effective date of the Registration Statement and any amendment thereto
and as of the applicable filing date of the Prospectus and any
amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter expressly for use therein;
(e) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business material to the Company and its
subsidiaries considered as a whole, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been (x) any material addition, or any
development involving a prospective material addition, to the Company's
consolidated reserve for losses and loss adjustment expense, (y) any
change in the authorized capital stock of the Company or any of its
Principal Subsidiaries (as defined below) or any increase in excess of
$15.0 million in the aggregate in the consolidated short-term or
long-term debt of the Company or (z) any material adverse change, or
any development involving a prospective material adverse change, in or
affecting the general affairs, management, consolidated financial
position, stockholders' equity or results of operations (in each case
considered on either a statutory or GAAP basis) of the Company and its
subsidiaries considered as a whole, in each case otherwise than as set
forth or contemplated in the Prospectus;
(f) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of Delaware, with
power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each other jurisdiction in which
it owns or leases properties or conducts any business so as to require
such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction; and each subsidiary of the Company set forth in Schedule
II hereto (each a "Principal Subsidiary" and collectively the
"Principal Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;
(g) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable; and all of the issued shares of capital stock
of each consolidated subsidiary of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable and
(except for directors' qualifying shares and except as otherwise set
forth in the Prospectus) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims;
(h) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will
3
<PAGE> 4
constitute valid and legally binding obligations of the Company
entitled to the benefits provided by the indenture to be dated as of
................, 1996 (the "Indenture") between the Company and The
Bank of New York, as Trustee (the "Trustee"), under which they are to
be issued, which will be substantially in the form filed as an exhibit
to the Registration Statement; the Indenture has been duly authorized
and duly qualified under the Trust Indenture Act and, when executed and
delivered by the Company and the Trustee, will constitute a valid and
legally binding instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and the Securities
and the Indenture will conform to the descriptions thereof in the
Prospectus;
(i) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture and
this Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound
or to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or By-laws of the
Company or any of its subsidiaries or any statute or any order, rule or
regulation of any court or insurance regulatory authority or other
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties, in each case other than
such breaches, conflicts, violations or defaults which, individually or
in the aggregate, (x) would not have a material adverse effect on the
Company and its subsidiaries considered as a whole and (y) would not
affect the validity, performance or consummation of the transactions
contemplated by this Agreement; and no authorization, approval, order,
consent, license, certificate, permit, registration or qualification of
or with any such court or insurance regulatory authority or other
governmental agency or body is required to be obtained by the Company
or, in the case of insurance regulatory authorities, the Underwriters
in connection with their purchase and distribution of the Securities
pursuant to this Agreement for the sale of the Securities, or the
consummation by the Company of the transactions contemplated by this
Agreement, except (v) those which have been obtained; (w) the
registration under the Act of the Securities; (x) such authorizations,
approvals, orders, consents, licenses, certificates, permits,
registrations or qualifications as may be required under state or
foreign securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters; and (y) such
authorizations, approvals, orders, consents, licenses, certificates,
permits, registrations or qualifications which (individually or in the
aggregate) the failure to make, obtain or comply with (a) would not
have a material adverse effect on the Company and its subsidiaries
considered as a whole and (b) would not affect the validity,
performance or consummation of the transactions contemplated by this
Agreement;
(j) Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation or By-laws or in default in the
performance or observance of any material obligation, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound;
4
<PAGE> 5
(k) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the consolidated financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries; and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(l) The Company is not and, after giving effect to the offering and
sale of the Securities, will not be an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(m) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes; and
(n) To the best of the Company's knowledge, Deloitte & Touche LLP,
who have certified certain financial statements of the Company and its
subsidiaries, are independent public accountants as required by the Act
and the rules and regulations of the Commission thereunder.
2. Subject to the terms and conditions herein set forth, the Company agrees
to issue and sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of .....% of the principal amount thereof, plus accrued interest[, IF
ANY,] from ...................., 1996 to the Time of Delivery hereunder, the
principal amount of Securities set forth opposite the name of such Underwriter
in Schedule I hereto.
3. Upon the authorization by you of the release of the Securities, the
several Underwriters propose to offer the Securities for sale upon the terms and
conditions set forth in the Prospectus.
4. (a) The Securities to be purchased by each Underwriter hereunder will be
represented by one or more definitive global Securities in book-entry form which
will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company will deliver the
Securities to Goldman, Sachs & Co., for the account of each Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor in
same-day funds, by causing DTC to credit the Securities to the account of
Goldman, Sachs & Co. at DTC. The Company will cause the certificate representing
the Securities to be made available to Goldman, Sachs & Co. for checking at
least twenty-four hours prior to the Time of Delivery (as defined below) at the
office of DTC or its designated custodian (the "Designated Office"). The time
and date of such delivery and payment shall be 7:00 a.m., San Francisco time, on
....................., 1996 or such other time and date as Goldman, Sachs & Co.
and the Company may agree upon in writing. Such time and date are herein called
the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross-receipt
for the Securities and any additional documents requested by the Underwriters
pursuant to Section 7(j) hereof, will be delivered at the offices of Orrick,
Herrington & Sutcliffe LLP, 400 Sansome Street, San Francisco, California 94111
(the
5
<PAGE> 6
"Closing Location"), and the Securities will be delivered at the Designated
Office, all at the Time of Delivery. A meeting will be held at the Closing
Location at ......... p.m., San Francisco time, on the New York Business Day
next preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. As used herein, "New York Business Day" shall
mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in New York City are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Registration Statement or Prospectus prior to the Time of
Delivery, unless you shall have had a reasonable opportunity to review and
comment on any such amendment or supplement prior to any filing thereof; to
advise you, promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes effective or
any supplement to the Prospectus or any amended Prospectus has been filed and to
furnish you with copies thereof; to file promptly all reports and any definitive
proxy or information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of the Prospectus and for so long as the delivery of a
prospectus is required in connection with the offering or sale of the
Securities; to advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus, of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or suspending any
such qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as you may request and to comply with such laws so as
to permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of the Securities,
provided that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) To use its best efforts to cause to be furnished to the Underwriters
prior to noon, New York Time, on the New York Business Day next succeeding the
date of this Agreement, and from time to time thereafter to furnish, the
Underwriters copies of the Prospectus in New York City in such quantities as you
may reasonably request, and, if the delivery of a prospectus is required at any
time prior to the expiration of nine months after the time of issue of the
Prospectus in connection with the offering or sale of the Securities and if at
such time any 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 during such same period to amend or supplement the
6
<PAGE> 7
Prospectus or to file under the Exchange Act any document incorporated by
reference in the Prospectus in order to comply with the Act, the Exchange Act or
the Trust Indenture Act, to notify you and upon your request to file such
document and to prepare and furnish without charge to each Underwriter and to
any dealer in securities as many copies as you may from time to time reasonably
request of an amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance; and in case any
Underwriter is required to deliver a prospectus in connection with sales of any
of the Securities at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter, to prepare
and deliver to such Underwriter as many copies as you may request of an amended
or supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c)), an earning
statement of the Company and its subsidiaries (which need not be audited)
complying with Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to and
including the Time of Delivery or such earlier time as you may notify the
Company, not to offer, sell, contract to sell or otherwise dispose of, except as
provided hereunder, any debt securities of the Company which mature more than
one year after the Time of Delivery and which are substantially similar to the
Securities without your prior written consent;
(f) During a period of five years from the effective date of the
Registration Statement, to furnish to the holders of the Securities as soon as
practicable after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholders' equity and cash flows of
the Company and its consolidated subsidiaries certified by independent public
accountants);
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which the Securities or any class of securities of the Company is
listed (such financial statements to be on a consolidated basis to the extent
the accounts of the Company and its subsidiaries are consolidated in reports
furnished to its stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the Securities
pursuant to this Agreement in the manner specified in the Prospectus under the
caption "Use of Proceeds"; and
(i) If the Company elects to rely upon Rule 462(b), to file a Rule 462(b)
Registration Statement with the Commission in compliance with Rule 462(b) by
10:00 P.M., Washington, D.C. time, on the date of this Agreement, and, at the
time of filing, to either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the payment
of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with each of the Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement,
7
<PAGE> 8
any Preliminary Prospectus and the Prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof to the Underwriters and
dealers; (ii) the cost of printing or producing any Agreement between
Underwriters, this Agreement, the Indenture, the Blue Sky and Legal Investment
Memoranda, closing documents (including any compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Securities; (iii) all reasonable expenses in connection with the qualification
of the Securities for offering and sale under state securities laws as provided
in Section 5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky and Legal Investment Memoranda; (iv) any fees charged by securities
rating services for rating the Securities; (v) the filing fees incident to any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Securities; (vi) the cost of preparing the Securities;
(vii) the fees and expenses of the Trustee and any agent of the Trustee and the
fees and disbursements of counsel for the Trustee in connection with the
Indenture and the Securities; and (viii) all other costs and expenses incident
to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company herein are, at and as of the Time of Delivery, true
and correct, the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by the
rules and regulations under the Act and in accordance with Section 5(a) hereof;
if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., Washington,
D.C. time, on the date of this Agreement; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have furnished
to you such opinion or opinions (a draft of each such opinion is attached as
Annex I(a) hereto), dated the Time of Delivery, with respect to the
incorporation of the Company, the validity of the Indenture and the Securities
being delivered at the Time of Delivery, the Registration Statement, the
Prospectus, and other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Orrick, Herrington & Sutcliffe LLP, as counsel for the Company, shall
have furnished to you their written opinion or opinions (a draft of each such
opinion is attached as Annex I(b) hereto), dated the Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of Delaware, with
corporate power and authority to own its properties and conduct its
business as described in the Prospectus;
(ii) This Agreement has been duly authorized, executed and
delivered by the Company;
8
<PAGE> 9
(iii) The issue and sale of the Securities and the compliance by
the Company with all of the provisions of the Securities, the Indenture
and this Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the Company or
any of its Principal Subsidiaries is a party or by which the Company or
any of its Principal Subsidiaries is bound or to which any of the
property or assets of the Company or any of its Principal Subsidiaries
is subject, nor will such actions result in any violation of any U.S.
statute or any order, rule or regulation known to such counsel of any
U.S. court or regulatory authority or governmental agency or body
having jurisdiction over the Company or any of its Principal
Subsidiaries or any of their properties (other than those relating to
misrepresentation or fraud or made or established by any insurance
official or regulatory authority as to which no opinion need be given),
in each case other than such breaches, conflicts, violations or
defaults which, individually or in the aggregate, (x) would not have a
material adverse effect on the Company and its subsidiaries considered
as a whole and (y) would not affect the validity, performance or
consummation of the transactions contemplated by this Agreement, nor
will such actions result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company;
(iv) The Securities have been duly authorized, executed,
authenticated, issued and delivered and constitute valid and legally
binding obligations of the Company entitled to the benefits provided by
the Indenture; and the Securities and the Indenture conform in all
material respects to the descriptions thereof in the Prospectus;
(v) The Indenture has been duly authorized, executed and delivered
by the Company and constitutes a valid and legally binding instrument,
enforceable against the Company in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general equity principles; and the Indenture has been
duly qualified under the Trust Indenture Act;
(vi) The information in the Prospectus under the caption
"Description of Notes", to the extent that it constitutes matters of
law or legal conclusions and to the extent that it summarizes the
documents referred to therein, has been reviewed by such counsel and is
correct in all material respects; and
(vii) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to the
Time of Delivery as of their respective effective or issue date
complied as to form in all material respects with the requirements of
the Act and the rules and regulations thereunder; although such counsel
does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or
the Prospectus, except for those referred to in the opinion in
subsection (vi) of this Section 7(c), nothing has come to the attention
of such counsel to cause it to believe that, as of its effective date,
the Registration Statement or any further amendment thereto made by the
Company prior to the Time of Delivery contained an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that, as of its date, the Prospectus or any further
amendment or supplement thereto made by the Company prior to the Time
of Delivery contained an untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made,
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<PAGE> 10
not misleading, or that, as of the Time of Delivery, the Prospectus or
any further amendment or supplement (when considered together with the
document to which such supplement relates) thereto made by the Company
prior to the Time of Delivery contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such counsel need
not make any comment with respect to the financial statements and
financial and accounting data and related schedules contained in the
Registration Statement or the Prospectus or the Statement of
Eligibility and Qualification of the Trustee); and such counsel does
not know of any contracts or other documents of a character required to
be filed as an exhibit to the Registration Statement or required to be
incorporated by reference therein which are not filed or incorporated
by reference as required.
(d) George G. Breed, Senior Vice President, General Counsel and Secretary
of the Company, shall have furnished to you his written opinion or opinions (a
draft of each such opinion is attached as Annex II(c) hereto), dated the Time of
Delivery, in form and substance satisfactory to you, to the effect that:
(i) The Company has an authorized equity capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued and are
fully paid and non-assessable;
(ii) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification or is subject to no
liability or disability material to the Company and its subsidiaries,
considered as a whole, by reason of the failure to be so qualified in
any such jurisdiction (such counsel being entitled to rely in respect
of the opinion in this clause upon opinions of local counsel and in
respect of matters of fact relating to such opinion upon certificates
of officers of the Company, provided that such counsel shall state that
he believes that both you and he are justified in relying upon such
opinions and certificates);
(iii) PMI Mortgage Insurance Co. has been duly incorporated and is
validly existing as an insurance corporation under the laws of the
State of Arizona, with corporate power and authority to own its
properties and conduct its business as described in the Prospectus, and
all of the issued shares of capital stock of PMI Mortgage Insurance Co.
have been duly and validly authorized and issued and are fully paid
and, except as provided in Article XIV, Section 11, of the Constitution
of the State of Arizona, non-assessable (such counsel being entitled to
rely in respect of the opinion in this clause upon an opinion of local
counsel, provided that such counsel shall state that he believes that
both you and he are justified in relying upon such opinion);
(iv) Each Principal Subsidiary is duly licensed or authorized as an
insurer or reinsurer in each other jurisdiction where it is required to
be so licensed, or is subject to no liability or disability material to
the Company and its subsidiaries considered as a whole by reason of the
failure to be so licensed or authorized in any such jurisdiction; the
Company and each Principal Subsidiary have made all required filings
under applicable insurance holding company statutes; the Company and
each Principal Subsidiary have all other necessary authorizations,
approvals, orders, consents, licenses, certificates, permits,
registrations or qualifications of and from all insurance regulatory
authorities to conduct their respective businesses as described in the
10
<PAGE> 11
Prospectus, or are subject to no material liability or disability by
reason of the failure to have such authorizations, approvals, orders,
consents, licenses, certificates, permits, registrations or
qualifications; and to the best of such counsel's knowledge, none of
the Company or any Principal Subsidiary has received any notification
from any insurance regulatory authority to the effect that any
additional authorization, approval, order, consent, license,
certificate, permit, registration or qualification from such insurance
regulatory authority is needed to be obtained by any of the Company or
any Principal Subsidiary in any case where it could be reasonably
expected that (x) the Company or any Principal Subsidiary would in fact
be required either to obtain any such additional authorization,
approval, order, consent, license, certificate, permit, registration or
qualification or cease or otherwise limit writing certain business and
(y) obtaining such authorization, approval, order, consent, license,
certificate, permit, registration or qualification or limiting such
business would have a material adverse effect on the business,
financial position or results of operations of the Company and its
subsidiaries, considered as a whole;
(v) To the best of such counsel's knowledge, each Principal
Subsidiary is in compliance with the requirements of the insurance laws
and regulations of its state of incorporation and the insurance laws
and regulations of other jurisdictions which are applicable to such
subsidiary, and has filed all notices, reports, documents or other
information required to be filed thereunder, or is subject to no
material liability or disability by reason of the failure to so comply
or file (such counsel being entitled to rely in respect of matters of
fact relating to the opinion in this clause upon certificates of
officers of the Company or its subsidiaries, provided that such counsel
shall state that he believes that both you and he are justified in
relying upon such certificates, and in respect of the opinion in this
clause upon opinions of local counsel provided that such counsel shall
state that he believes that both you and he are justified in relying
upon such opinions);
(vi) All statements made in the Prospectus with respect to existing
and proposed federal and state statutes, regulations and rules, and, to
the best of such counsel's knowledge, with respect to regulatory
policies and practices, fairly and accurately present the information
set forth therein in all material respects (such counsel being entitled
to rely in respect of the opinion in this clause upon opinions of
outside counsel, provided that such counsel shall state that he
believes that both you and he are justified in relying upon such
opinions);
(vii) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or
of which any property of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any of its
subsidiaries, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the consolidated
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, considered as a whole; and, to the
best of such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(viii) The issue and sale of the Securities and the compliance by
the Company with all of the provisions of the Securities, the Indenture
and this Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such
11
<PAGE> 12
counsel to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries
is subject, nor will such actions result in any violation of any U.S.
statute or any order, rule or regulation known to such counsel of any
U.S. court or regulatory authority or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any
of their properties (other than those relating to misrepresentation or
fraud), in each case other than such breaches, conflicts, violations or
defaults which, individually or in the aggregate, (x) would not have a
material adverse effect on the Company and its subsidiaries considered
as a whole and (y) would not affect the validity, performance or
consummation of the transactions contemplated by this Agreement, nor
will such actions result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company;
(ix) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the issue and sale of the Securities or the consummation
by the Company of the transactions contemplated by this Agreement or
the Indenture, except such as have been obtained under the Act and the
Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters, in each case other
than such approval, authorization, order, registration or qualification
which (individually or in the aggregate) the failure to make, obtain or
comply with (x) would not have a material adverse effect on the Company
and its subsidiaries considered as a whole and (y) would not affect the
validity, performance or consummation of the transactions contemplated
by this Agreement;
(x) Without limitation of the foregoing, the Company and its
subsidiaries, as applicable, have filed all notices, reports, documents
or other information required to be filed pursuant to, and have
obtained all authorizations, approvals, orders, consents, licenses,
certificates, permits, registrations or qualifications required to be
obtained under, and have otherwise complied with all requirements of,
all insurance laws and regulations applicable to the Company and its
subsidiaries in connection with the issuing and sale of the Securities,
in each case other than such filings, authorizations, approvals,
orders, consents, licenses, certificates, permits, registrations or
qualifications which (individually or in the aggregate) the failure to
make, obtain or comply with (x) would not have a material adverse
effect on the Company and its subsidiaries considered as a whole and
(y) would not affect the validity, performance or consummation of the
transactions contemplated by this Agreement;
(xi) Such counsel does not know of any amendment to the
Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be described in the
Registration Statement or the Prospectus which are not filed or
described as required; and
(xii) At the Time of Delivery, such counsel shall also have
furnished you a letter, dated the date thereof, advising you that as
general counsel to the Company, such counsel (or members of his staff)
reviewed the Registration Statement and Prospectus, and he and members
of his staff participated in various discussions with representatives
of the Underwriters and of the Company and its accountants at which
contents of the Registration Statement and Prospectus were discussed;
and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements
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<PAGE> 13
contained in the Registration Statement and Prospectus (except as
otherwise expressly set forth), on the basis of the foregoing, no facts
have come to the attention of such counsel in the course of such review
which has caused such counsel to believe that, as of its effective
date, the Registration Statement or any further amendment thereto made
by the Company prior to the Time of Delivery (other than the financial
statements and financial and accounting data and related schedules
therein, as to which no advice need be given) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company prior to
the Time of Delivery (other than the financial statements and financial
and accounting data and related schedules therein, as to which no
advice need be given) contained an untrue statement of a material fact
or omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or that, as of the Time of Delivery, the Prospectus or
any further amendment or supplement (when considered together with the
document to which such supplement relates) thereto made by the Company
prior to the Time of Delivery (other than the financial statements and
financial and accounting data and related schedules therein, as to
which no advice need be given) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(e) On the date of the Prospectus at a time prior to the execution of this
Agreement and at the Time of Delivery, Deloitte & Touche LLP shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set forth in
Annex II hereto;
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with its
business, otherwise than as set forth or contemplated in the Prospectus, and
(ii) since the respective dates as of which information is given in the
Prospectus there shall not have been (x) any addition, or any development
involving a prospective addition, to the Company's consolidated reserve for
losses and loss adjustment expense, (y) any change in the authorized capital
stock of the Company or any of its Principal Subsidiaries, or any increase in
the consolidated long-term debt of the Company, or (z) any change, or any
development involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations
(in each case considered on either a statutory or GAAP basis) of the Company and
its subsidiaries, in each case otherwise than as set forth or contemplated in
the Prospectus, the effect of which, in any such case described in Clause (i) or
(ii), is in your judgment (after consultation with the Company) 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;
(g) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's debt securities or the Company's financial
strength or PMI's claims paying ability by any "nationally recognized
statistical rating organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt securities or the
Company's financial strength or PMI'S claims paying ability, the effect of
which, in any such case described in clause (i) or (ii), is in your judgment
(after consultation with the Company) so material and adverse as to make it
impracticable or inadvisable to
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<PAGE> 14
proceed with the public offering or the delivery of the Securities on the terms
and in the manner contemplated in the Prospectus;
(h) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a suspension or material
limitation in trading in the Company's securities on the New York Stock
Exchange; (iii) a general moratorium on commercial banking activities declared
by either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this Clause (iv) in your judgment makes 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;
(i) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement; and
(j) The Company shall have furnished or caused to be furnished to you at
the Time of Delivery certificates of officers of the Company satisfactory to you
as to the accuracy of the representations and warranties of the Company herein
at and as of such Time of Delivery, as to the performance by the Company of all
of its obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsections (a) and (f) of this Section
and as to such other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement (when considered
together with the document to which such supplement relates) thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
expressly for use therein and provided, further, that the Company shall not be
liable to any Underwriter under the indemnity agreement in this subsection (a)
with respect to any Preliminary Prospectus to the extent that any such loss,
claim, damage or liability of such Underwriter results from the fact such
Underwriter sold Securities to a person as to whom it shall be established that
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the Prospectus in any case where such delivery is required by
the Act if the Company had previously furnished copies thereof in sufficient
quantities to such Underwriter and the loss, claim, damage or liability of such
Underwriter results from an untrue statement or omission of a material fact
contained in the Preliminary Prospectus which was (i) identified to such
Underwriter at or prior to the earlier of the filing with the Commission or the
furnishing to such Underwriter of the corrected Prospectus and (ii) corrected in
the Prospectus.
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(b) Each Underwriter will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement (when considered together with the document to which
such supplement relates) thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying party,
and who may act in respect of actions involving more than one indemnified
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. Notwithstanding anything to the contrary
in this Section 8, an indemnifying party shall only be liable for the legal fees
and expenses of one national counsel and appropriate local counsel for the
indemnified parties with respect to any proceeding or related proceedings.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company on the one
hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from
15
<PAGE> 16
the offering (before deducting expenses) received by the Company bear to the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this subsection
(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this subsection (d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company) and to each person, if any, who
controls the Company within the meaning of the Act.
9. (a) If either Underwriter shall default in its obligation to purchase
the Securities which it has agreed to purchase hereunder, you may in your
discretion arrange for you or another party or other parties to purchase such
Securities on the terms contained herein. If within thirty-six hours after such
default by either Underwriter you do not arrange for the purchase of such
Securities, then the Company shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to you
to purchase such Securities on such terms. In the event that, within the
respective prescribed periods, you notify the Company that you have so arranged
for the purchase of such Securities, or the Company notifies you that it has so
arranged for the purchase of such Securities, you or the Company shall have the
right to postpone the Time of Delivery for a period of not more than seven days,
in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Securities.
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<PAGE> 17
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter by you and the Company as provided in
subsection (a) above, the aggregate principal amount of such Securities which
remains unpurchased does not exceed one-eleventh of the aggregate principal
amount of all the Securities, then the Company shall have the right to require
the non-defaulting Underwriter to purchase the principal amount of Securities
which such Underwriter agreed to purchase hereunder and, in addition, to require
the non-defaulting Underwriter to purchase the Securities of the defaulting
Underwriter for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter by you and the Company as provided in
subsection (a) above, the aggregate principal amount of Securities which remains
unpurchased exceeds one-eleventh of the aggregate principal amount of all the
Securities, or if the Company shall not exercise the right described in
subsection (b) above to require the non-defaulting Underwriter to purchase
Securities of the defaulting Underwriter, then this Agreement shall thereupon
terminate, without liability on the part of the non-defaulting Underwriter or
the Company, except for the expenses to be borne by the Company and the
Underwriters as provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of either Underwriter or any controlling person of either Underwriter, or the
Company, or any officer or director or controlling person of the Company, and
shall survive delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to either Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, the
Securities are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Underwriters for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Securities, but the Company shall then be under no
further liability to either Underwriter except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, the parties hereto shall be entitled to act
and rely upon any statement, request, notice or agreement on behalf of the
Underwriters made or given by you jointly or by Goldman, Sachs & Co. on their
behalf.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission in care of Goldman, Sachs & Co., 85 Broad Street, New
York, New York 10004, Attention: Registration Department; and if to the Company
shall be delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Registration Statement, Attention:
General Counsel; provided, however, that any notice to an Underwriter pursuant
to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
17
<PAGE> 18
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Securities from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such respective counterparts shall together constitute one and the same
instrument.
18
<PAGE> 19
If the foregoing is in accordance with your understanding, please sign and
return to us five counterparts hereof, and upon the acceptance hereof by you,
this letter and such acceptance hereof shall constitute a binding agreement
between each of the Underwriters and the Company.
Very truly yours,
The PMI Group, Inc.
By: .................................
Name:
Title:
Accepted as of the date hereof:
....................................
(Goldman, Sachs & Co.)
Morgan Stanley & Co. Incorporated
By: .............................
Name:
Title:
19
<PAGE> 20
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
SECURITIES
TO BE
UNDERWRITER PURCHASED
----------- ----------
<S> <C>
Goldman, Sachs & Co........................................................ $
Morgan Stanley & Co. Incorporated..........................................
Total.................................................... $100,000,000
</TABLE>
<PAGE> 21
SCHEDULE II
<TABLE>
<CAPTION>
JURISDICTION
OF
PRINCIPAL SUBSIDIARIES INCORPORATION
- -------------------------- -----------------------
<S> <C>
American Pioneer Title Insurance Company.................................. Florida
PMI Mortgage Insurance Co. ............................................... Arizona
Residential Guaranty Co. ................................................. Arizona
</TABLE>
<PAGE> 22
ANNEX II
Pursuant to Section 7(e) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and
the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
prospective financial statements and/or pro forma financial
information) audited by them and included in the Prospectus or the
Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the related
published rules and regulations thereunder; and they have made a review
in accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim
financial statements, and any supplementary financial information and
schedules, selected financial data, pro forma financial information,
prospective financial statements and/or condensed financial statements
derived from audited financial statements of the Company for the
periods specified in such letter, and, as indicated in their report
thereon, copies of which have been furnished to the Underwriters;
(iii) The unaudited financial information with respect to the
consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
(iv) On the basis of limited procedures, not constituting an audit
in accordance with generally accepted auditing standards, consisting of
a reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus,
inquiries of officials of the Company and its subsidiaries responsible
for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus do not comply as to form
in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations thereunder;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and
II-1
<PAGE> 23
any such unaudited data and items were not determined on a
basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial
statements included in the Prospectus;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any
unaudited condensed financial statements referred to in clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in clause (B)
were not determined on a basis substantially consistent with
the basis for the audited consolidated financial statements
included in the Prospectus;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not comply
as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock or any increase in the consolidated
short-term or long-term debt or consolidated reserve for
losses and loss adjustment expenses, or any decreases in
consolidated fixed income securities available for sale,
consolidated equity securities, consolidated total investments
or stockholders' equity, or any decrease in PMI's unassigned
funds, contingency reserve or statutory capital, or other
items specified by the Underwriters, in each case as compared
with amounts shown in the latest balance sheet included in the
Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; or
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date
referred to in clause (E) there were any decreases in
consolidated premiums earned, consolidated net investment
income, consolidated realized capital gains, consolidated
total revenue or consolidated net income, or other items
specified by the Underwriters, or any increases in any items
specified by the Underwriters, in each case as compared with
the comparable period of the preceding year and with any other
period of corresponding length specified by the Underwriters,
except in each case for decreases or increases which the
Prospectus discloses have occurred or may occur or which are
described in such letter; and
(v) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of
minute books, inquiries and other procedures referred to in paragraphs
(ii) and (iv) above, they have carried out certain procedures as
specified in their letter, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Underwriters,
which are derived from the general accounting records of the Company
and its subsidiaries, which appear in the Prospectus, or in Part II of,
or in exhibits and schedules to, the Registration Statement specified
by the Underwriters, and have compared certain of such specified
amounts, percentages and financial information with the accounting
records of the Company and its subsidiaries and have found them to be
in agreement.
II-2
<PAGE> 1
EXHIBIT 4.1
- -------------------------------------------------------------------------------
THE PMI GROUP, INC.
TO
THE BANK OF NEW YORK
Trustee
----------------
Indenture
Dated as of November __, 1996
----------------
$100,000,000
___% Notes Due ______________, 2006
- -------------------------------------------------------------------------------
<PAGE> 2
.....................................
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ---------------- ---------
<S> <C> <C>
Section310(a)(1) ..................................................... 609
(a)(2) ..................................................... 609
(a)(3) ..................................................... Not Applicable
(a)(4) ..................................................... Not Applicable
(b) ..................................................... 608
610
Section 311(a) ..................................................... 613
(b) ..................................................... 613
Section 312(a) ..................................................... 701
702(a)
(b) ..................................................... 702(b)
(c) ..................................................... 702(c)
Section 313(a) ..................................................... 703(a)
(b) ..................................................... 703(a)
(c) ..................................................... 703(a)
(d) ..................................................... 703(b)
Section 314(a) ..................................................... 704
(a)(4) ..................................................... 101
1004
(b) ..................................................... Not Applicable
(c)(1) ..................................................... 102
(c)(2) ..................................................... 102
(c)(3) ..................................................... Not Applicable
(d) ..................................................... Not Applicable
(e) ..................................................... 102
Section 315(a) ..................................................... 601
(b) ..................................................... 602
(c) ..................................................... 601
(d) ..................................................... 601
(e) ..................................................... 514
</TABLE>
- -----------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C> <C>
Section 316(a) ..................................................... 101
(a)(1)(A) ..................................................... 502
512
(a)(1)(B) ..................................................... 513
(a)(2) ..................................................... Not Applicable
(b) ..................................................... 508
(c) ..................................................... 104(c)
Section 317(a)(1) ..................................................... 503
(a)(2) ..................................................... 504
(b) ..................................................... 1003
Section 318(a) ..................................................... 107
</TABLE>
- -----------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
-ii-
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Parties.................................................................................................1
Recitals of the Company.................................................................................1
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions............................................................. 1
Act................................................................ 2
Affiliate.......................................................... 2
Board of Directors................................................. 2
Board Resolution................................................... 2
Business Day....................................................... 2
Capital Stock...................................................... 2
Commission......................................................... 2
Company............................................................ 2
Company Request.................................................... 2
Company Order...................................................... 2
Control............................................................ 3
Corporate Trust Office............................................. 3
Corporation........................................................ 3
Covenant Defeasance................................................ 3
Defaulted Interest................................................. 3
Defeasance......................................................... 3
Depositary......................................................... 3
Designated Subsidiary.............................................. 3
Event of Default................................................... 3
Exchange Act....................................................... 3
Expiration Date.................................................... 3
Global Note........................................................ 3
Holder............................................................. 3
Indenture.......................................................... 3
Interest Payment Date.............................................. 4
Lien............................................................... 4
Maturity........................................................... 4
Note Register...................................................... 4
Note Registrar..................................................... 4
Officers' Certificate.............................................. 4
Opinion of Counsel................................................. 4
</TABLE>
- -----------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-i-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
Outstanding........................................................ 4
Paying Agent....................................................... 5
Person............................................................. 5
Predecessor Note................................................... 5
Regular Record Date................................................ 5
Responsible Officer................................................ 5
Special Record Date................................................ 5
Stated Maturity.................................................... 5
Subsidiary......................................................... 5
Trustee............................................................ 5
Trust Indenture Act................................................ 6
U.S. Government Obligation......................................... 6
Vice President..................................................... 6
Voting Stock....................................................... 6
Wholly-Owned Subsidiary............................................ 6
SECTION 102. Compliance Certificates and Opinions............................... 6
SECTION 103. Form of Documents Delivered to Trustee............................. 7
SECTION 104. Acts of Holders; Record Dates...................................... 7
SECTION 105. Notices, Etc., to Trustee and Company.............................. 9
SECTION 106. Notice to Holders; Waiver.......................................... 9
SECTION 107. Conflict with Trust Indenture Act.................................. 10
SECTION 108. Effect of Headings and Table of Contents........................... 10
SECTION 109. Successors and Assigns............................................. 10
SECTION 110. Separability Clause................................................ 10
SECTION 111. Benefits of Indenture.............................................. 10
SECTION 112. Governing Law...................................................... 11
SECTION 113. Legal Holidays..................................................... 11
ARTICLE TWO
Note Forms
SECTION 201. Forms Generally.................................................... 11
SECTION 202. Form of Face of Note............................................... 11
SECTION 203. Form of Reverse of Note............................................ 14
SECTION 204. Form of Trustee's Certificate of
Authentication..................................................... 15
SECTION 205. Form of Legend for Global Notes.................................... 16
</TABLE>
- -----------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-ii-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
ARTICLE THREE
The Notes
<S> <C> <C> <C>
SECTION 301. Title and Terms.................................................... 16
SECTION 302. Denominations...................................................... 17
SECTION 303. Execution, Authentication, Delivery
and Dating......................................................... 17
SECTION 304. Temporary Notes.................................................... 17
SECTION 305. Registration, Registration of Transfer and
Exchange; Global Notes............................................. 18
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes........................ 19
SECTION 307. Payment of Interest; Interest Rights Preserved..................... 20
SECTION 308. Persons Deemed Owners.............................................. 21
SECTION 309. Cancellation....................................................... 21
SECTION 310. Computation of Interest............................................ 21
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture............................ 22
SECTION 402. Application of Trust Money......................................... 23
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.................................................. 23
SECTION 502. Acceleration of Maturity; Rescission
and Annulment...................................................... 24
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee............................................. 25
SECTION 504. Trustee May File Proofs of Claim................................... 26
SECTION 505. Trustee May Enforce Claims Without
Possession of Notes................................................ 26
SECTION 506. Application of Money Collected..................................... 27
SECTION 507. Limitation on Suits................................................ 27
SECTION 508. Unconditional Right of Holders to Receive
Principal and Interest............................................. 28
SECTION 509. Restoration of Rights and Remedies................................. 28
SECTION 510. Rights and Remedies Cumulative..................................... 28
</TABLE>
- -----------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-iii-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
SECTION 511. Delay or Omission Not Waiver....................................... 28
SECTION 512. Control by Holders................................................. 28
SECTION 513. Waiver of Past Defaults............................................ 29
SECTION 514. Undertaking for Costs.............................................. 29
SECTION 515. Waiver of Stay or Extension Laws................................... 29
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities................................ 30
SECTION 602. Notice of Defaults................................................. 30
SECTION 603. Certain Rights of Trustee.......................................... 30
SECTION 604. Not Responsible for Recitals or
Issuance of Notes.................................................. 31
SECTION 605. May Hold Notes..................................................... 31
SECTION 606. Money Held in Trust................................................ 31
SECTION 607. Compensation and Reimbursement..................................... 32
SECTION 608. Disqualification; Conflicting Interests............................ 32
SECTION 609. Corporate Trustee Required; Eligibility............................ 32
SECTION 610. Resignation and Removal; Appointment
of Successor....................................................... 32
SECTION 611. Acceptance of Appointment by Successor............................. 34
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business.......................................... 34
SECTION 613. Preferential Collection of Claims
Against Company.................................................... 34
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and
Addresses of Holders............................................... 35
SECTION 702. Preservation of Information; Communications
to Holders......................................................... 35
SECTION 703. Reports by Trustee................................................. 35
SECTION 704. Reports by Company................................................. 36
</TABLE>
- -----------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-iv-
<PAGE> 8
<TABLE>
<CAPTION>
Page
----
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
<S> <C> <C> <C>
SECTION 801. Company May Consolidate, Etc., Only
on Certain Terms................................................... 36
SECTION 802. Successor Substituted.............................................. 37
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without
Consent of Holders................................................. 37
SECTION 902. Supplemental Indentures with
Consent of Holders................................................. 38
SECTION 903. Execution of Supplemental Indentures............................... 39
SECTION 904. Effect of Supplemental Indentures.................................. 39
SECTION 905. Conformity with Trust Indenture Act................................ 39
SECTION 906. Reference in Notes to Supplemental Indentures...................... 39
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal and Interest................................ 39
SECTION 1002. Maintenance of Office or Agency.................................. 40
SECTION 1003. Money for Note Payments
to Be Held in Trust.............................................. 40
SECTION 1004. Statement by Officers as to Default.............................. 41
SECTION 1005. Corporate Existence.............................................. 41
SECTION 1006. Maintenance of Properties........................................ 42
SECTION 1007. Payment of Taxes and Other Claims................................ 42
SECTION 1008. Limitations on Liens and Dispositions of
Capital Stock of a Designated Subsidiary......................... 43
SECTION 1009. Waiver of Certain Covenants...................................... 43
</TABLE>
- -----------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-v-
<PAGE> 9
<TABLE>
<CAPTION>
Page
----
ARTICLE ELEVEN
Defeasance and Covenant Defeasance
<S> <C> <C> <C>
SECTION 1101. Company's Option to Effect Defeasance or
Covenant Defeasance.............................................. 44
SECTION 1102. Defeasance and Discharge......................................... 44
SECTION 1103. Covenant Defeasance.............................................. 44
SECTION 1104. Conditions to Defeasance or Covenant
Defeasance....................................................... 45
SECTION 1105. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Miscellaneous Provisions......................................... 46
SECTION 1106. Reinstatement.................................................... 47
</TABLE>
- -----------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-vi-
<PAGE> 10
<TABLE>
<CAPTION>
Page
----
<S> <C>
TESTIMONIUM............................................................................................ 49
SIGNATURES ............................................................................................ 49
</TABLE>
- -----------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-vii-
<PAGE> 11
INDENTURE, dated as of November __, 1996, between The PMI
Group, Inc., a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
601 Montgomery Street, San Francisco, California 94111, and The Bank of New
York, a banking corporation duly organized and existing under the laws of the
State of New York, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
its ____% Notes Due _____________, 2006 (herein called the "Notes") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Notes, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Notes, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
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, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted
<PAGE> 12
hereunder shall mean such accounting principles as are generally
accepted at the date of such computation; 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 104.
"Affiliate" of any specified Person means any other Person
directly or indirectly Controlling or Controlled by or under direct or indirect
common Control with such specified Person; and the term "Affiliated" shall have
the meaning correlative to the foregoing.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in San Francisco,
California or The City of New York are authorized or obligated by law or
executive order to close.
"Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock or other equity participations, including partnership interests, whether
general or limited, of such Person.
"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 instrument 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 Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the Board, its
Vice Chairman of the Board, its President or a Vice President, and by its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
-2-
<PAGE> 13
"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" shall have meanings
correlative to the foregoing.
"Corporate Trust Office" means the principal corporate trust
office of the Trustee in The City of New York at which at any particular time
its corporate trust business shall be administered, which office, on the date
hereof, is located at 101 Barclay Street, Floor 21 West, New York, New York
10286.
"Corporation" means a corporation, association, company,
joint-stock company or business trust.
"Covenant Defeasance" has the meaning specified in Section
1103.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1102.
"Depositary" means The Depository Trust Company or, if The
Depository Trust Company shall cease to be a clearing agency registered under
the Exchange Act, any other clearing agency registered under the Exchange Act
that is designated as the successor Depositary in a Company Order delivered to
the Trustee.
"Designated Subsidiary" means PMI Mortgage Insurance Co., an
Arizona corporation, so long as it remains a Subsidiary, or any Subsidiary which
is a successor thereto.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" refers to the Securities Exchange Act of 1934,
as it may be amended and any successor act thereto.
"Expiration Date" has the meaning specified in Section 104(c).
"Global Note" means a Note that evidences all or part of the
Notes and bears the legend set forth in Section 205.
"Holder" means a Person in whose name a Note is registered in
the Note Register.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
-3-
<PAGE> 14
"Interest Payment Date" means the Stated Maturity of an
instalment of interest on the Notes.
"Lien" means a mortgage, pledge, security interest or other
encumbrance of any nature.
"Maturity", when used with respect to any Note, means the date
on which the principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration or
otherwise.
"Note Register" and "Note Registrar" have the respective
meanings specified in Section 305.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, a Vice Chairman of the Board, the President or a Vice
President, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Company, and delivered to the Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 1004 shall
be the principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who
may be inside counsel for the Company, and who shall be acceptable to the
Trustee.
"Outstanding", when used with respect to Notes, means, as of
the date of determination, all Notes theretofore authenticated and delivered
under this Indenture, except:
(i) Notes theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Notes for whose payment money 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 Notes; and
(iii) Notes in exchange for or in lieu of which other
Notes have been authenticated and delivered pursuant to this Indenture,
other than any such Notes in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such Notes are
held by a bona fide purchaser in whose hands such Notes are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor upon the Notes 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 relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Notes which the Trustee knows to be so owned shall be so
disregarded.
-4-
<PAGE> 15
Notes 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 Notes and that the pledgee is not
the Company or any other obligor upon the Notes 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 or interest on any Notes on behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Note" of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Note.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the __________ or _____________ (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Note or any
instalment of interest thereon, means the date specified in such Note as the
fixed date on which the principal of such Note or such instalment of interest is
due and payable.
"Subsidiary" means a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
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"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"U.S. Government Obligation" has the meaning specified in
Section 1104.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" means Capital Stock which ordinarily has voting
power for the election of directors (or, in the case of a Person that is not a
corporation, persons performing similar functions), whether at all times or only
so long as no senior class of Capital Stock has such voting power by reason of
any contingency.
"Wholly-Owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly-Owned Subsidiaries of such Person or by
such Person and one or more Wholly-Owned Subsidiaries of such Person.
SECTION 102. 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 such certificates and opinions as may be required under
the Trust Indenture Act. Each such certificate or opinion shall be given in the
form of an Officers' Certificate, if to be given by an officer of the Company,
or an Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
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 covenant or condition 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 covenant
or condition has been complied with; and
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(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to 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 an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this 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 (subject to Section 601) 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
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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 Company may set any day as a record date for the
purpose of determining the Holders of Outstanding Notes, entitled to make or
take any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be given, made or taken
by Holders of Notes, 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 any record date is set pursuant to this paragraph, the
Holders of Outstanding Notes on such record date, and no other Holders, shall be
entitled to take the relevant action, whether or not such Holders remain Holders
after such record date; provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of Outstanding Notes on such record date.
Nothing in this paragraph shall be construed to prevent the Company from setting
a new record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be 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 Notes
on the date such action is taken. Promptly after any record date is set pursuant
to this paragraph, the Company, at its own expense, shall cause notice of such
record date, the proposed action by Holders and the applicable Expiration Date
to be given to the Trustee in writing and to each Holder of Notes in the manner
set forth in Section 106.
The Trustee may set any day as a record date for the purpose
of determining the Holders of Outstanding Notes entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 502, (iii) any request to institute proceedings referred
to in Section 507(2) or (iv) any direction referred to in Section 512. If any
record date is set pursuant to this paragraph, the Holders of Outstanding Notes
on such record date, and no other Holders, shall be entitled to join in such
notice, declaration, request or direction, whether or not such Holders remain
Holders after such record date; provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of Outstanding Notes on such 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 Notes
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, the proposed action by Holders and the applicable Expiration
Date to be given to the Company in writing and to each Holder of Notes in the
manner set forth in Section 106.
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With respect to any record date set pursuant to this Section,
the party hereto which sets such record date may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day; provided that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the other party hereto in
writing, and to each Holder of Notes in the manner set forth in Section 106, on
or prior to the existing Expiration Date. If any Expiration Date is not
designated with respect to any record date set pursuant to this Section, the
party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
(d) The ownership of Notes shall be proved by the Note
Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every future
Holder of the same Note and the Holder of every Note 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 Note.
SECTION 105. 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 if made, given, furnished or
filed in writing to or with 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) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the Note
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), 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
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other Holders. 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 the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that 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.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Notes 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 111. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, and the Holders of Notes, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
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SECTION 112. Governing Law.
This Indenture and the Notes shall be governed by and
construed in accordance with the laws of the State of New York without regard
to conflict of laws principles thereof.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date or the Stated
Maturity of any Note shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Notes) payment of interest or
principal need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, or at the Stated Maturity, provided that no interest shall accrue for the
period from and after such Interest Payment Date or Stated Maturity, as the case
may be.
ARTICLE TWO
Note Forms
SECTION 201. Forms Generally.
The Notes and the Trustee's certificates of authentication
shall be in substantially the forms set forth in this Article, 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 the
Depositary or as may, consistently herewith, be determined by the officers
executing such Notes, as evidenced by their execution of the Notes.
The definitive Notes shall be printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by the rules of any
securities exchange on which the Notes may be listed, all as determined by the
officers executing such Notes, as evidenced by their execution of such Notes.
SECTION 202. Form of Face of Note.
THE PMI GROUP, INC.
___% Note Due _________, 2006
No. __________ $________
CUSIP No.________
The PMI Group, a corporation duly organized and existing under
the laws of Delaware (herein called the "Company", which term includes any
successor Person under the
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<PAGE> 22
Indenture hereinafter referred to), for value received, hereby promises to pay
to __________________, or registered assigns, the principal sum of
_____________________ Dollars on ________, 2006, and to pay interest thereon
from October __, 1996 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. 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 Note (or one or more Predecessor Notes) 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
Note (or one or more Predecessor Notes) 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 Notes 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 Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture. Payment of the
principal of and interest on this Note will be made at the office or agency of
the Company maintained for that purpose in the Borough of Manhattan, The City of
New York, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts [in the
case of a Note that is not a Global Note 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 Note
Register].
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
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Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note 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.
THE PMI GROUP, INC.
By______________________________________
Attest:
_____________________________
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SECTION 203. Form of Reverse of Note.
This Note is one of a duly authorized issue of Notes of the
Company designated as its __% Note Due ______________, 2006 (herein called the
"Notes"), limited in aggregate principal amount to $100,000,000, issued and to
be issued under an Indenture, dated as of October __, 1996 (herein called the
"Indenture"), between the Company and The Bank of New York, 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 Notes and of the terms upon which the Notes are, and are to be,
authenticated and delivered.
The Notes are not subject to redemption prior to maturity and
do not have the benefit of any sinking fund obligations.
The Indenture contains provisions for defeasance at any time
of the entire indebtedness of this Note or certain restrictive covenants and
Events of Default with respect to this Note, in each case upon compliance with
certain conditions set forth in the Indenture.
If an Event of Default shall occur and be continuing, the
principal of all the Notes may be declared or become due and payable in the
manner and with the effect provided in the Indenture.
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 Notes 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 Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding, on
behalf of the Holders of all the Notes, 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 Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and interest on
this Note 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 Note is registrable in the
Note Register, upon surrender of this Note for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Note Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one
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or more new Notes, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Notes 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, Notes are
exchangeable for a like aggregate principal amount of Notes 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 Note 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 Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
This Note shall be governed by and construed in accordance
with the laws of the State of New York without regard to conflict of laws
principles thereof.
All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
SECTION 204. Form of Trustee's Certificate of Authentication.
This is one of the Notes referred to in the within-mentioned
Indenture.
Dated: ___________________
THE BANK OF NEW YORK,
as Trustee
By _______________________
Authorized Signatory
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SECTION 205. Form of Legend for Global Notes.
Every Global Note authenticated and delivered hereunder shall
bear a legend in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF.
THIS NOTE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A NOTE REGISTERED, AND NO
TRANSFER OF THIS NOTE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
ARTICLE THREE
The Notes
SECTION 301. Title and Terms.
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to $100,000,000,
except for Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Notes pursuant to Section 304, 305, 306
or 906.
The Notes shall be known and designated as the "__% Notes Due
_______________, 2006" of the Company. Their Stated Maturity shall be
_______________, 2006, and they shall bear interest at the rate of ____% per
annum, from October __, 1996 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, as the case may be, payable
semi-annually on _____________ and ________, commencing ___________ ___, 1997,
until the principal thereof is paid or made available for payment.
The principal of and interest on the Notes shall be payable at
the office or agency of the Company in the Borough of Manhattan, The City of New
York, maintained for such purpose and at any other office or agency maintained
by the Company for such purpose; provided, however, that, at the option of the
Company, payment of interest in respect of any Note that is not a Global Note
may be made by check mailed to the address of the Person entitled thereto as
such address shall appear in the Note Register.
The Notes shall not be redeemable prior to maturity and shall
not have the benefit of any sinking fund obligations.
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SECTION 302. Denominations.
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Notes may be manual or facsimile.
Notes 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 Notes or did
not hold such offices at the date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Notes; and the Trustee in accordance with
such Company Order shall authenticate and make available for delivery such
Notes as in this Indenture provided and not otherwise.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder. The Trustee shall have the right to
decline to authenticate and make available for delivery any Notes under this
Section if the Trustee, being advised by counsel, determines that such action
may not lawfully be taken or if the Trustee in good faith shall determine that
such action would expose the Trustee to personal liability to existing Holders.
SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Notes may determine, as evidenced by
their execution of such Notes.
If temporary Notes are issued, the Company will cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes upon surrender of the temporary Notes at any office or agency
of the Company designated pursuant to Section 1002, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes the
Company shall execute and the Trustee shall authenticate and make available for
delivery in exchange therefor a
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like principal amount of definitive Notes of authorized denominations. Until so
exchanged the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as definitive Notes.
SECTION 305. Registration, Registration of Transfer and Exchange; Global
Notes.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Note Register") in which, subject to
such reasonable regulations as it may prescribe, the Company shall provide for
the registration of Notes and of transfers of Notes. The Trustee is hereby
appointed "Note Registrar" for the purpose of registering Notes and transfers of
Notes as herein provided.
Upon surrender for registration of transfer of any Note at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
make available for delivery, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denominations and of a like aggregate principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, the Notes which the
Holder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Note Registrar duly executed, by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Notes, 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 of transfer or exchange of Notes, other than
exchanges pursuant to Section 304 or 906 not involving any transfer.
The Notes may be issued in whole or in part in the form of one
or more Global Notes. The provisions of Clauses (1), (2), (3) and (4) below
shall apply only to Global Notes.
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(1) Each Global Note authenticated under this Indenture shall
be registered in the name of the Depositary or a nominee thereof and
delivered to the Depositary or a nominee thereof or custodian therefor,
and each such Global Note shall constitute a single Note for all
purposes of this Indenture.
(2) Notwithstanding any other provisions in this Indenture, no
Global Note may be exchanged in whole or in part for Notes registered,
and no transfer of a Global Note in whole or in part may be registered,
in the name of any Person other than the Depositary or a nominee
thereof unless (A) the Depositary (i) has notified the Company that it
is unwilling or unable to continue as Depositary for such Global Note
or (ii) has ceased to be a clearing agency registered under the
Exchange Act, (B) the Company executes and delivers to the Trustee a
Company Order that such Global Note shall be so exchangeable or (C)
there shall have occurred and be continuing an Event of Default.
(3) Subject to Clause (2) above, any exchange of a Global Note
for other Notes may be made in whole or in part, and all Notes issued
in exchange for a Global Note or any portion thereof shall be
registered in such names as the Depositary shall direct.
(4) Every Note authenticated and made available for delivery
upon registration of transfer of, or in exchange for or in lieu of, a
Global Note or any portion thereof, whether pursuant to this Section,
Section 304, 306 or 906 or otherwise, shall be authenticated and
made available for delivery in the form of, and shall be, a Global
Note, unless such Note is registered in the name of a Person other
than the Depositary or a nominee thereof.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes.
If any mutilated Note is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and make available for
delivery in exchange therefor a new Note of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Note 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 Note has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
make available for delivery, in lieu of any such destroyed, lost or stolen
Note, a new Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that
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may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note 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 Notes 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 Notes.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Note 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 Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest 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 any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) 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
Note and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this Clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall 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 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 at his address as it appears in the Note
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
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paid to the Persons in whose names the Notes (or their respective
Predecessor Notes) 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 any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Note is registered as the owner of such
Note for the purpose of receiving payment of principal of and (subject to
Section 307) interest on such Note and for all other purposes whatsoever,
whether or not such Note 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.
SECTION 309. Cancellation.
All Notes surrendered for payment, registration of transfer or
exchange shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly cancelled by it. The Company may
at any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Notes held by the Trustee shall be disposed of as
directed by a Company Order, except that the Trustee shall not be required to
destroy such Notes.
SECTION 310. Computation of Interest.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
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ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as
to any surviving rights of registration of transfer or exchange of Notes herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Notes theretofore authenticated and delivered
(other than (i) Notes which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 306 and (ii) Notes 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 1003) have
been delivered to the Trustee for cancellation; or
(B) all such Notes not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year,
and the Company, in the case of (i) or (ii) above, has
deposited or caused to be deposited with the Trustee in trust
an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation, for principal and interest to the
date of such deposit (in the case of Notes which have become
due and payable) or to the Stated Maturity, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) 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 have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
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SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be held
in trust and applied by it, in accordance with the provisions of the Notes 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 and interest for
whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (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) default in the payment of any interest upon any Note when
it becomes due and payable, and continuance of such default for a
period of 30 days; or
(2) default in the payment of the principal of any Note at its
Maturity; or
(3) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such default
or breach for a period of 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 principal
amount of the Outstanding Notes a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(4) the occurrence of an event of default under any bond,
debenture, note or other evidence of indebtedness for money borrowed by
the Company or any Designated Subsidiary, if (i) such default either
(A) results from the failure to pay the principal of any such
indebtedness at its stated maturity or (B) relates to an obligation
other than the obligation to pay the principal of such indebtedness at
its stated maturity and results in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise
have become due and payable, (ii) the principal amount of such
indebtedness, together with the principal amount of any other such
indebtedness in default for failure to pay principal at its stated
maturity or the maturity of which has been so accelerated, aggregates
$15,000,000 or more at any one time outstanding and (iii) such
indebtedness is not discharged, or such acceleration is not rescinded
or annulled, within a period of 10 Business Days after
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there shall have 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 principal amount of the Outstanding Notes a written
notice specifying such default and requiring the Company to cause such
indebtedness to be discharged or cause such acceleration to be
rescinded or annulled and stating that such notice is a "Notice of
Default" hereunder; or
(5) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive
days; or
(6) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by
it to the entry of a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable
Federal or State law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally
as they become due, or the taking of corporate action by the Company in
furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default
specified in Section 501(5) or (6)) occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Notes may declare the principal of all the Notes to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), and upon any such declaration such principal and any
accrued interest shall become immediately due and payable. If an Event of
Default specified in Section 501(5) or (6) occurs, the principal of any accrued
interest on the Notes then Outstanding shall ipso facto become immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder.
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At any time after such a declaration of acceleration 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 principal amount of the Outstanding Notes, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Notes,
(B) the principal of any Notes which have become due
otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Notes,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by
the Notes, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Notes which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. 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 Note
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 any
Note at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Notes, the whole amount then due and payable on such Notes for
principal and interest, and, to the extent that payment of such interest shall
be legally enforceable, interest on any overdue principal and on any overdue
interest, at the rate borne by the Notes, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of
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collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders 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 covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or
any other obligor upon the Notes), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. 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 607.
No provision of this Indenture shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Notes or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
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SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
or interest, upon presentation of the Notes and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest on the Notes in respect of which or for the
benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Notes for principal and interest, respectively.
SECTION 507. Limitation on Suits.
No Holder of any Note 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) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Notes shall have made 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
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Notes;
it being understood and intended that 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 Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
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SECTION 508. Unconditional Right of Holders to Receive Principal and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and (subject to Section 307) interest on
such Note on the respective Stated Maturities expressed in such Note and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
SECTION 509. 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 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to 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 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Note to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this Article
or by law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders, as
the case may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the
Outstanding Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
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(1) such direction shall not be in conflict with any rule of
law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of
the Outstanding Notes may on behalf of the Holders of all the Notes waive any
past default hereunder and its consequences, except a default
(1) in the payment of the principal of or interest on any
Note, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Note 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; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 514. 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,
suffered or omitted by it as Trustee, a court may require any party litigant in
such suit to file an undertaking to pay the costs of such suit, including
reasonable attorneys' fees and expenses, and may assess costs against any such
party litigant, in the manner and to the extent provided in the Trust Indenture
Act; provided, that neither this Section nor the Trust Indenture Act shall be
deemed to authorize any court to require such an undertaking or to make such an
assessment in any suit instituted by the Trustee, the Company, a Holder pursuant
to Section 508 hereof, or Holders of more than 10% in principal amount of the
then Outstanding Notes.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this 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.
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ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustee shall be as
set forth herein and as provided by the Trust Indenture Act. Notwithstanding the
foregoing, no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(b) Except during the continuance of an Event of Default,
the Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(c) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(d) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own wilful misconduct, except that:
(1) this Subsection shall not be construed to limit the
effect of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer,
unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of a
majority in principal amount of the Outstanding Notes
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.
(e) 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.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default
hereunder as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
501(3), no such notice to Holders shall be given until at least 30 days after
the occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would become,
an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
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(d) 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 by it hereunder in good faith and in
reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, 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, at the sole cost of the
Company, personally or by agent or attorney, and shall incur no
liability of any kind by reason of such inquiry or investigations;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture.
SECTION 604. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes. The Trustee shall not be accountable for the use or
application by the Company of Notes or the proceeds thereof.
SECTION 605. May Hold Notes.
The Trustee, any Paying Agent, any Note Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Notes and, subject to Sections 608 and 613, may otherwise
deal with the Company with the same rights it would have if it were not Trustee,
Paying Agent, Note Registrar or such other agent.
SECTION 606. 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 with the Company.
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SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time compensation for
all services rendered by it hereunder as such parties may agree in
writing (which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense including taxes (other than
taxes based upon, measured by or determined by the income of the
Trustee) incurred without negligence or bad faith on its part, arising
out of or in connection with the acceptance or administration of this
trust, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
The Trustee shall have a lien prior to the Notes as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 607, except with respect to funds
held in trust for the benefit of the Holders of particular Notes.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(5) or Section
501(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 Federal or state bankruptcy,
insolvency or other similar law.
The provisions of this Section shall survive the termination
of this Indenture.
SECTION 608. Disqualification; Conflicting Interests.
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 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
a Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person 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.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 611.
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(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the Outstanding Notes, delivered to
the Trustee and to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after
delivery of such Act of the Holders, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the date of such Board Resolution or any order
or decree of such court removing the Trustee, as the case may be, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Note 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.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
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SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, 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. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 612. 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 of 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 Notes 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 Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Notes), the Trustee shall be subject to
the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
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ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the
Trustee
(a) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such Regular
Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Note Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 701 and the names
and addresses of Holders received by the Trustee in its capacity as Note
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Notes, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Notes, 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 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
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(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Notes are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Notes are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission,
and transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not, in a single transaction or a series of related
transactions (a) consolidate with or merge with or into any other Person, (b)
sell, assign, transfer or lease, or otherwise dispose of, all or substantially
all of its properties and assets to any Person or group of affiliated Persons,
or (c) permit any of its Subsidiaries to enter into any such transaction or
transactions if such transaction or transactions entered into by such Subsidiary
or Subsidiaries, in the aggregate, would result in a sale, assignment, transfer,
lease or disposal of all or substantially all of the properties and assets of
the Company and its Subsidiaries on a consolidated basis to any other Person or
group of Affiliated Persons, unless:
(1) in a transaction in which the Company
consolidates with or merges with or into another Person and is
not the surviving entity of such consolidation or merger or in
which the Company directly or indirectly sells, assigns,
transfers, leases or otherwise disposes of all or
substantially all of its properties and assets as an entirety,
(a) the Person formed by such consolidation or with or into
which the Company is merged or the Person that acquires by
sale, assignment, transfer, lease or other disposition all or
substantially all of the properties and assets of the Company
as an entirety (for purposes of this Article Eight, a
"Successor Company") shall be a corporation, partnership or
trust, shall be organized and validly existing under the laws
of the United States of America, any State thereof or the
District of Columbia and (b) the Successor Company shall
expressly assume by an indenture supplemental hereto executed
and delivered to the Trustee, in form satisfactory to the
Trustee, the due and punctual payment of the principal of
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and interest on all the Notes and the performance of every
covenant of this Indenture on the part of the Company to be
performed or observed;
(2) immediately after giving effect to such
transaction, no Event of Default, and no event which, after
notice or lapse of time, or both, would become an Event of
Default, shall have occurred and be continuing;
(3) if, as a result of any such transaction, Capital
Stock of any Designated Subsidiary (or any Subsidiary of the
Company having direct or indirect Control of any Designated
Subsidiary) would become subject to a Lien prohibited by the
covenant in Section 1008(a), the Company or the Successor
Company shall have secured the Notes as required by such
covenant; and
(4) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment, transfer or
lease and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture
comply with this Article and that all conditions precedent
herein provided for relating to such transaction have been
complied with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any sale, assignment, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company is merged or the transferee or lessee to which such sale,
assignment, transfer or lease is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture with
the same effect as if such successor Person had been named as the Company
herein, and thereafter, except in the case of a lease, the predecessor Person
shall be relieved of all obligations and covenants under this Indenture and the
Notes.
ARTICLE NINE
Supplemental Indentures
SECTION 901. 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 one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
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(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Notes; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company; or
(3) to add additional Events of Default; or
(4) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture, provided that such
action pursuant to this Clause (4) shall not adversely affect the
interests of the Holders in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Notes, by Act of said Holders delivered to
the Company and the Trustee, the Company, when authorized by a Board Resolution,
and the Trustee may enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders under this Indenture; provided, however, that
no such supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount
thereof, or the rate of interest thereon, or change the place of
payment where, or the coin or currency in which, the principal of any
Note or 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
(2) reduce the percentage in principal amount of the
Outstanding Notes, 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, or
(3) modify any of the provisions of this Section or Section
513, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Note affected thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
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SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and (subject to Section 601) 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 904. 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 Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Notes to Supplemental Indentures.
Notes 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 Notes so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal and Interest.
The Company will duly and punctually pay the principal of and
interest on the Notes in accordance with the terms of the Notes and this
Indenture.
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SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The
City of New York, an office or agency where Notes may be presented or
surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside the Borough of Manhattan, The City of
New York) where the Notes 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 the Borough of Manhattan,
The City of New York, for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
SECTION 1003. Money for Note Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of or interest on any of
the Notes, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal 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 of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents, it
will, at or prior to 10:00 a.m. in the place of business of the Paying Agent on
each due date of the principal of or interest on any Notes, deposit with a
Paying Agent a sum sufficient to pay such amount, such sum to be held as
provided by the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.
The Company will cause each Paying Agent 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 (i) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (ii) during the continuance
of any default by the Company (or any other obligor upon the Notes) in the
making of any payment in respect of the Notes, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
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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 trusts 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 the principal of or
interest on any Note and remaining unclaimed for two years after such principal
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 Note 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 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, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.
SECTION 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate, stating whether or not to the best knowledge of the
signers thereof the Company is in default in the performance and observance of
any of the terms, provisions and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
SECTION 1005. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence, rights (charter and statutory) and franchises; provided,
however, that the Company shall not be required to preserve any such right or
franchise if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
that the loss thereof is not disadvantageous in any material respect to the
Holders.
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SECTION 1006. Maintenance of Properties.
The Company will cause all properties used or useful in the
conduct of its business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
SECTION 1007. 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, (1) 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 (2)
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.
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SECTION 1008. Limitations on Liens and Dispositions of Capital Stock of a
Designated Subsidiary.
So long as any Notes shall remain Outstanding:
(a) the Company shall not, and shall not permit any
Subsidiary to, directly or indirectly, create, issue, assume,
incur or guarantee any indebtedness for money borrowed which
is secured by a Lien on any of the present or future Capital
Stock of a Designated Subsidiary (or any Subsidiary of the
Company having direct or indirect Control of any Designated
Subsidiary), which Capital Stock is directly or indirectly
owned by the Company, unless the Notes and, if the Company so
elects, any other indebtedness of the Company ranking at least
pari passu with the Notes, shall be secured equally and
ratably with (or prior to) such other secured indebtedness for
money borrowed so long as it is outstanding; and
(b) The Company shall not, and shall not permit any
Subsidiary to, sell, transfer or otherwise dispose of any
shares of Capital Stock of any Designated Subsidiary (or of
any corporation having direct or indirect Control of any
Designated Subsidiary) except (subject to Article Eight) for
(i) a sale, transfer or other disposition of any Capital Stock
of any Designated Subsidiary to a Wholly-Owned Subsidiary of
the Company; (ii) a sale, transfer or other disposition of the
entire Capital Stock of any Designated Subsidiary for at least
fair value (as determined by the Board of Directors acting in
good faith); or (iii) a sale, transfer or other disposition of
the Capital Stock of any Designated Subsidiary for at least
fair value (as determined by the Board of Directors acting in
good faith), if, after giving effect thereto, the Company and
its Subsidiaries would own more than 80% of the issued and
outstanding Voting Stock of such Designated Subsidiary.
SECTION 1009. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any covenant or condition set forth in Sections 1006 to 1008, inclusive, if
before the time for such compliance the Holders of at least a majority in
principal amount of the Outstanding Notes shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect.
-43-
<PAGE> 54
ARTICLE ELEVEN
Defeasance and Covenant Defeasance
SECTION 1101. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may elect, at its option at any time, to have
Section 1102 or Section 1103 applied to the Outstanding Notes upon compliance
with the conditions set forth below in this Article.
SECTION 1102. Defeasance and Discharge.
Upon the Company's exercise of its option to have this Section
applied to the Outstanding Notes, the Company shall be deemed to have been
discharged from its obligations with respect to the Outstanding Notes as
provided in this Section on and after the date the conditions set forth in
Section 1104 are satisfied (hereinafter called "Defeasance"). For this purpose,
such Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by such Notes and to have
satisfied all its other obligations under such Notes and this Indenture insofar
as such Notes are concerned (and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging the same), subject to the
following, which shall survive until otherwise terminated or discharged
hereunder: (1) the rights of Holders of such Notes to receive, solely from the
trust fund described in Section 1104 and as more fully set forth in such
Section, payments in respect of the principal of and interest on such Notes when
payments are due, (2) the Company's obligations with respect to such Notes under
Sections 304, 305, 306, 1002 and 1003, (3) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and (4) this Article. Subject to
compliance with this Article, the Company may exercise its option (if any) to
have this Section applied to the Outstanding Notes notwithstanding the prior
exercise of its option to have Section 1103 applied to such Notes.
SECTION 1103. Covenant Defeasance.
Upon the Company's exercise of its option to have this Section
applied to the Outstanding Notes, the Company shall be released from its
obligations under Section 801, Sections 1006 through 1008, inclusive, and any
covenants provided pursuant to Section 901(2) for the benefit of the Holders of
the Notes and the occurrence of any event specified in Sections 501(3) (with
respect to any of Sections 1006 through 1008, inclusive, and any such covenants
provided pursuant to Section 901(2)) and 501(4) shall be deemed not to be or
result in an Event of Default on and after the date the conditions set forth in
Section 1104 are satisfied (hereinafter called "Covenant Defeasance"). For this
purpose, such Covenant Defeasance means that 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 specified Section, whether directly or indirectly by reason of
any reference elsewhere herein to any such Section or by reason of any reference
in any such Section to any other provision herein or in any other document, but
the remainder of this Indenture and such Notes shall be unaffected thereby.
-44-
<PAGE> 55
SECTION 1104. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of
Section 1102 or Section 1103 to the Outstanding Notes:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 609 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust
for the purpose of making the following payments, specifically pledged
as security for, and dedicated solely to, the benefits of the Holders
of such Notes, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, in each case
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or any such other qualifying trustee) to pay
and discharge, the principal of and interest on the Outstanding Notes
on the respective Stated Maturities, in accordance with the terms of
this Indenture and such Notes. As used herein, "U.S. Government
Obligation" means (x) any security which is (i) a direct obligation of
the United States of America for the payment of which the full faith
and credit of the United States of America is pledged or (ii) an
obligation of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment
of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case (i)
or (ii), is not callable or redeemable at the option of the issuer
thereof, and (y) any depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian
with respect to any U.S. Government Obligation which is specified in
Clause (x) above and held by such bank for the account of the holder of
such depositary receipt, or with respect to any specific payment of
principal of or interest on any U.S. Government Obligation which is so
specified and held, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount
received by the custodian in respect of the U.S. Government Obligation
or the specific payment of principal or interest evidenced by such
depositary receipt.
(2) In the event of an election to have Section 1102 apply to
the Outstanding Notes, the Company shall have delivered to the Trustee
an Opinion of Counsel stating that (A) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling
or (B) since the date of this Indenture, there has been a change in the
applicable Federal income tax law, in either case (A) or (B) to the
effect that, and based thereon such opinion shall confirm that, the
Holders of such Notes will not recognize gain or loss for Federal
income tax purposes as a result of the deposit, Defeasance and
discharge to be effected with respect to such Notes and will be subject
to Federal income tax on the same amount, in the same manner and at the
same times as would be the case if such deposit, Defeasance and
discharge were not to occur.
-45-
<PAGE> 56
(3) In the event of an election to have Section 1103 apply to
the Outstanding Notes, the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that the Holders of such Notes will
not recognize gain or loss for Federal income tax purposes as a result
of the deposit and Covenant Defeasance to be effected with respect to
such Notes and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would be the case
if such deposit and Covenant Defeasance were not to occur.
(4) The Company shall have delivered to the Trustee an
Officer's Certificate to the effect that the Notes, if then listed on
any securities exchange, will be delisted as a result of such deposit.
(5) No event which is, or after notice or lapse of time or
both would become, an Event of Default shall have occurred and be
continuing at the time of such deposit or, with regard to any such
event specified in Sections 501(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).
(6) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Notes are in default within the meaning of
such Act).
(7) Such Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(8) The Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that such Defeasance or Covenant Defeasance
shall not result in the trust arising from such deposit constituting 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.
(9) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance or Covenant
Defeasance have been complied with.
SECTION 1105. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee or other qualifying trustee (solely for purposes of
this Section and Section 1106, the Trustee and any such other trustee are
referred to collectively as the "Trustee") pursuant to Section 1104 in respect
of the Outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of the Notes 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 Notes, of
all sums due and to become due
-46-
<PAGE> 57
thereon in respect of principal and interest, but money so held in trust need
not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 1104 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of Outstanding Notes.
Anything in this Article to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1104 with respect to the Outstanding Notes which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect the
Defeasance or Covenant Defeasance, as the case may be, with respect to such
Notes.
SECTION 1106. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any
money in accordance with this Article with respect to the Outstanding Notes by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
obligations under this Indenture and such Notes from which the Company has been
discharged or released pursuant to Section 1102 or 1103 shall be revived and
reinstated as though no deposit had occurred pursuant to this Article with
respect to such Notes, until such time as the Trustee or Paying Agent is
permitted to apply all money held in trust pursuant to Section 1105 with respect
to such Notes in accordance with this Article; provided, however, that if the
Company makes any payment of principal of or interest on any such Note following
such reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money so
held in trust.
-----------------------------------------------------
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
-47-
<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
THE PMI GROUP, INC.
By:_____________________________________
THE BANK OF NEW YORK
By:_____________________________________
-48-
<PAGE> 1
EXHIBIT 5.1
[Letter of Orrick, Herrington & Sutcliffe LLP]
November 5, 1996
The PMI Group, Inc.
601 Montgomery Street
San Francisco, California 94111
Re: The PMI Group, Inc. Registration Statement
on Form S-3
-------------------------------------------
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-3
(the "Registration Statement"), in the form being filed with the Securities and
Exchange Commission in connection with the registration under the Securities Act
of 1933, as amended (the "Act"), of $100,000,000 aggregate principal amount of
Notes (the "Notes") of The PMI Group Inc., a Delaware corporation (the
"Company"). The Notes are to be issued under an Indenture (the "Indenture"), to
be entered into between the Company and The Bank of New York, as trustee, a form
of which is included as an exhibit to the Registration Statement. The Notes are
to be issued in substantially the form filed as an exhibit to the Registration
Statement (with the maturity, interest rate and other terms of the Notes
appropriately filled in). The Notes are to be sold in the manner set forth in
the Registration Statement, any amendment thereto, and the prospectus contained
therein (the "Prospectus").
We have examined instruments, documents and records which we deemed
relevant and necessary for the basis of our opinion hereinafter expressed. Based
on such examination, we are of the opinion that when the issuance of the Notes
has been duly authorized by appropriate corporate action and the Notes have been
duly completed, executed, authenticated and delivered in accordance with the
Indenture and sold as described in the Registration Statement, any amendment
thereto, and the Prospectus, the Notes will be legal, valid and binding
obligations of the Company, entitled to the benefits of the Indenture.
Our opinion that the Notes are legal, valid and binding is qualified as
to limitations imposed by bankruptcy, insolvency, reorganization, arrangement,
fraudulent conveyance, moratorium or other laws relating to or affecting the
enforcement of creditors' rights generally; and general principles of equity,
including without limitation concepts of materiality,
<PAGE> 2
The PMI Group, Inc.
November 5, 1996
Page 2
reasonableness, good faith and fair dealing, and the possible unavailability of
specific performance or injunctive relief, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
We express no opinion as to matters of law in jurisdictions other than the
State of New York, the federal law of the United States, and the corporate law
of the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and to the use of our name wherever it
appears in the Registration Statement, any amendment thereto, and the
Prospectus. In giving such consent, we do not consider that we are "experts"
within the meaning of such term as used in the Act or the rules and regulations
of the Securities and Exchange Commission issued thereunder with respect to any
part of the Registration Statement, including this opinion as an exhibit or
otherwise.
Very truly yours,
/s/ ORRICK, HERRINGTON & SUTCLIFFE LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
<PAGE> 1
EXHIBIT 12.1
THE PMI GROUP, INC.
STATEMENT SETTING FORTH COMPUTATION OF RATIO
OF PROFIT TO FIXED CHARGES
(Dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Income before cumulative effect of change
in accounting for income tax $119,490 $101,391 $135,231 $106,132 $ 88,668 $ 105,571 $ 52,392
Add:
Provision for income tax 48,552 33,459 45,310 32,419 24,305 (10,911) 69,661
-------- -------- -------- -------- -------- --------- --------
PROFIT BEFORE TAXES $168,042 $134,850 $180,541 $138,551 $112,973 $ 94,660 $122,053
======== ======== ======== ======== ======== ========= ========
Fixed charges:
Rentals-- at computed interest* $ 1,733 $ 1,492 $ 2,046 $ 1,584 $ 1,558 $ 1,308 $ 1,033
-------- -------- -------- -------- -------- --------- --------
TOTAL FIXED CHARGES $ 1,733 $ 1,492 $ 2,046 $ 1,584 $ 1,558 $ 1,308 $ 1,033
======== ======== ======== ======== ======== ========= ========
PROFIT BEFORE TAXES PLUS FIXED CHARGES $169,775 $136,342 $182,587 $140,135 $114,531 $ 95,968 $123,086
======== ======== ======== ======== ======== ========= ========
RATIO OF PROFIT BEFORE TAXES PLUS FIXED
CHARGES TO FIXED CHARGES 98.0 91.4 89.3 88.5 73.5 73.4 119.2
======== ======== ======== ======== ======== ========= ========
</TABLE>
* Those portions of rent expense that are representative of interest cost
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration
Statement of The PMI Group, Inc. on Form S-3 of our report dated January 17,
1996 (February 13, 1996 as to Note 15) (which report includes an explanatory
paragraph as to a change in accounting for investments in fixed income
securities in 1993), incorporated by reference in the Annual Report on Form 10-K
of The PMI Group, Inc. for the year ended December 31, 1995 and of our report
dated January 17, 1996 relating to the financial statement schedules appearing
in such Form 10-K.
We also consent to the reference to us under the headings "Experts" and
"Selected Financial and Operating Data" in the Prospectus, which is part of
this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
-------------------------
DELOITTE & TOUCHE LLP
San Francisco, California
November 5, 1996
<PAGE> 1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
THE PMI GROUP, INC.
(Exact name of obligor as specified in its charter)
Delaware 94-3199675
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
601 Montgomery Street
San Francisco, California 94111
(Address of principal executive offices) (Zip code)
----------------------
Debt Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Name Address
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE
24 OF THE COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
- 3 -
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 15th day of October, 1996.
THE BANK OF NEW YORK
by: /s/ NANCY B. GILL
------------------------------
Name: NANCY B. GILL
Title: ASSISTANT TREASURER
<PAGE> 5
Exhibit 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 1996,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from
depository institutions:
Noninterest-bearing balances and
currency and coin ........................ $ 2,461,550
Interest-bearing balances ................ 835,563
Securities:
Held-to-maturity securities .............. 802,064
Available-for-sale securities ............ 2,051,263
Federal funds sold in domestic offices of
the bank:
Federal funds sold ......................... 3,885,475
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .......................27,820,159
LESS: Allowance for loan and
lease losses ....................509,817
LESS: Allocated transfer risk
reserve............................1,000
Loans and leases, net of unearned
income, allowance, and reserve ......... 27,309,342
Assets held in trading accounts ............ 837,118
Premises and fixed assets (including
capitalized leases) ...................... 614,567
Other real estate owned .................... 51,631
Investments in unconsolidated
subsidiaries and associated
companies ................................ 225,158
Customers' liability to this bank on
acceptances outstanding .................. 800,375
Intangible assets .......................... 436,668
Other assets ............................... 1,247,908
-----------
Total assets ............................... $41,558,682
===========
LIABILITIES
Deposits:
In domestic offices ...................... $18,851,327
Noninterest-bearing .............7,102,645
Interest-bearing ...............11,748,682
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ......... 10,965,604
Noninterest-bearing ................37,855
Interest-bearing ...............10,927,749
Federal funds purchased and
securities sold under agreements to
repurchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased .................. 1,224,886
Securities sold under agreements
to repurchase .......................... 29,728
Demand notes issued to the U.S.
Treasury ................................. 118,870
Trading liabilities ........................ 673,944
Other borrowed money:
With original maturity of one year
or less ................................ 2,713,248
With original maturity of more than
one year ............................... 20,780
Bank's liability on acceptances
executed and outstanding ................. 803,292
Subordinated notes and debentures .......... 1,022,860
Other liabilities .......................... 1,590,564
-----------
Total liabilities .......................... 38,015,103
-----------
EQUITY CAPITAL
Common stock .............................. 942,284
Surplus ................................... 525,666
Undivided profits and capital
reserves ................................ 2,078,197
Net unrealized holding gains
(losses) on available-for-sale
securities .............................. 3,197
Cumulative foreign currency transla-
tion adjustments ........................ (5,765)
-----------
Total equity capital ...................... 3,543,579
-----------
Total liabilities and equity
capital ................................. $41,558,682
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
-
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
-
