EXHIBIT 7
AFC CAPITAL TRUST I
ALLMERICA FINANCIAL CORPORATION
$300,000,000
in Aggregate Liquidation Amount
8.207% Series A Capital Securities
PURCHASE AGREEMENT
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January 29, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Morgan Stanley & Co. Incorporated
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center, North Tower
New York, New York 10281-1209
Ladies and Gentlemen:
AFC Capital Trust I (the "Trust"), a statutory business trust
organized under the Business Trust Act (the "Delaware Act") of the State of
Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. (Sections 3801 et
seq.)) and Allmerica Financial Corporation, a Delaware corporation (the
"Company" and, together with the Trust, the "Offerors"), confirm their agreement
with Merrill Lynch & Co., Merrill Lynch, Pierce Fenner & Smith Incorporated
(collectively, "Merrill Lynch") and Morgan Stanley & Co. Incorporated (together,
the "Initial Purchasers", which term shall also include any initial purchaser
substituted as hereinafter provided in Section 11 hereof), with respect to the
issue and sale by the Trust and the purchase by the Initial Purchasers, acting
severally and not jointly, of the respective number set forth on Schedule I of
300,000 8.207% Series A Capital Securities
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(liquidation amount $1,000 per security) representing common undivided
beneficial interests in the assets of the Trust (the "Series A Capital
Securities").
The Series A Capital Securities will be guaranteed by the
Company, to the extent set forth in the Offering Memorandum (as defined below),
with respect to distributions and amounts payable upon liquidation or redemption
and otherwise pursuant to the Series A Capital Securities Guarantee Agreement
(the "Series A Guarantee Agreement", and such guarantee being referred to herein
as the "Series A Capital Securities Guarantee") to be dated as of the Closing
Time (as defined in Section 2(b) hereof) between the Company and The Chase
Manhattan Bank (the "Guarantee Trustee").
The entire proceeds from the sale of the Series A Capital
Securities will be com bined with the entire proceeds from the sale by the Trust
to the Company of its common securities (the "Common Securities") and will be
used by the Trust to purchase $309,278,000 in aggregate principal amount of
8.207% Series A Subordinated Deferrable Interest Debentures due February 3, 2027
(the "Series A Junior Subordinated Debentures") issued by the Company. The
Series A Capital Securities and the Common Securities will be issued pursuant to
the Amended and Restated Declaration of Trust, to be dated as of the Closing
Time (the "Declaration"), among the Company, as Sponsor, John F. Kelly, Edward
J. Parry III and John P. Kavanaugh as administrative trustees (the
"Administrative Trustees"), The Chase Manhattan Bank, as property trustee (the
"Property Trustee"), and The Chase Manhattan Bank (Delaware), as Delaware
trustee (the "Delaware Trustee") and, together with the Property Trustee and the
Administrative Trustees, the "Trustees"). The Series A Junior Subordinated
Debentures will be issued pursuant to an Indenture, to be dated as of the
Closing Time (the "Indenture"), between the Company and The Chase Manhattan
Bank, as trustee (the "Debenture Trustee"). The Series A Capital Securities
issued in book-entry form will be issued to Cede & Co. as nominee of The
Depository Trust Company ("DTC") pursuant to a letter agreement, to be dated as
of the Closing Time (the "DTC Agreement"), among the Trust, the Property Trustee
and DTC.
The Series A Capital Securities, the Series A Capital
Securities Guarantee and the Series A Junior Subordinated Debentures are
collectively referred to herein as the "Series A Securities". Capitalized terms
used herein without definition have the respective meanings specified in the
Offering Memorandum.
The Series A Capital Securities will be subject to the
registration rights set forth in a registration rights agreement (the
"Registration Rights Agreement"), to be executed on and dated as of the Closing
Time substantially in the form of Exhibit A. Pursuant to the Registration Rights
Agreement, the Trust and the Company will agree, among other things, to file
with the Securities and Exchange Commission ( the "Commission") (i) a
registration statement (the "Exchange Offer Registration Statement") under the
Securities Act of 1993, as
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amended (the "1933 Act") relating to the 8.207% Series B Capital Securities
(liquidation amount $1,000 per security) (the "Series B Capital Securities"),
the Series B Capital Securities Guarantee (the "Series B Capital Securities
Guarantee") of the Company pursuant to the Series B Capital Securities Guarantee
Agreement (the "Series B Guarantee Agreement"), and the 8.207% Series B
Subordinated Deferrable Interest Notes due February 3, 2027 (the "Series B
Junior Subordinated Debentures" and, collectively with the Series B Capital
Securities and the Series B Capital Securities Guarantee, the "Series B
Securities"), to be offered in exchange for the Series A Securities (such offer
to exchange being referred to herein as the "Exchange Offer") and/or (ii) a
shelf registration statement pursuant to Rule 415 under the 1933 Act (the "Shelf
Registration Statement") relating to the resale by certain holders of the Series
A Securities.
The Series A Securities and the Series B Securities are
jointly referred to as the "Securities"; the Series A Capital Securities and the
Series B Capital Securities are jointly referred to as the "Capital Securities";
the Series A Junior Subordinated Debentures and the Series B Junior Subordinated
Debentures are jointly referred to as the "Junior Subordinated Debentures"; and
the Series A Capital Securities Guarantee and the Series B Capital Securities
Guarantee are jointly referred to as the "Capital Securities Guarantees." The
Indenture, the Declaration, the Registration Rights Agreement, the DTC Agreement
and this Agreement are hereinafter referred to collectively as the "Operative
Documents."
The Offerors understand that the Initial Purchasers propose to
make an offering of the Series A Capital Securities (as guaranteed by the Series
A Capital Securities Guarantee) on the terms and in the manner set forth herein
and agree that the Initial Purchaser may resell in accordance with applicable
law, subject to the conditions set forth herein, all or a portion of the Capital
Securities to purchasers ("Subsequent Purchasers") at any time after the date of
this Agreement. The Series A Capital Securities are to be offered and sold
through the Initial Purchasers without being registered under the 1933 Act, in
reliance upon exemptions therefrom. Pursuant to the terms of the Series A
Capital Securities, investors that acquire Series A Capital Securities may only
resell or otherwise transfer such Capital Securities if such Capital Securities
are hereafter registered under the 1933 Act or if an exemption from the
registration requirements of the 1933 Act is available (including the exemption
afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S") of the
rules and regulations promulgated by the Commission under the 1933 Act (the
"1933 Act Regulations")).
The Offerors have prepared and delivered to each Initial
Purchaser copies of a preliminary offering memorandum dated January 24, 1997
(the "Preliminary Offering Memorandum") and will deliver to each Initial
Purchaser, as soon as practicable, but not later than February 3, 1997, copies
of an offering memorandum for use by such Initial Purchaser in connection with
its solicitation of purchases of, or offering of, the Series A Capital
Securities (the "Final Offering Memorandum" and, together with the Preliminary
Offering
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Memorandum, the "Offering Memorandums"). "Offering Memorandum" means, with
respect to any date or time referred to in this Agreement, the most recent
offering memorandum (or any amendment or supplement to such document), including
exhibits thereto and any documents incorporated therein by reference, which has
been prepared and delivered by the Offerors to the Initial Purchasers in
connection with their solicitation of purchases of, or offering of, the Series A
Capital Securities.
All references in this Agreement to financial statements and
schedules and other information which is "contained," "included," "specified" or
"stated" in the Offering Memorandums (including other references of like import)
shall be deemed to mean and include all such financial statements and schedules
and other information which are incorporated by reference in the Offering
Memorandums; and all references in this Agreement to amendments or supplements
to the Offering Memorandums shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934, as amended (the "1934
Act") which is incorporated by reference in the Offering Memorandums.
SECTION 1. Representations and Warranties.
------------------------------
(a) Each of the Trust and the Company represents and warrants
to each Initial Purchaser as of the date hereof and as of the Closing Time
referred to in Section 2(b) hereof, and agrees with each Initial Purchaser as
follows:
(i) The Offerors have not, directly or indirectly, solicited
any offer to buy or offered to sell, and will not, directly or
indirectly, solicit any offer to buy or offer to sell, in the United
States or to any United States citizen or resident, any security which
is or would be integrated with the sale of the Series A Capital
Securities in a manner that would require the Series A Capital
Securities to be registered under the 1933 Act.
(ii) Each of the Preliminary Offering Memorandum and the
Final Offering Memorandum as of their respective dates does not, and in
the case of the Final Offering Memorandum as of the Closing Time will
not, include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided that this representation, warranty and agreement shall not
apply to statements or omissions made in reliance upon and in
conformity with information furnished to the Offerors by or on behalf
of any Initial Purchaser through Merrill Lynch expressly for use in the
Offering Memorandums.
(iii) Each of the Capital Securities, the Capital Securities
Guarantees and the Junior Subordinated Debentures satisfy the
eligibility requirements of Rule 144A(d)(3) under the 1933 Act.
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(iv) The documents incorporated or deemed to be incorporated
by reference in the Offering Memorandums at the time they were or
hereafter are filed with the Commission complied and will comply in all
material respects with the requirements of the 1934 Act and the rules
and regulations of the Commission thereunder (the "1934 Act
Regulations"), and, when read together with the other information in
the Offering Memorandums, at the date of each respective Offering
Memorandum and, in the case of the Final Offering Memorandum, at the
Closing Time, do not and will not include 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.
(v) Price Waterhouse LLP, who are reporting upon the audited
consolidated financial statements and supporting schedules 1 through 6
of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 included or incorporated by reference in the Offering
Memorandums, are independent public accountants as required by the 1933
Act and the 1933 Act Regulations.
(vi) The consolidated financial statements, together with the
related schedules and notes thereto included in the Offering
Memorandums, present fairly in all material respects the financial
position of the Company and its subsidiaries at the dates indicated and
the consolidated statement of income, shareholders' equity and cash
flows of the Company and its subsidiaries for the periods specified;
said consolidated financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved except as noted
therein. The supporting schedules, if any, included in the Offering
Memorandums present fairly the information required to be stated
therein. The selected financial data included in the Offering
Memorandums present fairly the information shown therein and have been
compiled on a basis consistent with that of the consolidated audited
financial statements included in the Offering Memorandums except as
noted therein. The pro forma financial statements and other pro forma
financial information included in the Offering Memorandums present
fairly the information shown therein, have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma
financial statements, have been properly compiled on the pro forma
bases described therein, and, in the opinion of the Company, the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the proposed
transactions referred to therein.
(vii) The statutory consolidated financial statements of the
Company and its subsidiaries, from which certain ratios and other
statistical data contained in the Offering Memorandums have been
derived, have for each relevant period been
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prepared in accordance with accounting practices prescribed or
permitted by the National Association of Insurance Commissioners and
the insurance division of the Commonwealth of Massachusetts, and such
accounting practices have been applied on a consistent basis throughout
the periods involved, except as disclosed therein.
(viii) Since the respective dates as of which information is
given in the Offering Memorandum, except as otherwise described or
stated therein, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Trust or the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary
course of business, (B) there have been no transactions entered into by
the Trust or the Company or any of its subsidiaries, other than those
in the ordinary course of business, which are material with respect to
the Trust or the Company and its subsidiaries considered as one
enterprise, and (C) except for regular quarterly dividends, there has
been no dividend of any kind declared, paid or made by the Company on
any class of its capital stock.
(ix) The Company is a corporation organized, validly
existing and in good standing under the laws of the State of Delaware,
with corporate power and authority under such laws to own, lease and
operate its properties and conduct its business as described in the
Offering Memorandums, to enter into and perform its obligations under
each of the Operative Documents, to hold the Common Securities issued
by the Trust, to issue and to deliver the Junior Subordinated
Debentures and the Capital Securities Guarantees; and the Company is
duly qualified to transact business as a foreign corporation and is in
good standing in each other jurisdiction in which it owns or leases
property of a nature, or transacts business of a type, that would make
such qualification necessary, except to the extent that the failure to
so qualify or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, considered as one
enterprise.
(x) First Allmerica Financial Life Insurance Company
("FAFLIC"), SMA Financial Corp., Allmerica Financial Life Insurance and
Annuity Company ("AFLIAC"), Allmerica Property & Casualty Companies
("Allmerica P&C"), The Hanover Insurance Company, Citizens Corporation
("Citizens"), Citizens Insurance Company of America and any other
"significant subsidiary" of the Company (as such term is defined in
Rule 1-02 of Regulation S-X) are each a "Subsidiary" and, collectively,
the "Subsidiaries" of the Company. FAFLIC is duly organized and is
validly existing as a stock life insurance company in good standing
under the laws of the Commonwealth of Massachusetts with corporate
power and authority under such laws to own, lease and operate its
properties and conduct its business as described in the Offering
Memorandums. Each other Subsidiary is a corporation duly organized,
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validly existing and in good standing under the laws of the
jurisdiction of its incorporation with corporate power and authority
under such laws to own, lease and operate its properties and conduct
its business; and each Subsidiary is duly qualified to transact
business as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or
transacts business of a type, that would make such qualification
necessary, except to the extent that the failure to so qualify or be in
good standing would not have a material adverse effect on the Company
and its subsidiaries, considered as one enterprise. All of the
outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued and are fully paid and non-assessable.
Except for Allmerica P&C and Citizens, which are owned 40.5% and 17.5%,
respectively, by the public, and except for any shares required by law
to be owned by directors and as of the date hereof, all of the
outstanding shares of capital stock of each Subsidiary will be owned by
the Company, directly or through one or more Subsidiaries, free and
clear of any pledge, lien, security interest, charge, claim equity or
encumbrance of any kind.
(xi) The authorized, issued and outstanding capital stock of
the Company as of September 30, 1996 is as set forth in the Offering
Memorandums under the caption "Capitalization".
(xii) The Agreement and the DTC Agreement have been duly
authorized and, at the Closing Time will have been duly executed and
delivered by the Company and the Trust, as applicable;
(xiii) The Trust has been duly created and is validly existing
and in good standing as a business trust under the Delaware Act with
the power and authority to own its properties and to conduct its
business as described in the Offering Memorandums and to enter into and
perform its obligations under such of the Operative Documents to which
it is a party and the Series A Capital Securities; the Trust is duly
qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is necessary,
except to the extent that the failure to so qualify or be in good
standing would not have a material adverse effect on the Trust; the
Trust is not a party to or otherwise bound by any agreement other than
those described in the Offering Memorandum; the Trust is and will under
current law be classified for United States federal income tax purposes
as a grantor trust and not as an association taxable as a corporation;
and the Trust is and will be treated as a subsidiary of the Company
pursuant to generally accepted accounting principles.
(xiv) The Declaration has been duly authorized by the Company
and, at the Closing Time, will have been duly executed and delivered by
the Company and the
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Administrative Trustees (as defined in the Declaration) and (assuming
the due authorization, execution and delivery of the Declaration by the
Delaware Trustee and the Property Trustee (as defined in the
Declaration)) will, at the Closing Time, be a valid and binding
obligation of the Company and the Administrative Trustees, enforceable
against the Company and the Administrative Trustees in accordance with
its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, receivership, liquidation, fraudulent
conveyance, moratorium or similar laws affecting creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law); and the Declaration will conform
in all material respects to the description thereof in the Offering
Memorandums.
(xv) The Common Securities have been duly authorized by the
Declaration and, when issued and delivered by the Trust to the Company
against payment therefor as described in the Offering Memorandums, will
be validly issued and (subject to the terms of the Declaration) fully
paid and nonassessable undivided common beneficial interests in the
assets of the Trust and will conform in all material respects to the
description thereof in the Offering Memorandums; the issuance of the
Common Securities is not subject to preemptive or other similar rights;
and, at the Closing Time, all of the issued and outstanding Common
Securities of the Trust will be directly or indirectly owned by the
Company, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity and all action required to be taken
for the authorization, issue and sale of such Common Securities by the
Trust will have been validly and sufficiently taken.
(xvi) At the Closing Time, the Series A Capital Securities
will have been duly authorized by the Declaration and, when and issued
and delivered by the Trust pursuant to this Agreement against payment
of the consideration set forth herein, will be validly issued and
(subject to the terms of the Declaration) fully paid and nonassessable
undivided beneficial interests in the assets of the Trust, will be
entitled to the benefits of the Declaration and will conform in all
material respects to the description thereof in the Offering
Memorandums; the issuance of the Series A Capital Securities is not
subject to preemptive or other similar rights; and as of the Closing
Time, the Series B Capital Securities will have been duly authorized by
the Trust and, in the event of the consummation of the Exchange Offer,
will be validly issued and (subject to the terms of the Declaration)
fully paid and nonassessable undivided common beneficial interests in
the assets of the Trust; and (subject to the terms of the Declaration)
holders of Series A Capital Securities will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit incorporated under the laws of the State of
Delaware.
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(xvii) Each of the Series A Guarantee Agreement and the
Series B Guarantee Agreement has been duly authorized by the Company
and, at the Closing Time, the Series A Guarantee Agreement will have
been duly executed and delivered by the Company and (assuming due
authorization, execution and delivery of the Series A Guarantee
Agreement by Chase Manhattan Bank, not in its individual capacity but
solely as trustee) will constitute a valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, receivership, liquidation, fraudulent
conveyance, moratorium or similar laws affecting creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law); and each of the Series A Capital
Securities Guarantee and the Series A Guarantee Agreement will conform
in all material respects to the description thereof in the Offering
Memorandums. In the event the Exchange Offer is consummated, the Series
B Guarantee Agreement will have been duly executed and delivered by the
Company and (assuming due authorization, execution and delivery of the
Series B Guarantee Agreement by Chase Manhattan Bank, not in its
individual capacity but solely as trustee) will constitute a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, receivership, liquidation,
fraudulent conveyance, moratorium or similar laws affecting creditors'
rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law); and the Series B
Guarantee Agreement will have been duly qualified under the Trust
Indenture Act.
(xviii) The Indenture has been duly authorized by the Company
and, at the Closing Time, will have been duly executed and delivered by
the Company and (assuming due authorization, execution and delivery of
the Indenture by the Debenture Trustee) will constitute a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, receivership, liquidation,
fraudulent conveyance, moratorium or similar laws affecting creditors'
rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law); and the Indenture will
conform in all material respects to the description thereof in the
Offering Memorandums. In the event the Exchange Offer is consummated,
the Indenture will have been duly qualified under the Trust Indenture
Act.
(xix) The issuance and delivery of the Junior Subordinated
Debentures have been duly authorized by the Company and, at the Closing
Time, the Series A Junior
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Subordinated Debentures will have been duly executed by the Company
and, when authenticated in the manner provided for in the Indenture and
delivered against payment therefor as described in the Offering
Memorandums, will constitute valid and binding obligations of the
Company entitled to the benefits of the Indenture; and the Series B
Junior Subordinated Debentures have been duly authorized by the Company
and, when duly executed by the Company and authenticated in the manner
provided in the Indenture, will constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture,
in each case enforceable against the Company in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, receivership, liquidation, fraudulent
conveyance, moratorium or similar laws affecting creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law). The Junior Subordinated
Debentures will conform in all material respects to the description
thereof in the Offering Memorandums; and the Junior Subordinated
Debentures will be in the form contemplated by the Indenture.
(xx) At the Closing Time, the Registration Rights Agreement
will have been duly authorized, executed and delivered by each of the
Trust and the Company and (assuming the due authorization, execution
and delivery thereof by the other parties thereto) will constitute the
valid and binding obligation of each of the Trust and the Company
enforceable against each of the Trust and the Company in accordance
with the terms thereof, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, receivership, liquidation,
fraudulent conveyance, moratorium or similar laws affecting creditors'
rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law); and the Registration
Rights Agreement will conform in all material respects to the
description thereof in the Offering Memorandums.
(xxi) The Series A Junior Subordinated Debentures are
subordinate and junior in right of payment to all Senior Indebtedness
(as defined in the Indenture) of the Company.
(xxii) Each of the Administrative Trustees of the Trust is an
officer of the Company and has been duly authorized by the Company to
execute and deliver the Declaration.
(xxiii) Except for separate investment accounts of FAFLIC and
AFLIAC, neither the Trust nor the Company nor any of the Company's
other subsidiaries is or, after giving effect to the consummation of
the transactions contemplated herein, will
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be, and neither the Company nor the Trust nor any of the Company's
other subsidiaries is directly or indirectly controlled by, or acting
on behalf of any person which is, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(xxiv) None of the Company, any Subsidiary or the Trust is in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which
it is a party or by which it may be bound or to which any of its
properties may be subject, except for such defaults that would not have
a material adverse effect on the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise. The execution and delivery
of the Operative Documents, the issuance and delivery of the Series A
Capital Securities, the Series A Guarantee, the Series A Junior
Subordinated Debentures and the consummation of the transactions
contemplated herein and therein have been duly authorized by all
necessary corporate action on the part of the Company and the Trust and
do not and will not result in any violation of the charter or by-laws
of the Company or any Subsidiary nor any violation of the Declaration
or Trust Certificate, and do not and will not conflict with, or result
in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company, the
Trust or any Subsidiary under (A) any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which
the Company, the Trust or any Subsidiary is a party or by which it may
be bound or to which any of its properties may be subject (except for
such conflicts, breaches or defaults or liens, charges or encumbrances
that would not have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs or business
prospects of the Company and its subsidiaries, considered as one
enterprise, or of the Trust) or (B) any existing applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over
the Company, the Trust or any Subsidiary or any of their respective
properties.
(xxv) Neither the issuance and sale of the Capital Securities
by the Trust to the Initial Purchasers or the issuance and sale of the
Common Securities by the Trust to the Company, the extension of the
Series A Guarantee by the Company, the issuance and sale of the
Subordinated Debentures by the Company to the Trust, the execution,
delivery or performance of this Agreement, the Declaration, the
Indenture and the Series A Guarantee by the Offerors, nor the
consummation by the Offerors with their respective obligations
hereunder and thereunder requires any consent, approval, authorization
or other order of or registration or filing with, any court, regulatory
body (including any insurance regulatory body), administrative agency
or other governmental
12
body, agency or official (except such as may be required under the 1933
Act, the 1934 Act and the Trust Indenture Act and compliance with the
securities, Blue Sky laws and state insurance laws of various
jurisdictions), except where the failure to obtain such consent,
approval, authorization or other order or make such registration or
filing would not have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs and business
prospects of the Company and its subsidiaries considered as one
enterprise.
(xxvi) To the best knowledge of the company, no labor problem
exists with its employees or with employees of the Subsidiaries or the
Trust, or is imminent that could adversely affect the Trust, or the
Company and its subsidiaries, considered as one enterprise.
(xxvii) Except as disclosed in the Offering Memorandum, there
is no action, suit or proceeding before or by any government,
governmental instrumentality or court, domestic or foreign, now pending
or, to the knowledge of the Company, threatened against or affecting
the Trust, the Company, or any of its Subsidiaries that is required to
be disclosed in the Offering Memorandums or that could have a material
adverse change in the condition (financial or otherwise), earnings,
business affairs or business prospects of the Trust, and the Company
and its subsidiaries, considered as one enterprise, or that could
materially and adversely affect the properties or assets thereof or the
consummation of any Operative Documents or the performance by the
Company of its obligations hereunder and thereunder; the aggregate of
all pending legal or governmental proceedings to which the Trust, or
the Company or any Subsidiary is a party or which affect any of their
respective properties or assets, including ordinary routine litigation
incidental to the business of the Trust, or the Company or any
Subsidiary, would not reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), earnings, business
affairs or business prospects of the Trust, or the Company and its
subsidiaries, considered as one enterprise.
(xxviii) The Trust, the Company and each of the Subsidiaries
each has good and marketable title to all properties and assets
described in the Offering Memorandums as owned by it, free and clear of
all liens, charges, encumbrances or restrictions, except such as (A)
are described in the Offering Memorandums or (B) are not materially
significant in relation to the business of the Trust, the Company and
its subsidiaries, considered as one enterprise; all of the leases and
subleases material to the business of the Trust, the Company and its
subsidiaries, considered as one enterprise, and under which the Trust,
the Company or any Subsidiary holds properties, are described in the
Offering Memorandums, are in full force and effect; and neither the
Trust, the Company nor any Subsidiary has any notice of any material
claim of any sort that has been asserted by anyone adverse to the
rights of the Trust, the Company or any
13
Subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of such corporation to the
continued possession of the leased or subleased premises under any such
lease or sublease.
(xxix) The Trust, the Company and its Subsidiaries each owns,
possesses or has obtained all material governmental licenses, permits,
certificates, consents, orders, approvals and other authorizations
necessary to own or lease, as the case may be, and to operate its
properties and to carry on its business as presently conducted, and
neither the Trust, the Company nor any of its Subsidiaries has received
any notice of proceedings relating to revocation or modification of any
such licenses, permits, certificates, consents, orders, approvals or
authorization.
(xxx) Each of the Subsidiaries which is engaged in the
insurance business, (the "Insurance Subsidiaries"), is duly licensed or
authorized to conduct its insurance business under the insurance laws
of each jurisdiction in which it conducts such business so as to
require such licensing or authorization, except where the failure to be
so licensed or authorized would not, individually or in the aggregate,
have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Trust, the Company and its subsidiaries, considered as one enterprise;
all such licenses or authorizations are in full force and effect and
neither the Trust, the Company nor any Insurance Subsidiary has
received any notice of any event, inquiry, investigation or proceeding
that would reasonably be expected to result in the suspension,
revocation or limitation of any such licenses or authorizations or
otherwise impose any limitation on the conduct of the business of the
Trust, the Company or any Insurance Subsidiary, except any such
suspension, revocation or limitation which would not, individually or
in the aggregate, have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs or business
prospects of the Trust, the Company and its subsidiaries, considered as
one enterprise, and to the best of the Trust's, the Company's and the
Insurance Subsidiaries' knowledge, there is no sustainable basis for
any such suspension, revocation or limitation; each of the Insurance
Subsidiaries is in compliance with, and conducts its businesses in
conformity with, all applicable insurance laws and regulations, except
where the failure to so comply or conform would not have a material
adverse effect on the condition (financial or otherwise), earnings,
business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise; and the Company has
disclosed to you all pending significant examinations, and all
significant examinations which have been completed and filed since
October 1995, by any governmental authority having jurisdiction to
regulate the insurance operations of any Insurance Subsidiary.
(xxxi) The Trust, the Company and the Subsidiaries each owns
or possesses, or can acquire on reasonable terms, adequate patents,
patent licenses, trademarks,
14
service marks and trade names necessary to carry on its business as
presently conducted, and neither the Trust, the Company nor any
Subsidiary has received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, patent licenses,
trademarks, service marks or trade names that in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could materially
adversely affect the condition (financial or otherwise), earnings,
business affairs or business prospects of the Trust, the Company and
its subsidiaries, considered as one enterprise.
(xxxii) To the best of the Company's knowledge, except as
disclosed in the Offering Memorandums, no change in any insurance laws
or regulations of Massachusetts, Michigan, New Hampshire or Delaware is
pending or has been introduced which could reasonably be expected to be
adopted and, if adopted, could reasonably be expected to have,
individually or in the aggregate with all such changes, a material
adverse effect upon the condition (financial or otherwise), earnings,
business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise.
15
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.
------------------------------------------------
(a) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Trust
agrees to sell to each Initial Purchaser and each Initial Purchaser agrees to
purchase from the Trust, at a price of $1,000 per Series A Capital Security, the
number of Series A Capital Securities set forth in Schedule A opposite the name
of such Initial Purchaser, plus any additional Series A Capital Securities which
such Initial Purchaser may become obligated to purchase pursuant to the
provisions of Section 11 hereof.
(b) Deliveries of certificates for the respective accounts of
the Initial Purchasers for the Series A Capital Securities shall be made at the
office of Merrill Lynch in New York, and payment of the purchase price for the
Series A Capital Securities shall be made by Merrill Lynch on behalf of the
several Initial Purchasers, to the Trust by wire transfer of immediately
available funds contemporaneous with closing at such place as shall be agreed
upon by Merrill Lynch and the Offerors, at 10:00 A.M. on February 3, 1997
(unless postponed in accordance with the provisions of Section 11), or such
other time not later than ten business days after such date as shall be agreed
upon by Merrill Lynch and the Offerors (such time and date of payment and
delivery being herein called the "Closing Time").
Certificates for the Series A Capital Securities shall be in such
denominations and registered in such names as the Initial Purchasers may request
in writing at least one business day before the Closing Time. It is understood
that each Initial Purchaser has authorized Merrill Lynch, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Series A Capital Securities which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the Initial Purchasers, may (but shall
not be obligated to) make payment of the purchase price for the Series A Capital
Securities, to be purchased by any Initial Purchaser whose funds have not been
received by the Closing Time, but such payment shall not relieve such Initial
Purchaser from its obligations hereunder. The certificates representing the
Series A Capital Securities which are not resold to institutional "accredited
investors" shall be registered in the name of Cede & Co. pursuant to the DTC
Agreement and shall be made available for examination and packaging by the
Initial Purchasers in The City of New York not later than 10:00 A.M. on the last
business day prior to the Closing Time.
(c) As compensation to the Initial Purchasers for their commitment
hereunder and in view of the fact that the proceeds of the sale of the Series A
Capital Securities will be used to purchase Series A Junior Subordinated
Debentures of the Company, the Company hereby agrees to pay at the Closing Time
to Merrill Lynch in immediately available funds, for the accounts of the several
Initial Purchasers, $10 per Series A Capital Security to be delivered by the
Trust hereunder at the Closing Time.
16
(d) Each Initial Purchaser represents and warrants to, and agrees
with, the Company that it is a Qualified Institutional Buyer (as defined in
Section 6(a)(i)) and an Institutional Accredited Investor (as defined in Section
6(a)(i)).
SECTION 3. Covenants of the Offerors.
-------------------------
The Offerors covenant with each Initial Purchaser as follows:
(a) The Offerors, as promptly as possible, will furnish to each
Initial Purchaser, without charge, such number of copies of the Final Offering
Memorandum and any amendments and supplements thereto and documents incorporated
by reference therein as such Initial Purchaser may reasonably request.
(b) The Offerors will immediately notify each Initial Purchaser, and
confirm such notice in writing, of (x) any filing made by the Offerors of
information relating to the offering of the Series A Capital Securities to the
Initial Purchasers with any securities exchange or any other regulatory body in
the United States or any other jurisdiction, and (y) prior to the completion of
the placement of the Series A Capital Securities by the Initial Purchasers as
evidenced by a notice in writing from the Initial Purchasers to the Offerors,
any material changes in or affecting the earnings, business affairs or business
prospects of the Trust, or the Company and its subsidiaries considered as one
enterprise, which (i) make any statement in the Offering Memorandums false or
misleading or (ii) are not disclosed in the Offering Memorandums. In such event
or if during such time any event shall occur as a result of which it is
necessary, in the reasonable opinion of the Company, its counsel or counsel for
the Initial Purchasers, to amend or supplement Final Offering Memorandum in
order that the Final Offering Memorandum not include any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances then
existing, the Company will forthwith amend or supplement the Final Offering
Memorandum by preparing and furnishing to each Initial Purchaser an amendment or
amendments of, or a supplement or supplements to, the Final Offering Memorandum
(in form and substance satisfactory in the reasonable opinion of counsel for the
Initial Purchasers) so that, as so amended or supplemented, the Final Offering
Memorandum will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a Subsequent
Purchaser, not misleading.
(c) The Offerors will advise each Initial Purchaser promptly
of any proposal to amend or supplement the Offering Memorandums and will not
effect such amendment or supplement without the consent of the Initial
17
Purchasers, which consent shall not be unreasonably withheld. Neither the
consent of the Initial Purchasers, nor the Initial Purchasers' delivery of any
such amendment or supplement, shall constitute a waiver of any of the conditions
set forth in Section 5 hereof.
(d) The Offerors shall take all reasonable action necessary to enable
Standard & Poor's Ratings Services, a division of McGraw Hill, Inc. ("S&P"), and
Moody's Investors Service, Inc. ("Moody's") to provide their respective credit
ratings of the Capital Securities.
(e) The Offerors will cooperate with the Initial Purchaser and use
reasonable efforts to permit the Series A Capital Securities to be eligible for
clearance and settlement through the facilities of DTC.
(f) The Trust will use the net proceeds received by it from the sale
of the Series A Capital Securities; and the Company will use the proceeds
received by it from the sale of the Series A Junior Subordinated Debentures, in
the manners specified in the Offering Memorandums under "Use of Proceeds".
(g) Prior to 30 days after the date hereof, neither the Trust nor the
Company will, without the prior written consent of Merrill Lynch, directly or
indirectly, issue, sell, offer or agree to sell, grant any option for the sale
of, or otherwise dispose of, Capital Securities, any security convertible into
exchangeable or exercisable for Capital Securities or the Junior Subordinated
Debentures or any debt securities substantially similar (including provisions
with respect to the deferral of interest) to the Junior Subordinated Debentures
or any equity security substantially similar to the Capital Securities (except
for the Securities issued pursuant to this Agreement); provided, however, that
the foregoing restrictions shall not apply to any disposal of the Junior
Subordinated Debentures following any liquidation of the Trust.
SECTION 4. Payment of Expenses.
-------------------
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and any filing of the Offering Memorandums (including
financial statements and any schedules or exhibits and any document incorporated
therein by reference) and of each amendment or supplement thereto, (ii) the
preparation, printing and delivery to the Initial Purchasers of this Agreement,
the Operative Documents and such other documents as may be required in
connection with the offering, purchase, sale and delivery of the Securities,
(iii) the preparation, issuance and delivery of the certificates for the Series
A Capital Securities, the Series A Capital Securities Guarantee and the Series A
Junior Subordinated Debentures to the Initial Purchasers, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v)
rating agency fees, and (vi) the fees and expenses of any trustee appointed
18
under any of the Operative Documents, including the fees and disbursements of
counsel for such trustees in connection with the Operative Documents.
(b) Termination of Agreement. If this Agreement is terminated by the
Initial Purchasers in accordance with the provisions of Section 5 or Section
10(a)(i) hereof, the Company shall reimburse the Initial Purchasers for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
Shearman & Sterling, counsel for the Initial Purchasers.
SECTION 5. Conditions of Initial Purchasers' Obligations.
---------------------------------------------
The obligations of the Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of the Offerors contained in
Section 1 hereof or in certificates of any Trustee of the Trust, officer of the
Company or any of its subsidiaries delivered pursuant to the provisions hereof,
to the performance by the Offerors of their obligations hereunder, and to the
following further conditions:
(a) Opinion of Outside Counsel for Offerors. At the Closing Time, the
Initial Purchasers shall have received the favorable opinion, dated as of the
Closing Time, of Ropes & Gray, counsel for the Company, in form and substance
reasonably satisfactory to counsel for the Initial Purchasers. Such counsel may
also state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of Trustees of the
Trust, officers of the company and its subsidiaries and certificates of public
officials; provided that such certificates have been delivered to the Initial
--------
Purchasers.
(b) Opinion of Special Delaware Counsel for Offerors. At the Closing
Time, the Initial Purchasers shall have received the favorable opinion, dated as
of the Closing Time, of Richards, Layton & Finger, special Delaware counsel to
the Offerors, in form and substance reasonably satisfactory to counsel for the
Initial Purchasers. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of Trustees of the Trust, officers of the company and its
subsidiaries and certificates of public officials; provided that such
--------
certificates have been delivered to the Initial Purchasers.
(c) Opinion of Counsel for The Chase Manhattan Bank. At the Closing
Time, the Initial Purchasers shall have received the favorable opinion, dated as
of the Closing Time, of Seward & Kissel, counsel to The Chase Manhattan Bank, as
Property Trustee under the Declaration, as Guarantee Trustee under the Series A
Guarantee Agreement, and as Debenture Trustee under the Indenture in form and
substance reasonably satisfactory to counsel for the Initial Purchasers.
19
(d) Opinion of Special Tax Counsel for the Offerors. At the Closing
Time, the Initial Purchasers shall have received an opinion, dated as of the
Closing Time, of Latham & Watkins, special tax counsel to the Offerors, that (i)
the Junior Subordinated Debentures will be classified for United States federal
income tax purposes as indebtedness of the Company, (ii) the Trust will be
classified for United States federal income tax purposes as a grantor trust and
not as an association taxable as a corporation and (iii) although the discussion
set forth in the Offering Memorandums under the heading "Certain Federal Income
Tax Consequences" does not purport to discuss all possible United States federal
income tax consequences of the purchase, ownership and disposition of the Series
A Capital Securities, such discussion constitutes, in all material respects, a
fair and accurate summary of the United States federal income tax consequences
of the purchase, ownership and disposition of the Series A Capital Securities
under current law. Such opinion may be conditioned on, among other things, the
initial and continuing accuracy of the facts, financial and other information,
covenants and representations set forth in certificates of officers of the
Company and other documents deemed necessary for such opinion.
(e) Opinion of Counsel for Initial Purchasers. At the Closing Time,
the Initial Purchasers shall have received the favorable opinion, dated as of
the Closing Time, of Shearman & Sterling, counsel for the Initial Purchasers,
with respect to the incorporation and legal existence of the Company, the Series
A Capital Securities, the Indenture, the Series A Guarantee Agreement, this
Agreement, the Registration Rights Agreement, the Offering Memorandums and other
related matters as the Initial Purchasers may require. Such counsel may also
state that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of Trustees of the Trust,
officers of the Company and its subsidiaries and certificates of public
officials; provided that such certificates have been delivered to the Initial
Purchasers.
(f) Certificates. At the Closing Time there shall not have been, since
the date hereof or since the respective dates as of which information is given
in the Offering Memorandums, any material adverse change, or any development or
event involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Trust, or the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, except
that the announcement of or execution of an agreement relating to the terms and
conditions of the Acquisition (as defined in the Offering Memorandums) will not
be considered a material adverse change for purposes of this subsection (f), and
the Initial Purchasers shall have received a certificate of the President or
Chief Executive Officer, and the Treasurer, Chief Financial Officer or Vice-
President of the Company, and a certificate of an Administrative Trustee of the
Trust, dated as of the Closing Time, to the effect that except as disclosed in
the Offering Memorandums, (i) there has been no such material adverse change or
development or event, (ii) the representations and warranties in Section 1
hereof were true
20
and correct with the same force and effect as though expressly made at and as of
the Closing Time, and (iii) the Offerors have complied with all agreements and
satisfied all conditions on their part to be performed or satisfied at or prior
to the Closing Time.
(g) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Initial Purchasers shall have received from Price Waterhouse LLP
a letter dated such date, in form and substance satisfactory to the Initial
Purchasers, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to Initial Purchasers with respect to
the financial statements and certain financial information contained in the
Offering Memorandums.
(h) Bring-down Comfort Letter. At the Closing Time, the Initial
Purchasers shall have received from Price Waterhouse LLP a letter, dated as of
the Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (h) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to the Closing Time.
(i) Maintenance of Rating. Notwithstanding the satisfaction of any
other condition set forth in this Section 5, at the Closing Time, the Capital
Securities shall be rated at least "a2" by Moody's Investor's Service, Inc. and
BBB+ by Standard & Poor's Ratings Services, and the Trust shall have delivered
to the Initial Purchasers a letter dated the Closing Time, from each such rating
agency, or other evidence satisfactory to the Initial Purchasers, confirming
that the Series A Capital Securities have such ratings; and between the date of
this Agreement and the Closing Time, there shall not have occurred a downgrading
in the rating assigned to the Series A Capital Securities or any of the
Company's other debt securities by any nationally recognized statistical rating
organization, and no such organization shall have publicly announced that it has
under surveillance or review, with possible negative implications, its rating of
any Capital Securities or any of the Company's other debt securities.
(j) Additional Documents. At the Closing Time, counsel for the Initial
Purchasers shall have been furnished with the Registration Rights Agreement,
executed by the Company and the Trust, and such documents and opinions as they
may reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Series A Capital Securities as herein contemplated, or
in order to evidence the accuracy of any of the representations and warranties
of the Offerors, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Offerors in connection with the issuance and
sale of the Series A Capital Securities as herein contemplated shall be
reasonably satisfactory in form and substance to the Initial Purchasers and
counsel for the Initial Purchasers.
21
(k) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Initial Purchasers by notice to the Offerors
at any time at or prior to the Closing Time, and such termination shall be
without liability of any party to any other party except as Provided in Section
4 and except that Sections 7 and 9 shall survive any such termination and remain
in full force and effect.
SECTION 6. Subsequent Offers and Sales of the Series A Capital
---------------------------------------------------
Securities.
- ----------
(a) Offer and Sale Procedures. Each of the Initial Purchasers and the
Offerors hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Series A Securities:
(i) Offers and Sales Only to Institutional Accredited Investors,
-----------------------------------------------------------
Qualified Institutional Buyers and Non-U.S. Persons. Offers and sales of
---------------------------------------------------
the Capital Securities will be made only by the Initial Purchasers or
affiliates thereof qualified to do so in the jurisdictions in which such
offers or sales are made. Each such offer or sale shall only be made (A) to
persons whom the offeror or seller reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the 1933 Act)
("Qualified Institutional Buyers"), or (B) to a limited number of other
institutional accredited investors (as such term is defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D) that the Initial Purchasers
reasonably believe to be and, with respect to sales and deliveries, that
are accredited investors ("Institutional Accredited Investors"), or (C)
non-U-S, persons outside the United States to whom the Initial Purchasers
reasonably believe offers and sales of the Series A Capital Securities may
be made in reliance upon Regulation S under the 1933 Act.
(ii) No General Solicitation. The Series A Capital Securities
-----------------------
will be offered by approaching prospective Subsequent Purchasers on an
individual basis. No general solicitation or general advertising (within
the meaning of Rule 502(c) under the 1933 Act) will be used in the United
States in connection with the offering of the Capital Securities.
(iii) Purchases by Non-Bank Fiduciaries. In the case of a non-bank
---------------------------------
Subsequent Purchaser of a Series A Capital Security acting as a fiduciary
for one or more third parties, in connection with an offer and sale to such
purchaser pursuant to clause (a) above, each third party shall, in the
judgment of the applicable Initial Purchaser, be an Institutional
Accredited Investor or a Qualified Institutional Buyer or a non-U.S. person
outside the United States.
22
(iv) Subsequent Purchaser Notification. Each Initial Purchaser will
---------------------------------
take reasonable steps to inform, and cause each of its U.S. affiliates to
take reasonable steps to inform, persons acquiring Series A Capital
Securities from such Initial Purchaser or affiliate, as the case may be, in
the United States that the Series A Capital Securities (A) have not been
and will not be registered under the 1933 Act, (B) are being sold to them
without registration under the 1933 Act in reliance on Rule 144A or in
accordance with another exemption from registration under the 1933 Act, as
the case may be, and (C) may not be offered, sold or otherwise transferred
except (1) to the Company, (2) outside the United States in accordance with
Regulation S, or (3) inside the United States in accordance with (x) Rule
144A to a person whom the seller reasonably believes is a Qualified
Institutional Buyer that is purchasing such Securities for its own account
or for the account of a Qualified Institutional Buyer to whom notice is
given that the offer, sale or transfer is being made in reliance on Rule
144A or (y) an exemption from registration under the 1933 Act (including
the exemption provided by Rule 144), if available.
(v) Minimum Amount. No sale of the Series A Capital Securities to
--------------
any one Subsequent Purchaser will be in blocks of less than U.S.$100,000
liquidation amount.
(vi) Restrictions on Transfer. The transfer restrictions and the
------------------------
other provisions of the Declaration, including the legend required thereby,
shall apply to the Series A Capital Securities except as otherwise agreed
by the Offerors and the Initial Purchasers. Following the sale of the
Series A Capital Securities by the Initial Purchasers to Subsequent
Purchasers pursuant to the terms hereof, the Initial Purchasers shall not
be liable or responsible to the Offerors for any losses, damages or
liabilities suffered or incurred by the Offerors, including any losses,
damages or liabilities under the 1933 Act, arising from or relating to any
resale or transfer of any Capital Security.
(vii) Delivery of Offering Memorandum. Each Initial Purchaser will
-------------------------------
deliver to each purchaser of the Series A Capital Securities from such
Initial Purchaser, in connection with its original distribution of the
Series A Capital Securities, a copy of the Final Offering Memorandum, as
amended and supplemented at the date of such delivery.
(b) Covenants of the Offerors. Each of the Offerors, jointly and
severally, covenants with each Initial Purchaser as follows:
(i) Due Diligence. In connection with the original distribution of
-------------
the Series A Capital Securities, the Offerors agree that, prior to any
offer or sale of the
23
Series A Capital Securities by the Initial Purchasers, the Initial
Purchasers and counsel for the Initial Purchasers shall have the right to
make reasonable inquiries into the business of the Trust, the Company and
its subsidiaries. The Offerors also agree to provide answers to each
prospective Subsequent Purchaser of Series A Capital Securities who so
requests concerning the Trust, Company and its subsidiaries (to the extent
that such information is available or can be acquired and made available to
each prospective Subsequent Purchaser without unreasonable effort or
expense and to the extent the provision thereof is not prohibited by
applicable law or contractual restriction) and the terms and conditions of
the offering of the Securities, as provided in the Offering Memorandums.
(ii) Integration. The Offerors agree that they will not and will
-----------
cause their affiliates not to make any offer or sale of securities of the
Offerors of any class if, as a result of the doctrine of "integration"
referred to in Rule 502 under the 1933 Act, such offer or sale would render
invalid (for the purpose of (i) the sale of the Series A Capital Securities
by the Trust to the Initial Purchasers, (ii) the resale of the Series A
Capital Securities by the Initial Purchasers to Subsequent Purchasers or
(iii) the resale of the Series A Capital Securities by such Subsequent
Purchasers to others) the exemption from the registration requirements of
the 1933 Act provided by Section 4(2) thereof or by Rule 144A or by
Regulation S thereunder or otherwise,
(iii) Rule 144A Information. The Company agrees that, in order to
---------------------
render the Series A Capital Securities eligible for resale pursuant to Rule
144A under the 1933 Act, while any of the Series A Capital Securities
remain outstanding, the Company will make available, upon request, to any
holder of Series A Capital Securities or prospective purchasers of Series A
Capital Securities the information specified in Rule 144A(d)(4), unless
such information is furnished to the Commission pursuant to Section 13 or
15(d) of the 1934 Act (such information, whether made available to holders
or prospective purchasers or furnished to the Commission, is herein
referred to as "Additional Information").
(iv) Restriction on Repurchases. Until the expiration of three years
--------------------------
(or such shorter period as may hereafter be referred to in Rule 144(k) (or
similar successor rule)) after the original issuance of the Series A
Capital Securities, the Offerors will not, and will cause their affiliates
not to, purchase or agree to purchase or otherwise acquire any Series A
Capital Securities which are "restricted securities" (as such term is
defined under Rule 144(a)(3) under the 1933 Act), whether as beneficial
owner, or otherwise unless, immediately upon any such purchase, the
Offerors or any affiliate shall submit such Series A Capital Securities to
24
the Trustee for cancellation; provided, that any affiliate which is an
--------
insurance company need not deliver such securities to the Trustee for
cancellation for so long as such affiliate continues to hold such Series A
Capital Securities for its own account.
(c) Resale Pursuant to Rule 903 of Regulation S or Rule 144A. Each
Initial Purchaser understands that the Series A Capital Securities have not been
and will not be registered under the 1933 Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons
except in accordance with Regulation S under the 1933 Act or pursuant to an
exemption from the registration requirements of the 1933 Act. Each Initial
Purchaser represents and agrees, that, except as permitted below, it has offered
and sold Series A Capital Securities and will offer and sell Series A Capital
Securities (i) as part of their distribution at any time and (ii) otherwise
until forty days after the later of the date upon which the offering of the
Series A Capital Securities commences and the Closing Time, only in accordance
with Rule 903 of Regulation S or Rule 144A under the 1933 Act or to
Institutional Accredited Investors. Accordingly, neither the Initial Purchasers
and their affiliates nor any persons acting on their behalf have engaged or will
engage in any directed selling efforts with respect to Series A Capital
Securities, and the Initial Purchasers, their affiliates and any person acting
on their behalf have complied and will comply with the offering restriction
requirements of Regulation S. Each Initial Purchaser agrees that, at or prior to
confirmation of a sale of Series A Capital Securities (other than a sale of
Series A Capital Securities pursuant to Rule 144A or to Institutional Accredited
Investors), it will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Securities from it
or through it during the restricted period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under
the United States Securities Act of 1933 (the "Securities
Act") and may not be offered or sold within the United States
or to or for the account or benefit of U.S. persons (i) as
part of their distribution at any time and (ii) otherwise
until forty days after the later of the date upon which the
offering of the Securities commenced and the date of closing,
except in either case in accordance with Regulation S or Rule
144A under the Securities Act. Terms used above have the
meaning given to them by Regulation S."
Terms used in the above paragraph have the meanings given to them by
Regulation S.
Each Initial Purchaser severally represents and agrees that it has not entered
and will not enter into any contractual arrangements with respect to the
distribution of the Series A Capital Securities, except with its affiliates that
are Qualified Institutional Buyers or with the prior written consent of the
Offerors.
25
(d) Compliance with United Kingdom Law. Each Initial Purchaser
represents and agrees that (i) it has not offered or sold and, prior to the
expiry of the period of six months from the date hereof, will not offer or sell
any Series A Capital Securities to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has only issued or passed
on and will only issue or pass on in the United Kingdom any document received by
it in connection with the issue of the Series A Capital Securities to a person
who is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a person to whom such
document may otherwise lawfully be issued or passed on; and (iii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to any Series
A Capital Securities in, from or otherwise involving the United Kingdom.
(e) Compliance with Other Laws. Each Initial Purchaser acknowledges
that no action has been taken to permit a public offering of the Series A
Capital Securities in any jurisdiction outside of the United States where action
would be required for such purpose. Each Initial Purchaser agrees that it will
not offer or sell any Series A Capital Securities in any jurisdiction outside of
the United States except under circumstances that will result in compliance with
all applicable laws thereof.
SECTION 7. Indemnification.
---------------
(a) The Offerors agree to jointly and severally indemnify and
hold harmless each Initial Purchaser and each person, if any, who controls any
Initial Purchaser within the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of an untrue statement or alleged
untrue statement of a material fact contained in the Offering Memorandums,
or the omission or alleged omission therefrom of 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;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue
26
statement or omission, or any such alleged untrue statement or omission, if
such settlement is effected with the written consent of the Offerors; and
(iii) against any and all expense whatsoever, as incurred (including
fees and disbursements of counsel chosen by you), reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that this indemnity agreement does not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Offerors by any
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandums; and provided, further that the foregoing indemnity agreement with
-------- -------
respect to any untrue statement contained in or any omission from a preliminary
Offering Memorandum shall not inure to the benefit of any Initial Purchaser (or
any person who controls such Initial Purchaser within the meaning of Section 15
of the 1933 Act) from whom the person asserting any such loss, liability, claim,
damage or expense purchased any of the Series A Securities that are the subject
thereof if such person was not sent or given a copy of the Final Offering
Memorandum in the quantities requested by such Initial Purchaser and the loss,
claim, damage or liability of such Initial Purchaser results from an untrue
statement contained in or the omission from such preliminary Offering Memorandum
which was corrected in the Final Offering Memorandum.
(b) Each Initial Purchaser severally agrees to indemnify and hold
harmless the Company, its directors and officers, the Trust, the Administrative
Trustees and each person, if any, who controls the Company or the Trust within
the meaning of Section 15 of the 1933 Act, against any and all loss, liability,
claim, damage and expense described in the indemnity agreement in Section 7(a),
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Offering Memorandums in reliance
upon and in conformity with written information furnished to the Company or the
Trust by such Initial Purchaser through Merrill Lynch expressly for use in the
Offering Memorandums.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. An indemnifying party may participate at
its own expense in the defense of such action. In no event shall the
27
indemnifying party or parties be liable for the fees and expenses of more than
one counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances.
SECTION 8. Contribution.
------------
In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in Section 7 is for any
reason held to be unenforceable by the indemnified parties although applicable
in accordance with its terms, the Offerors and the Initial Purchasers shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity incurred by the Company, the Trust and
one or more of the Initial Purchasers, as incurred, in such proportions that (a)
the Initial Purchasers are responsible for that portion represented by the
percentage that the total commission for the Initial Purchasers appearing on the
cover page of the Final Offering Memorandum bears to the aggregate offering
price to investors of the Series A Capital Securities appearing thereon and (b)
the Offerors are responsible for the balance; provided, however, that no person
-------- -------
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section, each
person, if any, who controls an Initial Purchaser within the meaning of Section
15 of the 1933 Act shall have the same rights to contribution as such Initial
Purchaser, and each officer and director of the Company, each Administrative
Trustee and each person, if any, who controls the Company or the Trust within
the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company and the Trust.
SECTION 9. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery.
- --------
All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or trustees of the Trust
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Initial Purchaser or
controlling person, or by or on behalf of the Trust or the Company, and shall
survive delivery of the Series A Capital Securities to the Initial Purchasers.
SECTION 10. Termination of Agreement.
------------------------
(a) Termination; General. The Initial Purchasers may terminate this
Agreement, by notice to the Offerors, at any time at or prior to the Closing
Time (i) if there has occurred any material adverse change in the financial
markets in the United Sates or any outbreak of hostilities or escalation thereof
or other calamity or crisis the effect of which on
28
the financial markets of the United States is such as to make it, in your
judgment, impracticable to market the Series A Capital Securities or to enforce
contracts for the sale of the Series A Capital Securities, or (ii) if trading in
any securities of the Company has been suspended by the Commission or the New
York Stock Exchange, or if trading generally on either the American Stock
Exchange or the New York Stock Exchange or in the over-the-counter market has
been suspended, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices for securities have been required, by any of such
exchange or by order of the Commission or any other governmental authority or
(iii) if a banking moratorium has been declared by either federal, New York,
Massachusetts or Delaware authorities, or (iv) if there has been, since the date
hereof or since the respective dates as of which information is given in the
Offering Memorandums, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Trust or the Company and its subsidiaries considered as one enterprise, whether
or not arising in the ordinary course of business, except that the announcement
of or execution of an agreement relating to the terms and conditions of the
Acquisition (as defined in the Offering Memorandum) will not be considered a
material adverse change for purposes of this clause (iv).
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 7 and 8 shall survive such termination and remain in full force and effect.
SECTION 11. Default by One or More of the Initial Purchasers.
------------------------------------------------
If one or more of the Initial Purchasers shall fail at the Closing
Time to purchase Securities which it or they are obligated to purchase under
this Agreement (the "Defaulted Securities"), the Initial Purchasers shall have
the right, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting Initial Purchasers, or any other Initial Purchasers, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the
Initial Purchasers shall not have completed such arrangements within such 24-
hour period, then this Agreement shall terminate without liability on the part
of any non-defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Initial Purchasers or the Company
shall have the right to postpone the Closing Time until no later than February
5, 1997 in order to effect any required changes in the Offering Memorandums or
in any other documents or arrangements. As used herein, the
29
term "Initial Purchaser" includes any person substituted for an Initial
Purchaser under this Section 11.
SECTION 12. Notices.
-------
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Initial Purchasers shall be directed
to the Initial Purchasers c/o Merrill Lynch at North Tower, World Financial
Center, New York, New York 10281-1201, attention of Steven J. Goulart, with a
copy to Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022,
Attention of Faith Grossnickle, Esq.; notices to the Offerors shall be directed
to Allmerica Financial Corporation, 440 Lincoln Street, Worcester, Massachusetts
01653, attention of Edward J. Parry III, with a copy to Ropes & Gray, One
International Square, Boston, Massachusetts 02110, Attention of Lauren I.
Norton, Esq.
SECTION 13. Parties.
-------
This Agreement shall each inure to the benefit of and be binding upon
the Initial Purchasers and the Offerors and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other thin the Initial Purchasers and the
Offerors and their respective successors and the controlling persons and
officers and directors referred to in Sections 7 and 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Initial Purchasers and the Offerors and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any Initial
Purchaser shall be deemed to be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW.
-------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
SECTION 15. Effect of Headings.
------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding Agreement
between the Initial Purchasers and the Offerors in accordance with its terms.
Very truly yours,
ALLMERICA FINANCIAL CORPORATION
By Edward J. Parry III
-------------------------------
Name: Edward J. Parry III
Title: Vice President and Chief
Financial Officer
AFC CAPITAL TRUST I
By Edward J. Parry III
-------------------------------
Name: Edward J. Parry III
Administrative Trustee
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Morgan Stanley & Co. Incorporated
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By Steven J. Goulart
---------------------------
Name: Steven J. Goulart
Title: Managing Director
SCHEDULE A
Number of
Series A
Capital
Name of Initial Purchaser Securities
- ------------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................ 150,000
Morgan Stanley & Co. Incorporated............................ 150,000
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Total........................................................ 300,000
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