EXHIBIT 4.2
THE COMMERCE GROUP, INC.
FORM OF
OFFICERS' CERTIFICATE
Dated as of [__________], 2003
________________________
SETTING FORTH TERMS OF A SERIES OF DEBT SECURITIES
[__]% Senior Notes due [_____]
________________________
Pursuant to the Indenture dated as of [____________], 2003
OFFICERS' CERTIFICATE
The undersigned, the [title] and the [title] of The Commerce Group,
Inc., a Massachusetts corporation (the "Company"), hereby certify as provided
below pursuant to Section 301 of the Indenture, dated as of [_______], 2003 (the
"Indenture"), between the Company and Wachovia Bank, National Association (the
"Trustee"). This Officers' Certificate is delivered, pursuant to authority
granted to the undersigned by the resolutions adopted on [________], 2003 by the
Board of Directors of the Company, for the purpose of creating and setting forth
the terms of a series of Securities to be issued pursuant to the Indenture.
Capitalized terms not otherwise defined herein are used as defined in the
Indenture.
1. The Board of Directors of the Company has authorized the creation
by the Company of one or more series of Securities under the Indenture through
one or more Officers' Certificates and, pursuant to such authorization and in
accordance with the Indenture, this Officers' Certificate is being delivered to
the Trustee to establish the terms of a series of Securities as set forth
therein.
2. The title of the Securities shall be "[__]% Senior Notes due
[_____]" (herein called the "Notes").
3. The aggregate principal amount of Notes which may be
authenticated and delivered under the Indenture is limited to U.S.$300,000,000,
except for Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Notes as provided in Sections [304,
305, 306, 906, or 1106] of the Indenture, upon surrender in part of any
registered Security for conversion into other securities of the Company or
exchange for securities of another issuer pursuant to its terms, or pursuant to
or as contemplated by the terms of such Notes.
4. The Notes shall be issuable as registered Securities and shall
not be exchangeable for bearer Securities.
5. Subject to earlier redemption at the option of the Company, the
principal of the Notes shall be payable in U.S. dollars on [___________],
[_____].
6. The Notes shall bear interest at the rate of [__]% per annum;
such interest shall accrue from [_______], 2003 (or from the most recent
Interest Payment Date to which interest on the Notes has been paid or provided
for); the Interest Payment Dates on which such interest shall be payable shall
be [_________] and [__________] in each year, commencing [__________], 2004; the
Regular Record Dates for the determination of Holders to whom interest is
payable shall be the [_________] and [__________] next preceding each Interest
Payment Date. Interest on the Notes shall be payable in U.S. dollars.
7. Pursuant to the Indenture, the Trustee has been appointed as the
Security Registrar for the Notes. The Trustee is hereby further appointed as the
initial Paying Agent and transfer agent of the Notes. The principal of and
interest on the Notes shall be payable at the office of the Paying Agent, which
shall initially be located in [____________].
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8. The Notes shall be redeemable at the option of the Company at any
time in whole, or from time to time in part, at a Redemption Price equal to the
greater of:
(i) 100% of the principal amount of the Notes being redeemed
on the Redemption Date; or
(ii) the sum of the present values of the remaining scheduled
payments of principal and interest on the Notes being redeemed on the
Redemption Date (not including any portion of any interest payments
accrued to the Redemption Date) discounted to the Redemption Date on a
semi-annual basis at the Treasury Rate, as determined by the Reference
Treasury Dealer, plus 20 basis points
plus, in each case, accrued and unpaid interest on the notes to the Redemption
Date; provided, however, that installments of interest on Notes that are due and
payable on Interest Payment Dates falling on or prior to a Redemption Date will
be payable on the Interest Payment Date to the Holders of such Notes who were
registered Holders as of the close of business on the Record Date immediately
preceding such Interest Payment Date. The Redemption Price will be calculated on
the basis of a 360-day year consisting of twelve 30-day months.
9. The Company will not, and will not permit any Subsidiary of the
Company to, at any time, directly or indirectly, create, assume, incur or permit
to exist any Indebtedness secured by a pledge, lien or any other encumbrance on
the Common Stock of any Designated Subsidiary if the aggregate amount of the
Indebtedness so secured exceeds an amount equal to 15% of Consolidated Tangible
Net Worth, without making effective provision whereby the Notes then Outstanding
(and, if the Company so elects, any other Indebtedness of the Company that is
not subordinate to the Notes and with respect to which the governing instruments
require, or pursuant to which the Company is otherwise obligated or required, to
provide such security) shall be equally and ratably secured with such secured
Indebtedness so long as such other Indebtedness shall be secured.
If the Company shall be required to secure the Notes equally and
ratably with any other Indebtedness pursuant to this Officers' Certificate, (i)
the Company will promptly deliver to the Trustee an Officers' Certificate
stating that the foregoing covenant has been complied with, and an Opinion of
Counsel stating that, in the opinion of such counsel, the foregoing covenant has
been complied with and that any instruments executed by the Company or any
Subsidiary of the Company in the performance of the foregoing covenant comply
with the requirements of the foregoing covenant and (ii) the Trustee is hereby
authorized to enter into an indenture or agreement supplemental hereto and to
take such action, if any, as it may deem advisable to enable it to enforce the
rights of the Holder of the Notes so secured.
10. So long as any Notes are Outstanding and except in a transaction
otherwise permitted by the Indenture, the Company will not issue, sell, transfer
or otherwise dispose of (except to the Company, to a Subsidiary of the Company
that agrees in writing to hold such transferred shares subject to the terms of
this Officers' Certificate, or director's qualifying shares), and the Company
will not permit any Designated Subsidiary to issue, sell, transfer or
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otherwise dispose of (except to the Company, to a Subsidiary of the Company that
agrees in writing to hold such transferred shares subject to the terms of this
Officers' Certificate, or director's qualifying shares), any shares of capital
stock of a Designated Subsidiary (other than preferred stock having no voting
rights of any kind, except as required by law or in the event of non-payment of
dividends) in each case if, after giving effect to any such transaction, the
Company or such Designated Subsidiary, as applicable, would own, directly or
indirectly, less than 80% of the shares of the Designated Subsidiary, unless, in
each case, the capital stock of such Designated Subsidiary shall be issued,
sold, transferred or otherwise disposed of for consideration consisting of cash
or other property which, in the opinion of the Board of Directors of the Company
pursuant to a Board Resolution adopted in good faith, is at least equal to the
fair market value of such capital stock; provided, however, that the foregoing
shall not prohibit the issuance or disposition of securities if required by any
law or any regulation or order of any court or governmental or insurance
regulatory authority.
11. The terms defined below shall, for all purposes of the Notes
under the Indenture and this Officers' Certificate, have the meanings specified
below, unless the context clearly otherwise requires or unless otherwise
indicated:
"Common Stock" means, with respect to any Designated Subsidiary,
capital stock of any class or classes, however designated, except capital
stock that is non-participating beyond fixed dividend and liquidation
preferences and the holders of which have either no voting rights or
limited voting rights, only in the case of certain contingencies, to elect
less than a majority of the directors of such Designated Subsidiary, and
shall include capital stock of any class, however designated, which are
convertible into such Common Stock.
"Comparable Treasury Issue" means the United States Treasury
security selected by the Reference Treasury Dealer as having an actual or
interpolated maturity comparable to the remaining term of the Notes to be
redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of
the Notes.
"Comparable Treasury Price" means, with respect to any Redemption
Date, (a) the average of the Reference Treasury Dealer Quotations for such
Redemption Date, after excluding the highest and lowest of the Reference
Treasury Dealer Quotations, or (b) if the Trustee obtains fewer than four
such Reference Treasury Dealer Quotations, the average of all such
Reference Treasury Dealer Quotations.
"Consolidated Tangible Net Worth" shall mean, at any date, the total
assets appearing on the consolidated balance sheet of the Company and its
consolidated Subsidiaries as of the end of the most recent fiscal quarter
of the Company, prepared in accordance with generally accepted accounting
principles, less (a) the total liabilities appearing on such balance sheet
and (b) Intangible Assets.
"Designated Subsidiary" means any present or future consolidated
Subsidiary of the Company, the consolidated shareholders' equity of which
constitutes at least 10%
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of the consolidated shareholders' equity of the Company. As of the date
hereof, the Designated Subsidiaries are The Commerce Insurance Company,
Commerce West Insurance Company, American Commerce Insurance Company, ACIC
Holding Co., Inc., Citation Insurance Company and Commerce Holdings, Inc.
"Indebtedness" means, with respect to any Person:
(i) the principal of, and any premium and interest on, whether
outstanding on the date hereof or hereafter created, incurred or
assumed, which is (a) indebtedness of the Person for money borrowed
and (b) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which that Person is
responsible or liable;
(ii) all capitalized lease obligations of that Person;
(iii) all obligations of that Person issued or assumed as the
deferred purchase price of property, assets or businesses (except
that the deferred purchase price shall not be considered
Indebtedness if the purchase price thereof is payable in full within
90 days from the date on which such indebtedness was created);
(iv) all obligations of that Person for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar
credit transaction, other than obligations with respect to some
letters of credit securing obligations entered into in the ordinary
course of business;
(v) all guarantees of that Person of obligations of the
type referred to above or dividends of other Persons;
(vi) all obligations of the type referred to above of third
parties secured by any lien on the Common Stock of a Designated
Subsidiary, the amount of this obligation being deemed to be the
lesser of the value of the Common Stock of such Designated
Subsidiary or the amount of the obligation so secured; and
(vii) any amendments, modifications, refundings, renewals or
extensions of any indebtedness or obligation described above.
"Intangible Assets" means the value, as shown on or reflected on the
consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the end of the most recent fiscal quarter of the
Company, prepared in accordance with generally accepted accounting
principles, of (i) all trade names, trademarks, licenses, patents,
copyrights and goodwill, (ii) organizational costs and (iii) unamortized
debt discount and expense, less unamortized premium.
"Reference Treasury Dealer" means each of Bear, Stearns & Co. Inc.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated (or their
affiliates which are primary U.S. Government securities dealers) and their
respective successors; provided, however, that if any of the foregoing or
their affiliates shall cease to be a primary U.S. Government
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securities dealer in The City of New York (a "Primary Treasury Dealer"),
the Company will substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Trustee by such Reference Treasury Dealer
at 3:30 p.m. (New York City time) on the third Business Day preceding such
Redemption Date.
"Treasury Rate" means, with respect to any Redemption Date, the rate
per year equal to the semi-annual equivalent yield to maturity or
interpolated (on a day count basis) of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price
for such Redemption Date.
12. The Notes shall not be subject to any sinking fund and shall not
be repurchasable at the option of any Holder.
13. The Notes shall not be convertible into other securities of the
Company or exchangeable for securities of another issuer.
14. Defeasance and covenant defeasance under Section [1302] and
Section [1303] of the Indenture shall be applicable to the Notes.
15. The Notes shall not be issuable upon the exercise of warrants.
16. The Notes shall initially be issued in whole in the form of one
or more permanent Global Securities. The Depository Trust Company, a clearing
agency registered under the Securities Exchange Act of 1934, as amended ("DTC"),
shall initially serve as the Depositary for such Global Security or Securities.
For so long as DTC shall be the Depositary, all Notes shall be registered in its
name or in the name of a nominee thereof. While the Notes are evidenced by one
or more Global Securities, the Depositary or its nominee, as the case may be,
shall be the sole Holder thereof for all purposes under the Indenture. Neither
the Company nor the Trustee shall have any responsibility or obligation to the
Depositary's participants or the beneficial owners for whom they act with
respect to their receipt from the Depositary of payments on the Notes or notices
given under the Indenture. The Global Security or Securities provided for
hereunder shall bear such legend or legends as may be required from time to time
by the Depositary.
17. Except as hereinafter described, Notes in definitive form will
not be issued. Notwithstanding the foregoing, in the event the Company decides
to discontinue the use of Global Securities, any Event of Default has occurred
and is continuing or if DTC is at any time unwilling, unable or ineligible to
continue as Depositary and a successor Depositary is not appointed by the
Company within 90 days, the Company will issue individual Notes in certificated
form to owners of "book-entry" ownership interests in exchange for the Notes
held by DTC or its nominee, as the case may be. In such instance, an owner of a
"book-entry" ownership interest will be entitled to physical delivery of
certificates equal in principal amount to
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such "book-entry" ownership interest and to have such certificates registered in
its name. Individual certificates so issued will be issued in denominations of
U.S.$1,000 or any multiple thereof.
18. Additional terms regarding the Notes are as set forth in the
form of the Notes set forth below.
19. The form of the Notes shall be substantially as follows:
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY
("DTC") OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE TRANSFERRED TO, OR REGISTERED
OR EXCHANGED FOR, NOTES REGISTERED IN THE NAME OF, ANY PERSON OTHER THAN DTC OR
A NOMINEE THEREOF OR A SUCCESSOR OF DTC OR A NOMINEE OF SUCH SUCCESSOR, AND NO
SUCH TRANSFER MAY BE REGISTERED, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, DATED [________], 2003 BETWEEN THE COMMERCE GROUP, INC. AND
WACHOVIA BANK, NATIONAL ASSOCIATION, AS TRUSTEE. EVERY NOTE AUTHENTICATED AND
DELIVERED UPON REGISTRATION OF TRANSFER OF, OR IN EXCHANGE FOR OR IN LIEU OF,
THIS NOTE SHALL BE A GLOBAL NOTE SUBJECT TO THE FOREGOING, EXCEPT IN LIMITED
CIRCUMSTANCES.
[Insert the Form of Note (including terms of this series) from
Article II of the Indenture]
* * *
(Signature page follows)
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IN WITNESS WHEREOF, we have set our hands as of the date first above
written.
THE COMMERCE GROUP, INC.
By:
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Name:
Title:
By:
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Name:
Title:
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