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EXHIBIT 10.04
AMENDED AND RESTATED DECLARATION
OF TRUST
BY AND AMONG
WILMINGTON TRUST COMPANY,
AS INSTITUTIONAL TRUSTEE,
WILMINGTON TRUST COMPANY,
AS DELAWARE TRUSTEE,
TOWER GROUP, INC.,
AS SPONSOR,
AND
MICHAEL H. LEE, FRANCIS M. COLALUCCI AND STEVEN G. FAUTH,
AS ADMINISTRATORS,
DATED AS OF DECEMBER 15, 2004
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TABLE OF CONTENTS
PAGE
ARTICLE I. INTERPRETATION AND DEFINITIONS...............................................................1
Section 1.1. Definitions............................................................................1
ARTICLE II. ORGANIZATION.................................................................................9
Section 2.1. Name...................................................................................9
Section 2.2. Office.................................................................................9
Section 2.3. Purpose................................................................................9
Section 2.4. Authority..............................................................................9
Section 2.5. Title to Property of the Trust........................................................10
Section 2.6. Powers and Duties of the Trustees and the Administrators..............................10
Section 2.7. Prohibition of Actions by the Trust and the Institutional Trustee.....................14
Section 2.8. Powers and Duties of the Institutional Trustee........................................15
Section 2.9. Certain Duties and Responsibilities of the Institutional Trustee and
Administrators........................................................................16
Section 2.10. Certain Rights of Institutional Trustee...............................................18
Section 2.11. Delaware Trustee......................................................................20
Section 2.12. Execution of Documents................................................................20
Section 2.13. Not Responsible for Recitals or Issuance of Securities................................20
Section 2.14. Duration of Trust.....................................................................21
Section 2.15. Mergers...............................................................................21
ARTICLE III. SPONSOR.....................................................................................22
Section 3.1. Sponsor's Purchase of Common Securities...............................................22
Section 3.2. Responsibilities of the Sponsor.......................................................22
Section 3.3. Expenses..............................................................................23
Section 3.4. Right to Proceed......................................................................23
ARTICLE IV. INSTITUTIONAL TRUSTEE AND ADMINISTRATORS....................................................24
Section 4.1. Number of Trustees....................................................................24
Section 4.2. Delaware Trustee......................................................................24
Section 4.3. Institutional Trustee; Eligibility....................................................24
Section 4.4. Certain Qualifications of the Delaware Trustee Generally..............................25
Section 4.5. Administrators........................................................................25
Section 4.6. Initial Delaware Trustee..............................................................25
Section 4.7. Appointment, Removal and Resignation of Institutional Trustee and
Administrators........................................................................25
Section 4.8. Vacancies Among Trustees..............................................................27
Section 4.9. Effect of Vacancies...................................................................27
Section 4.10. Meetings of the Trustees and the Administrators.......................................27
Section 4.11. Delegation of Power...................................................................28
Section 4.12. Conversion, Consolidation or Succession to Business...................................28
ARTICLE V. DISTRIBUTIONS...............................................................................28
Section 5.1. Distributions.........................................................................28
ARTICLE VI. ISSUANCE OF SECURITIES......................................................................29
Section 6.1. General Provisions Regarding Securities...............................................29
Section 6.2. Paying Agent, Transfer Agent and Registrar............................................30
Section 6.3. Form and Dating.......................................................................30
Section 6.4. Mutilated, Destroyed, Lost or Stolen Certificates.....................................30
Section 6.5. Temporary Securities..................................................................31
Section 6.6. Cancellation..........................................................................31
Section 6.7. Rights of Holders; Waivers of Past Defaults...........................................31
ARTICLE VII. DISSOLUTION AND TERMINATION OF TRUST........................................................33
Section 7.1. Dissolution and Termination of Trust..................................................33
ARTICLE VIII. TRANSFER OF INTERESTS.......................................................................34
Section 8.1. General...............................................................................34
Section 8.2. Transfer Procedures and Restrictions..................................................35
Section 8.3. Deemed Security Holders...............................................................38
ARTICLE IX. LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS...........38
Section 9.1. Liability.............................................................................38
Section 9.2. Exculpation...........................................................................38
Section 9.3. Fiduciary Duty........................................................................39
Section 9.4. Indemnification.......................................................................39
Section 9.5. Outside Businesses....................................................................41
Section 9.6. Compensation; Fee.....................................................................42
ARTICLE X. TAX AND ACCOUNTING..........................................................................42
Section 10.1. Fiscal Year...........................................................................42
Section 10.2. Certain Accounting Matters............................................................42
Section 10.3. Banking...............................................................................43
Section 10.4. Withholding...........................................................................43
Section 10.5. Intention of the Parties..............................................................43
ARTICLE XI. AMENDMENTS AND MEETINGS.....................................................................44
Section 11.1. Amendments............................................................................44
Section 11.2. Meetings of the Holders of Securities; Action by Written Consent......................45
ARTICLE XII. REPRESENTATIONS OF INSTITUTIONAL TRUSTEE and the delaware trustee..........................47
Section 12.1. Representations and Warranties of Institutional Trustee...............................47
Section 12.2. Representations of the Delaware Trustee...............................................47
ARTICLE XIII. MISCELLANEOUS...............................................................................48
Section 13.1. Notices...............................................................................48
Section 13.2. Governing Law.........................................................................49
Section 13.3. Intention of the Parties..............................................................50
Section 13.4. Headings..............................................................................50
Section 13.5. Successors and Assigns................................................................50
Section 13.6. Partial Enforceability................................................................50
Section 13.7. Counterparts..........................................................................50
ii
Annex I Terms of Securities
Exhibit A-1................Form of Capital Security Certificate
Exhibit A-2................Form of Common Security Certificate
Exhibit B..................Specimen of Initial Debenture
Exhibit C..................Placement Agreement
iii
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
TOWER GROUP STATUTORY TRUST III
DECEMBER 15, 2004
AMENDED AND RESTATED DECLARATION OF TRUST ("DECLARATION") dated and
effective as of December 15, 2004, by the Trustees (as defined herein), the
Administrators (as defined herein), the Sponsor (as defined herein) and the
holders, from time to time, of undivided beneficial interests in the Trust (as
defined herein) to be issued pursuant to this Declaration;
WHEREAS, the Trustees, the Administrators and the Sponsor established
Tower Group Statutory Trust III (the "TRUST"), a statutory trust under the
Statutory Trust Act (as defined herein) pursuant to a Declaration of Trust dated
as of December 3, 2004 (the "ORIGINAL DECLARATION"), and a Certificate of Trust
filed with the Secretary of the State of Delaware on December 3, 2004 (the
"Certificate of Trust"), for the sole purpose of issuing and selling the
Securities (as defined herein) representing undivided beneficial interests in
the assets of the Trust and investing the proceeds thereof in the Debentures (as
defined herein) of the Debenture Issuer (as defined herein) and engaging in
those activities necessary, advisable or incidental thereto;
WHEREAS, as of the date hereof, no interests in the Trust have been
issued; and
WHEREAS, the Trustees, the Administrators and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration;
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a statutory trust under the Statutory Trust Act and that
this Declaration constitutes the governing instrument of such statutory trust,
Trustees declares that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the Securities, subject to
the provisions of this Declaration, and, in consideration of the mutual
covenants contained herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties, intending to be legally
bound hereby, amend and restate in its entirety the Original Declaration and
agree as follows:
ARTICLE I.
INTERPRETATION AND DEFINITIONS
SECTION 1.1. DEFINITIONS. Unless the context otherwise requires:
(a) capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration and each Annex and Exhibit hereto, as modified, supplemented or
amended from time to time;
(d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to
this Declaration unless otherwise specified; and
(e) a reference to the singular includes the plural and vice versa.
"ADDITIONAL INTEREST" has the meaning set forth in the Indenture.
"ADDITIONAL SUMS" has the meaning set forth in the Indenture.
"ADMINISTRATIVE ACTION" has the meaning set forth in paragraph 4(a) of
Annex I.
"ADMINISTRATORS" means each of Michael H. Lee, Francis M. Colalucci and
Steven G. Fauth, solely in such Person's capacity as Administrator of the Trust
created and continued hereunder and not in such Person's individual capacity, or
such Administrator's successor in interest in such capacity, or any successor
appointed as herein provided.
"AFFILIATE" has the same meaning as given to that term in Rule 405 of
the Securities Act or any successor rule thereunder.
"AUTHORIZED OFFICER" of a Person means any Person that is authorized to
bind such Person.
"BANKRUPTCY EVENT" means, with respect to any Person:
(a) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of such Person in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs and such decree or order shall remain unstayed and in effect for a
period of 90 consecutive days; or
(b) such Person shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of such Person of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due.
"BUSINESS DAY" means any day other than Saturday, Sunday or any other
day on which banking institutions in New York City Wilmington, Delaware are
permitted or required by any applicable law to close.
"CAPITAL SECURITIES" has the meaning set forth in paragraph 1(a) of
Annex I.
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"CAPITAL SECURITY CERTIFICATE" means a definitive Certificate in fully
registered form representing a Capital Security substantially in the form of
Exhibit A-1.
"CERTIFICATE" means any certificate evidencing Securities.
"CLOSING DATE" has the meaning set forth in the Placement Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.
"COMMON SECURITIES" has the meaning set forth in paragraph 1(b) of
Annex I.
"COMMON SECURITY CERTIFICATE" means a definitive Certificate in fully
registered form representing a Common Security substantially in the form of
Exhibit A-2.
"COMPANY INDEMNIFIED PERSON" means (a) any Administrator; (b) any
Affiliate of any Administrator; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Administrator; or
(d) any officer, employee or agent of the Trust or its Affiliates.
"COMPARABLE TREASURY ISSUE" has the meaning set forth in paragraph 4(a)
of Annex I.
"COMPARABLE TREASURY PRICE" has the meaning set forth in paragraph 4(a)
of Annex I.
"CORPORATE TRUST OFFICE" means the office of the Institutional Trustee
at which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-1600, Attn: Corporate Trust
Administration.
"COUPON RATE" has the meaning set forth in paragraph 2(a) of Annex I.
"COVERED PERSON" means: (a) any Administrator, officer, director,
shareholder, partner, member, representative, employee or agent of (i) the Trust
or (ii) any of the Trust's Affiliates; and (b) any Holder of Securities.
"CREDITOR" has the meaning set forth in Section 3.3.
"DEBENTURE ISSUER" means Tower Group, Inc., a Delaware corporation, in
its capacity as issuer of the Debentures under the Indenture.
"DEBENTURE TRUSTEE" means Wilmington Trust Company, as trustee under
the Indenture until a successor is appointed thereunder, and thereafter means
such successor trustee.
"DEBENTURES" means the Fixed/Floating Rate Junior Subordinated
Deferrable Interest Debentures due 2034 to be issued by the Debenture Issuer
under the Indenture.
"DEFAULTED INTEREST" has the meaning set forth in the Indenture.
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"DELAWARE TRUSTEE" has the meaning set forth in Section 4.2.
"DETERMINATION DATE" has the meaning set forth in paragraph 2(a) of
Annex I.
"DIRECT ACTION" has the meaning set forth in Section 2.8(d).
"DISTRIBUTION" means a distribution payable to Holders of Securities in
accordance with Section 5.1.
"DISTRIBUTION PAYMENT DATE" has the meaning set forth in paragraph 4(b)
of Annex I.
"DISTRIBUTION PERIOD" means (i) with respect to the first Distribution
Payment Date, the period beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in March
2005 and (ii) thereafter, with respect to each Distribution Payment Date, the
period beginning on (and including) the preceding Distribution Payment Date and
ending on (but excluding) such current Distribution Payment Date.
"DISTRIBUTION RATE" means, for the period beginning on (and including)
the date of original issuance and ending on (but excluding) the Distribution
Payment Date in December 2009 the rate per annum of 7.40%, and for the period
beginning on (and including), the Distribution Payment Date in December 2009 and
thereafter, the Coupon Rate.
"EVENT OF DEFAULT" means any one of the following events (whatever the
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(a) the occurrence of an Indenture Event of Default; or
(b) default by the Trust in the payment of any Optional
Redemption Price of any Security when it becomes due and payable; or
(c) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Institutional Trustee in this
Declaration (other than those specified in clause (a) or (b) above) and
continuation of such default or breach for a period of 60 days after there has
been given, by registered or certified mail to the Institutional Trustee and to
the Sponsor by the Holders of at least 25% in aggregate liquidation amount of
the outstanding Capital Securities, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(d) the occurrence of a Bankruptcy Event with respect to the
Institutional Trustee if a successor Institutional Trustee has not been
appointed within 90 days thereof.
"EXTENSION PERIOD" has the meaning set forth in paragraph 4(b) of Annex
I.
"FEDERAL RESERVE" has the meaning set forth in paragraph 4(a) of Annex
I.
4
"FIDUCIARY INDEMNIFIED PERSON" shall mean each of the Institutional
Trustee, (including in its individual capacity), the Delaware Trustee (including
in its individual capacity), any Affiliate of the Institutional Trustee or
Delaware Trustee and any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Institutional
Trustee or Delaware Trustee or Delaware Trustee.
"FISCAL YEAR" has the meaning set forth in Section 10.1.
"FIXED RATE PERIOD REMAINING LIFE" has the meaning set forth in
paragraph 4(a) of Annex I.
"GUARANTEE" means the guarantee agreement, dated as of December 15,
2004, of the Sponsor in respect of the Capital Securities.
"HOLDER" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the meaning
of the Statutory Trust Act.
"INDEMNIFIED PERSON" means a Company Indemnified Person or a Fiduciary
Indemnified Person.
"INDENTURE" means the Indenture dated as of December 15, 2004, between
the Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued, as such Indenture and
any supplemental indenture may be amended, supplemented or otherwise modified
from time to time.
"INDENTURE EVENT OF DEFAULT" means an "Event of Default" as defined in
the Indenture.
"INSTITUTIONAL TRUSTEE" means the Trustee meeting the eligibility
requirements set forth in Section 4.7.
"INTEREST" means any interest due on the Debentures including any
Additional Interest and Defaulted Interest.
"INTEREST RATE" has the meaning set forth in paragraph 2(a) of Annex I.
"INVESTMENT COMPANY" means an investment company as defined in the
Investment Company Act.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"INVESTMENT COMPANY EVENT" has the meaning set forth in paragraph 4(a)
of Annex I.
"LIQUIDATION" has the meaning set forth in paragraph 3 of Annex I.
"LIQUIDATION DISTRIBUTION" has the meaning set forth in paragraph 3 of
Annex I.
"MAJORITY IN LIQUIDATION AMOUNT OF THE SECURITIES" means Holder(s) of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
5
Common Securities voting separately as a class, who are the record owners of
more than 50% of the aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.
"MATURITY DATE" has the meaning set forth in paragraph 2(a) of Annex I.
"OFFICERS' CERTIFICATES" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person, and, with respect
to the Administrators, a certificate signed by at least two Administrators. Any
Officers' Certificate delivered with respect to compliance with a condition or
covenant providing for it in this Declaration shall include:
(a) a statement that each individual signing the Officers'
Certificate has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each individual in rendering the Officers'
Certificate;
(c) a statement that each such individual signing the Officers'
Certificate has made such examination or investigation as, in such individual's
opinion, is necessary to enable such individual to express an informed opinion
as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"OPTIONAL REDEMPTION DATE" has the meaning set forth in paragraph 4(a)
of Annex I.
"OPTIONAL REDEMPTION PRICE" has the meaning set forth in paragraph 4(a)
of Annex I.
"PAYING AGENT" has the meaning set forth in Section 6.2.
"PERSON" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"PLACEMENT AGREEMENT" means the Placement Agreement relating to the
offering and sale of Capital Securities in the form of Exhibit C.
"PRIMARY TREASURY DEALER" has the meaning set forth in paragraph 4(a)
of Annex I.
"PROPERTY ACCOUNT" has the meaning set forth in Section 2.8(c).
"PRO RATA" has the meaning set forth in paragraph 8 of Annex I.
6
"QUORUM" means a majority of the Administrators or, if there are only
two Administrators, both of them.
"QUOTATION AGENT" has the meaning set forth in paragraph 4(a) of Annex
I.
"REDEMPTION/DISTRIBUTION NOTICE" has the meaning set forth in paragraph
4(e) of Annex I.
"REFERENCE TREASURY DEALER" has the meaning set forth in paragraph 4(a)
of Annex I.
"REFERENCE TREASURY DEALER QUOTATIONS" has the meaning set forth in
paragraph 4(a) of Annex I.
"REGISTRAR" has the meaning set forth in Section 6.2.
"RELEVANT TRUSTEE" has the meaning set forth in Section 4.7(a).
"RESPONSIBLE OFFICER" means, with respect to the Institutional Trustee,
any officer within the Corporate Trust Office of the Institutional Trustee,
including any vice-president, any assistant vice-president, any assistant
secretary, any secretary, the treasurer, any assistant treasurer, any trust
officer or other officer of the Corporate Trust Office of the Institutional
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.
"RESTRICTED SECURITIES LEGEND" has the meaning set forth in Section
8.2(b).
"RULE 3A-5" means Rule 3a-5 under the Investment Company Act.
"RULE 3A-7" means Rule 3a-7 under the Investment Company Act.
"SECURITIES" means the Common Securities and the Capital Securities.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time, or any successor legislation.
"SPECIAL EVENT" has the meaning set forth in paragraph 4(a) of Annex I.
"SPECIAL REDEMPTION DATE" has the meaning set forth in paragraph 4(a)
of Annex I.
"SPECIAL REDEMPTION PRICE" has the meaning set forth in paragraph 4(a)
of Annex I.
"SPONSOR" means Tower Group, Inc., a Delaware corporation, or any
successor entity in a merger, consolidation or amalgamation, in its capacity as
sponsor of the Trust.
"STATUTORY TRUST ACT" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. ss.ss. 3801, ET SEQ. as may be amended from time to time.
7
"SUBSIDIARY" means with respect to any Person, (a) any corporation at
least a majority of the outstanding voting stock of which is owned, directly or
indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (b) any general partnership, joint
venture or similar entity, at least a majority of the outstanding partnership or
similar interests of which shall at the time be owned by such Person, or by one
or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries, and (c) any limited partnership of which such Person or any of its
Subsidiaries is a general partner. For the purposes of this definition, "voting
stock" means shares, interests, participations or other equivalents in the
equity interest (however designated) in such Person having ordinary voting power
for the election of a majority of the directors (or the equivalent) of such
Person, other than shares, interests, participations or other equivalents having
such power only by reason of the occurrence of a contingency.
"SUCCESSOR ENTITY" has the meaning set forth in Section 2.15(b).
"SUCCESSOR DELAWARE TRUSTEE" has the meaning set forth in Section
4.7(e).
"SUCCESSOR INSTITUTIONAL TRUSTEE" has the meaning set forth in Section
4.7(a).
"SUCCESSOR SECURITIES" has the meaning set forth in Section 2.15(b).
"SUPER MAJORITY" has the meaning set forth in paragraph 5(b) of Annex
I.
"TAX EVENT" has the meaning set forth in paragraph 4(a) of Annex I.
"10% IN LIQUIDATION AMOUNT OF THE SECURITIES" means Holder(s) of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of 10%
or more of the aggregate liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.
"3-MONTH LIBOR" has the meaning set forth in paragraph 2(a) of Annex I.
"TRANSFER AGENT" has the meaning set forth in Section 6.2.
"TREASURY RATE" has the meaning set forth in paragraph 4(a) of Annex I.
"TREASURY REGULATIONS" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"TRUST PROPERTY" means (a) the Debentures, (b) any cash on deposit in,
or owing to, the Property Account and (c) all proceeds and rights in respect of
the foregoing and any other property and assets for the time being held or
deemed to be held by the Institutional Trustee pursuant to the trusts of this
Declaration.
8
"TRUSTEE" or "TRUSTEES" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"U.S. PERSON" means a United States Person as defined in Section
7701(a)(30) of the Code.
ARTICLE II.
ORGANIZATION
SECTION 2.1. NAME. The Trust is named "Tower Group Statutory Trust
III," as such name may be modified from time to time by the Administrators
following written notice to the Institutional Trustee and the Holders of the
Securities. The Trust's activities may be conducted under the name of the Trust
or any other name deemed advisable by the Administrators.
SECTION 2.2. OFFICE. The address of the principal office of the Trust
is c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-1600. On at least 10 Business Days written notice to
the Institutional Trustee and the Holders of the Securities, the Administrators
may designate another principal office, which shall be in a state of the United
States or in the District of Columbia.
SECTION 2.3. PURPOSE. The exclusive purposes and functions of the Trust
are (a) to issue and sell the Securities representing undivided beneficial
interests in the assets of the Trust, (b) to invest the gross proceeds from such
sale to acquire the Debentures, (c) to facilitate direct investment in the
assets of the Trust through issuance of the Common Securities and the Capital
Securities, and (d) except as otherwise limited herein, to engage in only those
other activities necessary, advisable or incidental thereto. The Trust shall not
borrow money, issue debt or reinvest proceeds derived from investments, pledge
any of its assets, or otherwise undertake (or permit to be undertaken) any
activity that would cause the Trust not to be classified for United States
federal income tax purposes as a grantor trust.
SECTION 2.4. AUTHORITY. Except as specifically provided in this
Declaration, the Institutional Trustee shall have exclusive and complete
authority to carry out the purposes of the Trust. An action taken by a Trustee
in accordance with its powers shall constitute the act of and serve to bind the
Trust. In dealing with the Trustees acting on behalf of the Trust, no Person
shall be required to inquire into the authority of the Trustees to bind the
Trust. Persons dealing with the Trust are entitled to rely conclusively on the
power and authority of the Trustees as set forth in this Declaration. The
Administrators shall have only those ministerial duties set forth herein with
respect to accomplishing the purposes of the Trust and are not intended to be
trustees or fiduciaries with respect to the Trust or the Holders. The
Institutional Trustee shall have the right, but shall not be obligated except as
provided in Section 2.6, to perform those duties assigned to the Administrators.
9
SECTION 2.5. TITLE TO PROPERTY OF THE TRUST. Except as provided in
Section 2.8 with respect to the Debentures and the Property Account or as
otherwise provided in this Declaration, legal title to all assets of the Trust
shall be vested in the Trust. The Holders shall not have legal title to any part
of the assets of the Trust, but shall have an undivided beneficial interest in
the assets of the Trust.
SECTION 2.6. POWERS AND DUTIES OF THE TRUSTEES AND THE ADMINISTRATORS.
(a) The Trustees and the Administrators shall conduct the affairs of
the Trust in accordance with the terms of this Declaration. Subject to the
limitations set forth in paragraph (b) of this Section, and in accordance with
the following provisions (i) and (ii), the Trustees and the Administrators shall
have the authority to enter into all transactions and agreements determined by
the Institutional Trustee to be appropriate in exercising the authority, express
or implied, otherwise granted to the Trustees or the Administrators, as the case
may be, under this Declaration, and to perform all acts in furtherance thereof,
including without limitation, the following:
(i) Each Administrator shall have the power, duty and
authority to act on behalf of the Trust with respect to the following
matters:
(A) the issuance and sale of the Securities;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, such agreements as
may be necessary, advisable or incidental thereto in
connection with the purposes and function of the Trust,
including agreements with the Paying Agent;
(C) ensuring compliance with the Securities Act and
applicable securities or blue sky laws of states and other
jurisdictions;
(D) the sending of notices (other than notices of
default), and other information regarding the Securities and
the Debentures to the Holders in accordance with this
Declaration including notice of any notice received from the
Debenture Issuer of its election to defer payments of interest
on the Debentures by extending the interest payment period
under the Indenture;
(E) the consent to the appointment of a Paying Agent,
Transfer Agent and Registrar in accordance with this
Declaration, which consent shall not be unreasonably withheld
or delayed;
(F) execution and delivery of the Securities in
accordance with this Declaration;
(G) execution and delivery of closing certificates
pursuant to the Placement Agreement and the application for a
taxpayer identification number;
10
(H) unless otherwise determined by the Holders of a
Majority in liquidation amount of the Securities or as
otherwise required by the Statutory Trust Act, to execute on
behalf of the Trust (either acting alone or together with any
or all of the Administrators) any documents that the
Administrators have the power to execute pursuant to this
Declaration;
(I) the taking of any action as the Sponsor or an
Administrator may from time to time determine is necessary,
advisable or incidental to the foregoing to give effect to the
terms of this Declaration for the benefit of the Holders
(without consideration of the effect of any such action on any
particular Holder);
(J) to establish a record date with respect to all
actions to be taken hereunder that require a record date be
established, including Distributions, voting rights,
redemptions and exchanges, and to issue relevant notices to
the Holders of Capital Securities and Holders of Common
Securities as to such actions and applicable record dates; and
(K) to duly prepare and file all applicable tax
returns and tax information reports that are required to be
filed with respect to the Trust on behalf of the Trust.
(L) to negotiate the terms of, and the execution and
delivery of, the Placement Agreement providing for the sale of
the Capital Securities;
(M) to employ or otherwise engage employees, agents
(who may be designated as officers with titles), managers,
contractors, advisors, attorneys and consultants and pay
reasonable compensation for such services;
(N) to incur expenses that are necessary, advisable
or incidental to carry out any of the purposes of the Trust;
and
(O) to take all action that may be necessary or
appropriate for the preservation and the continuation of the
Trust's valid existence, rights, franchises and privileges as
a statutory trust under the laws of each jurisdiction (other
than the State of Delaware) in which such existence is
necessary to protect the limited liability of the Holders of
the Capital Securities or to enable the Trust to effect the
purposes for which the Trust was created.
(ii) As among the Trustees and the Administrators, the
Institutional Trustee shall have the power, duty and authority, and is
hereby authorized, to act on behalf of the Trust with respect to the
following matters:
(A) the establishment of the Property Account;
(B) the receipt of the Debentures;
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(C) the collection of interest, principal and any other
payments made in respect of the Debentures in the
Property Account;
(D) the distribution through the Paying Agent of amounts
owed to the Holders in respect of the Securities;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Securities and the
Debentures to the Holders in accordance with this
Declaration;
(G) the distribution of the Trust Property in accordance
with the terms of this Declaration;
(H) to the extent provided in this Declaration, the
winding up of the affairs of and liquidation of the
Trust and the preparation, execution and filing of
the certificate of cancellation with the Secretary of
State of the State of Delaware;
(I) after any Event of Default (PROVIDED that such Event
of Default is not by or with respect to the
Institutional Trustee) the taking of any action
incidental to the foregoing as the Institutional
Trustee may from time to time determine is necessary,
advisable or incidental to the foregoing to give
effect to the terms of this Declaration and protect
and conserve the Trust Property for the benefit of
the Holders (without consideration of the effect of
any such action on any particular Holder); and
(J) to take all action that may be necessary for the
preservation and the continuation of the Trust's
valid existence, rights, franchises and privileges as
a statutory trust under the laws of the State of
Delaware.
(iii) The Institutional Trustee shall have the power and
authority to act on behalf of the Trust with respect to any of the
duties, liabilities, powers or the authority of the Administrators set
forth in Section 2.6(a)(i)(D), (E) and (F) herein but shall not have a
duty to do any such act unless specifically requested to do so in
writing by the Sponsor, and shall then be fully protected in acting
pursuant to such written request; and in the event of a conflict
between the action of the Administrators and the action of the
Institutional Trustee, the action of the Institutional Trustee shall
prevail.
(b) So long as this Declaration remains in effect, the Trust (or the
Trustees or Administrators acting on behalf of the Trust) shall not undertake
any business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, neither the Trustees nor the Administrators
may cause the Trust to (i) acquire any investments or engage in any activities
not authorized by this Declaration, (ii) sell, assign, transfer, exchange,
mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or
interests therein, including to Holders, except as expressly provided herein,
(iii) take any action that would reasonably be expected (A) to cause the Trust
to fail or cease to qualify as a "grantor trust" for United States federal
income tax purposes or (B) to require the trust to register as an Investment
Company under the Investment Company Act, (iv) incur any indebtedness for
borrowed money or issue any other debt, or (v) take or consent to any action
that would result in the placement of a lien on any of the Trust Property. The
Institutional Trustee shall, at the sole cost and expense of the Trust, defend
all claims and demands of all Persons at any time claiming any lien on any of
the Trust Property adverse to the interest of the Trust or the Holders in their
capacity as Holders.
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(c) In connection with the issuance and sale of the Capital Securities,
the Sponsor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (and any actions
taken by the Sponsor in furtherance of the following prior to the date of this
Declaration are hereby ratified and confirmed in all respects):
(i) the taking of any action necessary to obtain an exemption
from the Securities Act;
(ii) the determination of the jurisdictions in which to take
appropriate action to qualify or register for sale all or part of the
Capital Securities and the determination of any and all such acts,
other than actions which must be taken by or on behalf of the Trust,
and the advice to the Administrators of actions they must take on
behalf of the Trust, and the preparation for execution and filing of
any documents to be executed and filed by the Trust or on behalf of the
Trust, as the Sponsor deems necessary or advisable in order to comply
with the applicable laws of any such States in connection with the sale
of the Capital Securities;
(iii) the negotiation of the terms of, and the execution and
delivery of, the Placement Agreement providing for the sale of the
Capital Securities; and
(iv) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrators
and the Holders of a Majority in liquidation amount of the Common Securities are
authorized and directed to conduct the affairs of the Trust and to operate the
Trust so that the Trust will not (i) be deemed to be an Investment Company
required to be registered under the Investment Company Act, and (ii) fail to be
classified as a "grantor trust" for United States federal income tax purposes.
The Administrators and the Holders of a Majority in liquidation amount of the
Common Securities shall not take any action inconsistent with the treatment of
the Debentures as indebtedness of the Debenture Issuer for United States federal
income tax purposes. In this connection, the Administrators and the Holders of a
Majority in liquidation amount of the Common Securities are authorized to take
any action, not inconsistent with applicable laws, the Certificate of Trust or
this Declaration, as amended from time to time, that each of the Administrators
and the Holders of a Majority in liquidation amount of the Common Securities
determines in their discretion to be necessary or desirable for such purposes.
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(e) All expenses incurred by the Administrators or the Trustees
pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the
Trustees and the Administrators shall have no obligations with respect to such
expenses.
(f) The assets of the Trust shall consist of the Trust Property.
(g) Legal title to all Trust Property shall be vested at all times in
the Institutional Trustee (in its capacity as such) and shall be held and
administered by the Institutional Trustee and the Administrators for the benefit
of the Trust in accordance with this Declaration.
(h) If the Institutional Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Declaration and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Institutional Trustee or to such Holder, then and in
every such case the Sponsor, the Institutional Trustee and the Holders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Institutional Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 2.7. PROHIBITION OF ACTIONS BY THE TRUST AND THE INSTITUTIONAL
TRUSTEE.
(a) The Trust shall not, and the Institutional Trustee shall cause the
Trust not to, engage in any activity other than as required or authorized by
this Declaration. In particular, the Trust shall not and the Institutional
Trustee shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of the
Securities pursuant to the terms of this Declaration and of the
Securities;
(ii) acquire any assets other than as expressly provided
herein;
(iii) possess Trust Property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(v) possess any power or otherwise act in such a way as to
vary the Trust assets or the terms of the Securities in any way
whatsoever other than as expressly provided herein;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities;
(vii) carry on any "trade or business" as that phrase is used
in the Code; or
(viii) other than as provided in this Declaration (including
Annex I), (A) direct the time, method and place of exercising any trust
or power conferred upon the Debenture Trustee with respect to the
Debentures, (B) waive any past default that is waivable under the
Indenture, (C) exercise any right to rescind or annul any declaration
that the principal of all the Debentures shall be due and payable, or
(D) consent to any amendment, modification or termination of the
Indenture or the Debentures where such consent shall be required unless
the Trust shall have received a written opinion of counsel to the
effect that such modification will not cause the Trust to cease to be
classified as a "grantor trust" for United States federal income tax
purposes.
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SECTION 2.8. POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE.
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Institutional Trustee in trust for the benefit of the
Trust and the Holders of the Securities. The right, title and interest of the
Institutional Trustee to the Debentures shall vest automatically in each Person
who may hereafter be appointed as Institutional Trustee in accordance with
Section 4.11. Such vesting and cessation of title shall be effective whether or
not conveyancing documents with regard to the Debentures have been executed and
delivered.
(b) The Institutional Trustee shall not transfer its right, title and
interest in the Debentures to the Administrators or to the Delaware Trustee.
(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "PROPERTY ACCOUNT") in the name of and under the
exclusive control of the Institutional Trustee, maintained in the
Institutional Trustee's trust department, on behalf of the Holders of
the Securities and, upon the receipt of payments of funds made in
respect of the Debentures held by the Institutional Trustee, deposit
such funds into the Property Account and make payments, or cause the
Paying Agent to make payments, to the Holders of the Capital Securities
and Holders of the Common Securities from the Property Account in
accordance with Section 5.1. Funds in the Property Account shall be
held uninvested until disbursed in accordance with this Declaration;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the Capital
Securities and the Common Securities to the extent the Debentures are
redeemed or mature; and
(iii) upon written notice of distribution issued by the
Administrators in accordance with the terms of the Securities, engage
in such ministerial activities as shall be necessary or appropriate to
effect the distribution of the Debentures to Holders of Securities upon
the occurrence of certain circumstances pursuant to the terms of the
Securities.
(d) The Institutional Trustee may bring or defend, pay, collect,
compromise, arbitrate, resort to legal action with respect to, or otherwise
adjust claims or demands of or against, the Trust that arise out of or in
connection with an Event of Default of which a Responsible Officer of the
Institutional Trustee has actual knowledge or arises out of the Institutional
Trustee's duties and obligations under this Declaration; PROVIDED, HOWEVER, that
if an Event of Default has occurred and is continuing and such event is
attributable to the failure of the Debenture Issuer to pay interest or premium,
if any, on or principal of the Debentures on the date such interest, premium, if
any, or principal is otherwise payable (or in the case of redemption, on the
redemption date), then a Holder of the Capital Securities may directly institute
a proceeding for enforcement of payment to such Holder of the principal of or
premium, if any, or interest on the Debentures having a principal amount equal
to the aggregate liquidation amount of the Capital Securities of such Holder (a
"DIRECT ACTION") on or after the respective due date specified in the
Debentures. In connection with such Direct Action, the rights of the Holders of
the Common Securities will be subrogated to the rights of such Holder of the
Capital Securities to the extent of any payment made by the Debenture Issuer to
such Holder of the Capital Securities in such Direct Action; PROVIDED, HOWEVER,
that no Holder of the Common Securities may exercise such right of subrogation
so long as an Event of Default with respect to the Capital Securities has
occurred and is continuing.
15
(e) The Institutional Trustee shall continue to serve as a Trustee
until either:
(i) the Trust has been completely liquidated and the proceeds
of the liquidation distributed to the Holders of the Securities
pursuant to the terms of the Securities and this Declaration; or
(ii) a Successor Institutional Trustee has been appointed and
has accepted that appointment in accordance with Section 4.11.
(f) The Institutional Trustee shall have the legal power to exercise
all of the rights, powers and privileges of a Holder of the Debentures under the
Indenture and, if an Event of Default occurs and is continuing, the
Institutional Trustee may, for the benefit of Holders of the Securities, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to this Declaration (including Annex I) and the terms of the
Securities.
The Institutional Trustee must exercise the powers set forth in this
Section 2.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 2.3, and the Institutional Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 2.3.
SECTION 2.9. CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL
TRUSTEE AND ADMINISTRATORS.
(a) The Institutional Trustee, before the occurrence of any Event of
Default and after the curing or waiving of all such Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 6.7), the
Institutional Trustee shall exercise such of the rights and powers vested in it
by this Declaration, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(b) The duties and responsibilities of the Institutional Trustee and
the Administrators shall be as provided by this Declaration. Notwithstanding the
foregoing, no provision of this Declaration shall require the Institutional
Trustee or Administrators to expend or risk their own funds or otherwise incur
any financial liability in the performance of any of their duties hereunder, or
in the exercise of any of their rights or powers if the Institutional Trustee or
such Administrator shall have reasonable grounds to believe that repayment of
such funds or adequate protection against such risk of liability is not
reasonably assured to Institutional Trustee or such Administrator. Whether or
not therein expressly so provided, every provision of this Declaration relating
to the conduct or affecting the liability of or affording protection to the
Institutional Trustee or Administrators shall be subject to the provisions of
this Article. Nothing in this Declaration shall be construed to relieve an
Administrator the Institutional Trustee from liability for the Instititutional
Trustee's or such Administrator's own negligent act, the Instititutional
Trustee's or such Administrator's own negligent failure to act, or the
Instititutional Trustee's or such Administrator's own willful misconduct. To the
extent that, at law or in equity, the Institutional Trustee or an Administrator
has duties and liabilities relating to the Trust or to the Holders, the
Institutional Trustee or such Administrator shall not be liable to the Trust or
to any Holder for the Institutional Trustee's or such Administrator's good faith
reliance on the provisions of this Declaration. The provisions of this
Declaration, to the extent that they restrict the duties and liabilities of the
Administrators or the Institutional Trustee otherwise existing at law or in
equity, are agreed by the Sponsor and the Holders to replace such other duties
and liabilities of the Administrators or the Institutional Trustee.
16
(c) All payments made by the Institutional Trustee or a Paying Agent in
respect of the Securities shall be made only from the revenue and proceeds from
the Trust Property and only to the extent that there shall be sufficient revenue
or proceeds from the Trust Property to enable any Institutional Trustee or a
Paying Agent to make payments in accordance with the terms hereof. Each Holder,
by its acceptance of a Security, agrees that it will look solely to the revenue
and proceeds from the Trust Property to the extent legally available for
distribution to it as herein provided and that the Trustees and the
Administrators are not personally liable to it for any amount distributable in
respect of any Security or for any other liability in respect of any Security.
This Section 2.9(c) does not limit the liability of the Trustees expressly set
forth elsewhere in this Declaration.
(d) The Institutional Trustee shall not be liable for its own acts or
omissions hereunder except as a result of its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) the Institutional Trustee shall not be liable for any
error of judgment made in good faith by an Authorized Officer of the
Institutional Trustee, unless it shall be proved that the Institutional
Trustee was negligent in ascertaining the pertinent facts;
(ii) the Institutional Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Capital Securities or the Common
Securities, as applicable, relating to the time, method and place of
conducting any proceeding for any remedy available to the Institutional
Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under this Declaration;
17
(iii) the Institutional Trustee's sole duty with respect to
the custody, safekeeping and physical preservation of the Debentures
and the Property Account shall be to deal with such property in a
similar manner as the Institutional Trustee deals with similar property
for its fiduciary accounts generally, subject to the protections and
limitations on liability afforded to the Institutional Trustee under
this Declaration;
(iv) the Institutional Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
in writing with the Sponsor; and money held by the Institutional
Trustee need not be segregated from other funds held by it except in
relation to the Property Account maintained by the Institutional
Trustee pursuant to Section 2.8(c)(i) and except to the extent
otherwise required by law; and
(v) the Institutional Trustee shall not be responsible for
monitoring the compliance by the Administrators or the Sponsor with
their respective duties under this Declaration, nor shall the
Institutional Trustee be liable for any default or misconduct of the
Administrators or the Sponsor.
SECTION 2.10. CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE. Subject to the
provisions of Section 2.9:
(a) the Institutional Trustee may conclusively rely and shall fully be
protected in acting, or refraining from acting, in good faith upon any
resolution, opinion of counsel, certificate, written representation of a Holder
or transferee, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
appraisal, bond, debenture, note, other evidence of indebtedness or other paper
or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;
(b) if (i) in performing its duties under this Declaration, the
Institutional Trustee is required to decide between alternative courses of
action, (ii) in construing any of the provisions of this Declaration, the
Institutional Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein, or (iii) the Institutional Trustee is unsure of the
application of any provision of this Declaration, then, except as to any matter
as to which the Holders of Capital Securities are entitled to vote under the
terms of this Declaration, the Institutional Trustee may deliver a notice to the
Sponsor requesting the Sponsor's written instructions as to the course of action
to be taken and the Institutional Trustee shall take such action, or refrain
from taking such action, as the Institutional Trustee shall be instructed in
writing, in which event the Institutional Trustee shall have no liability except
for its own negligence or willful misconduct;
(c) any direction or act of the Sponsor or the Administrators
contemplated by this Declaration shall be sufficiently evidenced by an Officers'
Certificate;
(d) whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved or
established before undertaking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein specifically prescribed)
may request and conclusively rely upon an Officers' Certificate as to factual
matters which, upon receipt of such request, shall be promptly delivered by the
Sponsor or the Administrators;
18
(e) the Institutional Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;
(f) the Institutional Trustee may consult with counsel of its selection
(which counsel may be counsel to the Sponsor or any of its Affiliates) and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon and in accordance with such advice; the
Institutional Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of competent
jurisdiction;
(g) the Institutional Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Declaration at the request or
direction of any of the Holders pursuant to this Declaration, unless such
Holders shall have offered to the Institutional Trustee security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction; PROVIDED,
that nothing contained in this Section 2.10(g) shall be taken to relieve the
Institutional Trustee, subject to Section 2.9(b), upon the occurrence of an
Event of Default (that has not been cured or waived pursuant to Section 6.7), of
the power to exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs;
(h) the Institutional Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless requested in writing to do so by one or more Holders, but
the Institutional Trustee may make such further inquiry or investigation into
such facts or matters as it may see fit;
(i) the Institutional Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys and the Institutional Trustee shall not be responsible for
any misconduct or negligence on the part of or for the supervision of, any such
agent or attorney appointed with due care by it hereunder;
19
(j) whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action hereunder
the Institutional Trustee (i) may request instructions from the Holders of the
Capital Securities which instructions may only be given by the Holders of the
same proportion in liquidation amount of the Capital Securities as would be
entitled to direct the Institutional Trustee under the terms of the Capital
Securities in respect of such remedy, right or action, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be fully protected in acting in
accordance with such instructions;
(k) except as otherwise expressly provided in this Declaration, the
Institutional Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Declaration;
(l) when the Institutional Trustee incurs expenses or renders services
in connection with a Bankruptcy Event, such expenses (including the fees and
expenses of its counsel) and the compensation for such services are intended to
constitute expenses of administration under any bankruptcy law or law relating
to creditors rights generally;
(m) the Institutional Trustee shall not be charged with knowledge of an
Event of Default unless a Responsible Officer of the Institutional Trustee
obtains actual knowledge of such event or the Institutional Trustee receives
written notice of such event from any Holder, the Sponsor or the Debenture
Trustee;
(n) any action taken by the Institutional Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Institutional Trustee or its agents alone shall be sufficient
and effective to perform any such action and no third party shall be required to
inquire as to the authority of the Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration, both of
which shall be conclusively evidenced by the Institutional Trustee's or its
agent's taking such action; and
(o) no provision of this Declaration shall be deemed to impose any duty
or obligation on the Institutional Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Institutional Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty.
SECTION 2.11. DELAWARE TRUSTEE. Notwithstanding any other provision of
this Declaration other than Section 4.1, the Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities of any of the Trustees or the Administrators
described in this Declaration (except as may be required under the Statutory
Trust Act). Except as set forth in Section 4.1, the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of ss.
3807 of the Statutory Trust Act.
SECTION 2.12. EXECUTION OF DOCUMENTS. Unless otherwise determined in
writing by the Institutional Trustee, and except as otherwise required by the
Statutory Trust Act, the Institutional Trustee, or any one or more of the
Administrators, as the case may be, is authorized to execute and deliver on
behalf of the Trust any documents, agreements, instruments or certificates that
the Trustees or the Administrators, as the case may be, have the power and
authority to execute pursuant to Section 2.6.
SECTION 2.13. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained in this Declaration and the Securities shall be taken as
the statements of the Sponsor, and the Trustees do not assume any responsibility
for their correctness. The Trustees make no representations as to the value or
condition of the property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration, the
Debentures or the Securities.
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SECTION 2.14. DURATION OF TRUST. The Trust, unless earlier dissolved
pursuant to the provisions of Article VII hereof, shall be in existence for 35
years from the Closing Date.
SECTION 2.15. MERGERS.
(a) The Trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in Sections 2.15(b) and (c) and except in connection with the
liquidation of the Trust and the distribution of the Debentures to Holders of
Securities pursuant to Section 7.1(a)(iv) of the Declaration or Section 4 of
Annex I.
(b) The Trust may, with the consent of the Institutional Trustee and
without the consent of the Holders of the Capital Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any state; provided that:
(c) if the Trust is not the surviving entity, such successor entity
(the "SUCCESSOR ENTITY") either:
(A) expressly assumes all of the obligations of the
Trust under the Securities; or
(B) substitutes for the Securities other securities
having substantially the same terms as the Securities (the
"SUCCESSOR SECURITIES") so that the Successor Securities rank
the same as the Securities rank with respect to Distributions
and payments upon Liquidation, redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the Successor
Entity that possesses substantially the same powers and duties as the
Institutional Trustee as the Holder of the Debentures;
(iii) such merger, consolidation, amalgamation or replacement
does not adversely affect the rights, preferences and privileges of the
Holders of the Securities (including any Successor Securities) in any
material respect;
(iv) the Institutional Trustee receives written confirmation
from a nationally recognized statistical rating organization that rates
securities issued by the initial purchaser of the Capital Securities
that it will not reduce or withdraw the rating of any such securities
because of such merger, conversion, consolidation, amalgamation or
replacement;
(v) such Successor Entity has a purpose substantially
identical to that of the Trust;
21
(vi) prior to such merger, consolidation, amalgamation or
replacement, the Trust has received an opinion of a nationally
recognized independent counsel to the Trust experienced in such matters
to the effect that:
(A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences
and privileges of the Holders of the Securities (including any
Successor Securities) in any material respect;
(B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor the
Successor Entity will be required to register as an Investment
Company; and
(C) following such merger, consolidation,
amalgamation or replacement, the Trust (or the Successor
Entity) will continue to be classified as a "grantor trust"
for United States federal income tax purposes;
(vii) the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the extent provided
by the Guarantee;
(viii) the Sponsor owns 100% of the common securities of any
Successor Entity; and
(ix) prior to such merger, consolidation, amalgamation or
replacement, the Institutional Trustee shall have received an Officers'
Certificate of the Administrators and an opinion of counsel, each to
the effect that all conditions precedent under this Section 2.15(b) to
such transaction have been satisfied.
(d) Notwithstanding Section 2.15(b), the Trust shall not, except with
the consent of Holders of 100% in aggregate liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as other
than a grantor trust for United States federal income tax purposes.
ARTICLE III.
SPONSOR
SECTION 3.1. SPONSOR'S PURCHASE OF COMMON SECURITIES. On the Closing
Date, the Sponsor will purchase all of the Common Securities issued by the Trust
in an amount at least equal to 3% of the capital of the Trust, at the same time
as the Capital Securities are sold.
SECTION 3.2. RESPONSIBILITIES OF THE SPONSOR. In connection with the
issue and sale of the Capital Securities, the Sponsor shall have the exclusive
right and responsibility to engage in, or direct the Administrators to engage
in, the following activities:
(a) to determine the jurisdictions in which to take appropriate action
to qualify or register for sale all or part of the Capital Securities and to do
any and all such acts, other than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and prepare for execution and filing
any documents to be executed and filed by the Trust, as the Sponsor deems
necessary, advisable or incidental thereto in order to comply with the
applicable laws of any such jurisdictions; and
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(b) to negotiate the terms of and/or execute and deliver on behalf of
the Trust, the Placement Agreement and other related agreements providing for
the sale of the Capital Securities.
SECTION 3.3. EXPENSES. In connection with the offering, sale and
issuance of the Debentures to the Trust and in connection with the sale of the
Securities by the Trust, the Sponsor, in its capacity as Debenture Issuer,
shall:
(a) pay all reasonable costs and expenses relating to the offering,
sale and issuance of the Debentures, including compensation of the Debenture
Trustee under the Indenture in accordance with the provisions of the Indenture;
(b) be responsible for and shall pay all debts and obligations (other
than with respect to the Securities) and all costs and expenses of the Trust
(including, but not limited to, costs and expenses relating to the organization,
maintenance and dissolution of the Trust), the offering, sale and issuance of
the Securities (including fees to the placement agents in connection therewith),
the fees and expenses (including reasonable counsel fees and expenses) of the
Institutional Trustee and the Administrators, the costs and expenses relating to
the operation of the Trust, including, without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, Paying Agents,
Registrars, Transfer Agents, duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of Trust assets and the enforcement
by the Institutional Trustee of the rights of the Holders; and
(c) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.
The Sponsor's obligations under this Section 3.3 shall be for the
benefit of, and shall be enforceable by, any Person to whom such debts,
obligations, costs, expenses and taxes are owed (a "CREDITOR") whether or not
such Creditor has received notice hereof. Any such Creditor may enforce the
Sponsor's obligations under this Section 3.3 directly against the Sponsor and
the Sponsor irrevocably waives any right or remedy to require that any such
Creditor take any action against the Trust or any other Person before proceeding
against the Sponsor. The Sponsor agrees to execute such additional agreements as
may be necessary or desirable in order to give full effect to the provisions of
this Section 3.3.
SECTION 3.4. RIGHT TO PROCEED. The Sponsor acknowledges the rights of
Holders to institute a Direct Action as set forth in Section 2.8(d) hereto.
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ARTICLE IV.
INSTITUTIONAL TRUSTEE AND ADMINISTRATORS
SECTION 4.1. NUMBER OF TRUSTEES. The number of Trustees shall initially
be two, and;
(a) at any time before the issuance of any Securities, the Sponsor may,
by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may be
increased or decreased by vote of the Holder of a Majority in liquidation amount
of the Common Securities voting as a class at a meeting of the Holder of the
Common Securities; PROVIDED, HOWEVER, that there shall be a Delaware Trustee if
required by Section 4.2; and there shall always be one Trustee who shall be the
Institutional Trustee, and such Trustee may also serve as Delaware Trustee if it
meets the applicable requirements, in which case Section 2.11 shall have no
application to such entity in its capacity as Institutional Trustee.
SECTION 4.2. DELAWARE TRUSTEE. If required by the Statutory Trust Act,
one Trustee (the "DELAWARE TRUSTEE") shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which is organized under the
laws of the United States or any state thereof or the District of Columbia, has
its principal place of business in the State of Delaware, and otherwise meets
the requirements of applicable law, including ss. 3807 of the Statutory Trust
Act.
SECTION 4.3. INSTITUTIONAL TRUSTEE; ELIGIBILITY.
(a) There shall at all times be one Institutional Trustee which shall:
(i) not be an Affiliate of the Sponsor;
(ii) not offer or provide credit or credit enhancement to the
Trust; and
(iii) be a banking corporation or national association
organized and doing business under the laws of the United States of
America or any state thereof or the District of Columbia and authorized
under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least fifty million U.S. dollars
($50,000,000.00), and subject to supervision or examination by Federal,
state, or District of Columbia authority. If such corporation or
national association publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or examining
authority referred to above, then for the purposes of this Section
4.3(a)(iii), the combined capital and surplus of such corporation or
national association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
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(b) If at any time the Institutional Trustee shall cease to be eligible
to so act under Section 4.1(a), the Institutional Trustee shall immediately
resign in the manner and with the effect set forth in Section 4.3(a).
(c) If the Institutional Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture
Act of 1939, as amended, the Institutional Trustee shall either
eliminate such interest or resign, to the extent and in the manner
provided by, and subject to this Declaration.
(d) The initial Institutional Trustee shall be Wilmington Trust
Company.
SECTION 4.4. CERTAIN QUALIFICATIONS OF THE DELAWARE TRUSTEE GENERALLY.
The Delaware Trustee shall be a U.S. Person and either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.
SECTION 4.5. ADMINISTRATORS. Each Administrator shall be a U.S. Person, 21 years
of age or older and authorized to bind the Sponsor. The initial Administrators
shall be Michael H. Lee, Francis M. Colalucci and Steven G. Fauth. There shall
at all times be at least one Administrator. Except where a requirement for
action by a specific number of Administrators is expressly set forth in this
Declaration and except with respect to any action the taking of which is the
subject of a meeting of the Administrators, any action required or permitted to
be taken by the Administrators may be taken by, and any power of the
Administrators may be exercised by, or with the consent of, any one such
Administrator.
SECTION 4.6. INITIAL DELAWARE TRUSTEE. The initial Delaware Trustee
shall be Wilmington Trust Company.
SECTION 4.7. APPOINTMENT, REMOVAL AND RESIGNATION OF INSTITUTIONAL
TRUSTEE AND ADMINISTRATORS.
(a) Notwithstanding anything to the contrary in this Declaration, no
resignation or removal of any Trustee (the "Relevant Trustee") and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of this Section 4.8.
(b) Subject to the immediately preceding paragraph, a Trustee may
resign at any time by giving written notice thereof to the Holders of the
Securities and by appointing a successor Relevant Trustee. Upon the resignation
of the Institutional Trustee, the Institutional Trustee shall appoint a
successor by requesting from at least three Persons meeting the eligibility
requirements their expenses and charges to serve as the successor Institutional
Trustee on a form provided by the Administrators, and selecting the Person who
agrees to the lowest expense and charges (the "SUCCESSOR INSTITUTIONAL
TRUSTEE"). If the instrument of acceptance by the successor Relevant Trustee
required by this Section 4.8 shall not have been delivered to the Relevant
Trustee within 60 days after the giving of such notice of resignation or
delivery of the instrument of removal, the Relevant Trustee may petition, at the
expense of the Trust, any Federal, state or District of Columbia court of
competent jurisdiction for the appointment of a successor Relevant Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Relevant Trustee. The Institutional Trustee shall have no
liability for the selection of such successor pursuant to this Section 4.8.
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(c) Unless an Event of Default shall have occurred and be continuing,
any Trustee may be removed at any time by an act of the Holders of a Majority in
liquidation amount of the Common Securities. If any Trustee shall be so removed,
the Holders of the Common Securities, by act of the Holders of a Majority in
liquidation amount of the Common Securities delivered to the Relevant Trustee,
shall promptly appoint a successor Relevant Trustee, and such Successor
Institutional Trustee shall comply with the applicable requirements of this
Section 4.7. If an Event of Default shall have occurred and be continuing, the
Institutional Trustee or the Delaware Trustee, or both of them, may be removed
by the act of the Holders of a Majority in liquidation amount of the Capital
Securities, delivered to the Relevant Trustee (in its individual capacity and on
behalf of the Trust). If any Trustee shall be so removed, the Holders of Capital
Securities, by act of the Holders of a Majority in liquidation amount of the
Capital Securities then outstanding delivered to the Relevant Trustee, shall
promptly appoint a successor Relevant Trustees, and such successor Trustee shall
comply with the applicable requirements of this Section 4.8. If no successor
Relevant Trustee shall have been so appointed by the Holders of a Majority in
liquidation amount of the Capital Securities and accepted appointment in the
manner required by this Section 4.7, within 30 days after delivery of an
instrument of removal, the Relevant Trustee or any Holder who has been a Holder
of the Securities for at least 6 months may, on behalf of himself and all others
similarly situated, petition any Federal, state or District of Columbia court of
competent jurisdiction for the appointment of the successor Relevant Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a successor Relevant Trustee or Trustees.
(d) The Institutional Trustee shall give notice of each resignation and
each removal of a Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 13.1(d) and shall give notice to the
Sponsor. Each notice shall include the name of the successor Relevant Trustee
and the address of its Corporate Trust Office if it is the Institutional
Trustee.
(e) Notwithstanding the foregoing or any other provision of this
Declaration, in the event a Delaware Trustee who is a natural person dies or is
adjudged by a court to have become incompetent or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled by the
Institutional Trustee following the procedures in this Section 4.7 (with the
successor being a Person who satisfies the eligibility requirement for a
Delaware Trustee set forth in this Declaration) (the "SUCCESSOR DELAWARE
TRUSTEE").
(f) In case of the appointment hereunder of a successor Relevant
Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with
respect to the Securities shall execute and deliver an amendment hereto wherein
each successor Relevant Trustee shall accept such appointment and which (i)
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Securities and the Trust and (ii) shall add to or change any of the provisions
of this Declaration as shall be necessary to provide for or facilitate the
administration of the Trust by more than one Relevant Trustee, it being
understood that nothing herein or in such amendment shall constitute such
Institutional Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on request of the Trust or any successor Relevant Trustee such retiring Relevant
Trustee shall duly assign, transfer and deliver to such successor Relevant
Trustee all Trust Property, all proceeds thereof and money held by such retiring
Relevant Trustee hereunder with respect to the Securities and the Trust subject
to the payment of all unpaid fees, expenses and indemnities of such retiring
Relevant Trustee.
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(g) No Institutional Trustee or Delaware Trustee shall be liable for
the acts or omissions to act of any Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be.
(h) The Holders of the Capital Securities will have no right to vote to
appoint, remove or replace the Administrators, which voting rights are vested
exclusively in the Holder of the Common Securities.
(i) Any successor Delaware Trustee shall file an amendment to the
Certificate of Trust with the Secretary of State of the State of Delaware
identifying the name and principal place of business of such Delaware Trustee in
the State of Delaware.
SECTION 4.8. VACANCIES AMONG TRUSTEES. If a Trustee ceases to hold
office for any reason and the number of Trustees is not reduced pursuant to
Section 4.1, a vacancy shall occur. A resolution certifying the existence of
such vacancy by the Trustees or, if there are more than two, a majority of the
Trustees, shall be conclusive evidence of the existence of such vacancy. The
vacancy shall be filled with a Trustee appointed in accordance with Section 4.8.
SECTION 4.9. EFFECT OF VACANCIES. The death, resignation, retirement,
removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to
perform the duties of a Trustee shall not operate to dissolve, terminate or
annul the Trust or terminate this Declaration. Whenever a vacancy in the number
of Trustees shall occur, until such vacancy is filled by the appointment of a
Trustee in accordance with Section 4.7, the Institutional Trustee shall have all
the powers granted to the Trustees and shall discharge all the duties imposed
upon the Trustees by this Declaration.
SECTION 4.10. MEETINGS OF THE TRUSTEES AND THE ADMINISTRATORS. Meetings
of the Administrators shall be held from time to time upon the call of an
Administrator. Regular meetings of the Administrators may be held in person in
the United States or by telephone, at a place (if applicable) and time fixed by
resolution of the Administrators. Notice of any in-person meetings of the
Trustees with the Administrators or meetings of the Administrators shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a hard
copy by overnight courier) not less than 48 hours before such meeting. Notice of
any telephonic meetings of the Trustees with the Administrators or meetings of
the Administrators or any committee thereof shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 24 hours before a meeting. Notices shall contain a brief
statement of the time, place and anticipated purposes of the meeting. The
presence (whether in person or by telephone) of a Trustee or an Administrator,
as the case may be, at a meeting shall constitute a waiver of notice of such
meeting except where the Trustee or an Administrator, as the case may be,
attends a meeting for the express purpose of objecting to the transaction of any
activity on the grounds that the meeting has not been lawfully called or
convened. Unless provided otherwise in this Declaration, any action of the
Trustees or the Administrators, as the case may be, may be taken at a meeting by
vote of a majority of the Trustees or the Administrators present (whether in
person or by telephone) and eligible to vote with respect to such matter,
provided that a Quorum is present, or without a meeting by the unanimous written
consent of the Trustees or the Administrators. Meetings of the Trustees and the
Administrators together shall be held from time to time upon the call of any
Trustee or an Administrator.
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SECTION 4.11. DELEGATION OF POWER.
(a) Any Administrator may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 that is
a U.S. Person his or her power for the purpose of executing any documents
contemplated in Section 2.6; and
(b) the Administrators shall have power to delegate from time to time
to such of their number the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Administrators
or otherwise as the Administrators may deem expedient, to the extent such
delegation is not prohibited by applicable law or contrary to the provisions of
the Trust, as set forth herein.
SECTION 4.12. CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any
Person into which the Institutional Trustee or the Delaware Trustee may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the
Institutional Trustee or the Delaware Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of the
Institutional Trustee or the Delaware Trustee shall be the successor of the
Institutional Trustee or the Delaware Trustee hereunder, provided such Person
shall be otherwise qualified and eligible under this Article and, provided,
further, that such Person shall file an amendment to the Certificate of Trust
with the Secretary of State of the State of Delaware as contemplated in Section
4.7(i).
ARTICLE V.
DISTRIBUTIONS
SECTION 5.1. DISTRIBUTIONS. Holders shall receive Distributions in
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Capital Securities and the Common Securities
in accordance with the preferences set forth in their respective terms. If and
to the extent that the Debenture Issuer makes a payment of Interest or any
principal on the Debentures held by the Institutional Trustee, the Institutional
Trustee shall and is directed to, to the extent funds are available for that
purpose, make a distribution (a "DISTRIBUTION") of such amounts to Holders.
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ARTICLE VI.
ISSUANCE OF SECURITIES
SECTION 6.1. GENERAL PROVISIONS REGARDING SECURITIES.
(a) The Administrators shall, on behalf of the Trust, issue one series
of capital securities, evidenced by a certificate substantially in the form of
Exhibit A1, representing undivided beneficial interests in the assets of the
Trust and having such terms as are set forth in Annex I and one series of common
securities, evidenced by a certificate substantially in the form of Exhibit A-2,
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in Annex I. The Trust shall issue no securities or
other interests in the assets of the Trust other than the Capital Securities and
the Common Securities. The Capital Securities rank PARI PASSU to, and payment
thereon shall be made Pro Rata with, the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to payment
of the Holders of the Capital Securities as set forth in Annex I.
(b) The Certificates shall be signed on behalf of the Trust by one or
more Administrators. Such signature shall be the facsimile or manual signature
of any Administrator. In case any Administrator of the Trust who shall have
signed any of the Securities shall cease to be such Administrator before the
Certificates so signed shall be delivered by the Trust, such Certificates
nevertheless may be delivered as though the person who signed such Certificates
had not ceased to be such Administrator, and any Certificate may be signed on
behalf of the Trust by such persons who, at the actual date of execution of such
Security, shall be an Administrator of the Trust, although at the date of the
execution and delivery of the Declaration any such person was not such an
Administrator. A Capital Security shall not be valid until authenticated by the
facsimile or manual signature of an Authorized Officer of the Institutional
Trustee. Such signature shall be conclusive evidence that the Capital Security
has been authenticated under this Declaration. Upon written order of the Trust
signed by one Administrator, the Institutional Trustee shall authenticate the
Capital Securities for original issue. The Institutional Trustee may appoint an
authenticating agent that is a U.S. Person acceptable to the Trust to
authenticate the Capital Securities. A Common Security need not be so
authenticated and shall be valid upon execution by one or more administrators.
(c) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(d) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and,
except as provided in Section 9.1(b) with respect to the Common Securities,
non-assessable.
(e) Every Person, by virtue of having become a Holder in accordance
with the terms of this Declaration, shall be deemed to have expressly assented
and agreed to the terms of, and shall be bound by, this Declaration and the
Guarantee.
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SECTION 6.2. PAYING AGENT, TRANSFER AGENT AND REGISTRAR. The Trust
shall maintain in Wilmington, Delaware, an office or agency where the Securities
may be presented for payment ("PAYING AGENT"), and an office or agency where
Securities may be presented for registration of transfer or exchange (the
"TRANSFER AGENT"). The Trust shall keep or cause to be kept at such office or
agency a register for the purpose of registering Securities, transfers and
exchanges of Securities, such register to be held by a registrar (the
"REGISTRAR"). The Administrators may appoint the Paying Agent, the Registrar and
the Transfer Agent and may appoint one or more additional Paying Agents or one
or more co-Registrars, or one or more co-Transfer Agents in such other locations
as they shall determine. The term "PAYING AGENT" includes any additional paying
agent, the term "REGISTRAR" includes any additional registrar or co-Registrar
and the term "TRANSFER AGENT" includes any additional transfer agent. The
Administrators may change any Paying Agent, Transfer Agent or Registrar at any
time without prior notice to any Holder. The Administrators shall notify the
Institutional Trustee of the name and address of any Paying Agent, Transfer
Agent and Registrar not a party to this Declaration. The Administrators hereby
initially appoint the Institutional Trustee to act as Paying Agent, Transfer
Agent and Registrar for the Capital Securities and the Common Securities. The
Institutional Trustee or any of its Affiliates in the United States may act as
Paying Agent, Transfer Agent or Registrar.
SECTION 6.3. FORM AND DATING. The Capital Securities and the
Institutional Trustee's certificate of authentication thereon shall be
substantially in the form of Exhibit A-1, and the Common Securities shall be
substantially in the form of Exhibit A-2, each of which is hereby incorporated
in and expressly made a part of this Declaration. Certificates may be typed,
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Administrators, as conclusively evidenced by their
execution thereof. The Securities may have letters, numbers, notations or other
marks of identification or designation and such legends or endorsements required
by law, stock exchange rule, agreements to which the Trust is subject if any, or
usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Sponsor). The Trust at the direction of the Sponsor shall
furnish any such legend not contained in Exhibit A-1 to the Institutional
Trustee in writing. Each Capital Security shall be dated on or before the date
of its authentication. The terms and provisions of the Securities set forth in
Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part
of the terms of this Declaration and to the extent applicable, the Institutional
Trustee, the Delaware Trustee, the Administrators and the Sponsor, by their
execution and delivery of this Declaration, expressly agree to such terms and
provisions and to be bound thereby. Capital Securities will be issued only in
blocks having an aggregate liquidation amount of not less than $100,000.00 and
any multiple of $1,000.00 in excess thereof.
The Capital Securities are being offered and sold by the Trust pursuant
to the Placement Agreement in definitive, registered form without coupons and
with the Restricted Securities Legend.
SECTION 6.4. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.
If:
30
(a) any mutilated Certificates should be surrendered to the Registrar,
or if the Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate; and
(b) there shall be delivered to the Registrar, the Administrators and
the Institutional Trustee such security or indemnity as may be required by them
to keep each of them harmless;
then, in the absence of notice that such Certificate shall have been acquired by
a protected purchaser, an Administrator on behalf of the Trust shall execute
(and in the case of a Capital Security Certificate, the Institutional Trustee
shall authenticate) and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 6.4, the Registrar or the Administrators may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Certificate issued pursuant to this
Section shall constitute conclusive evidence of an ownership interest in the
relevant Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
SECTION 6.5. TEMPORARY SECURITIES. Until definitive Securities are
ready for delivery, the Administrators may prepare and, in the case of the
Capital Securities, the Institutional Trustee shall authenticate, temporary
Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Administrators consider
appropriate for temporary Securities. Without unreasonable delay, the
Administrators shall prepare and, in the case of the Capital Securities, the
Institutional Trustee shall authenticate, definitive Securities in exchange for
temporary Securities.
SECTION 6.6. CANCELLATION. The Administrators at any time may deliver
Securities to the Institutional Trustee for cancellation. The Registrar shall
forward to the Institutional Trustee any Securities surrendered to it for
registration of transfer, redemption or payment. The Institutional Trustee shall
promptly cancel all Securities surrendered for registration of transfer,
payment, replacement or cancellation and shall dispose of such canceled
Securities as the Administrators direct. The Administrators may not issue new
Securities to replace Securities that have been paid or that have been delivered
to the Institutional Trustee for cancellation.
SECTION 6.7. RIGHTS OF HOLDERS; WAIVERS OF PAST DEFAULTS.
(a) The legal title to the Trust Property is vested exclusively in the
Institutional Trustee (in its capacity as such) in accordance with Section 2.5,
and the Holders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Securities and they shall have no right to call for any partition or division of
property, profits or rights of the Trust except as described below. The
Securities shall be personal property giving only the rights specifically set
forth therein and in this Declaration. The Securities shall have no preemptive
or similar rights.
(b) For so long as any Capital Securities remain outstanding, if upon
an Indenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of a Majority in liquidation amount of the Capital Securities then
outstanding shall have the right to make such declaration by a notice in writing
to the Institutional Trustee, the Sponsor and the Debenture Trustee.
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At any time after a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as provided in the
Indenture, if the Institutional Trustee, subject to the provisions hereof, fails
to annul any such declaration and waive such default, the Holders of a Majority
in liquidation amount of the Capital Securities, by written notice to the
Institutional Trustee, the Sponsor and the Debenture Trustee, may rescind and
annul such declaration and its consequences if:
(i) the Debenture Issuer has paid or deposited with the
Debenture Trustee a sum sufficient to pay
(A) all overdue installments of interest on all of
the Debentures,
(B) any accrued Additional Interest on all of the
Debentures,
(C) the principal of (and premium, if any, on) any
Debentures that have become due otherwise than by such
declaration of acceleration and interest and Additional
Interest thereon at the rate borne by the Debentures, and
(D) all sums paid or advanced by the Debenture
Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Debenture Trustee
and the Institutional Trustee, their agents and counsel; and
(ii) all Events of Default with respect to the Debentures,
other than the non-payment of the principal of the Debentures that has
become due solely by such acceleration, have been cured or waived as
provided in Section 5.7 of the Indenture.
The Holders of at least a Majority in liquidation amount of the Capital
Securities may, on behalf of the Holders of all the Capital Securities, waive
any past default under the Indenture or any Indenture Event of Default, except a
default or Indenture Event of Default in the payment of principal or interest
(unless such default or Indenture Event of Default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee) or
a default under the Indenture or an Indenture Event of Default in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the holder of each outstanding Debenture. No such waiver
shall affect any subsequent default or impair any right consequent thereon.
Upon receipt by the Institutional Trustee of written notice declaring
such an acceleration, or rescission and annulment thereof, by Holders of any
part of the Capital Securities, a record date shall be established for
determining Holders of outstanding Capital Securities entitled to join in such
notice, which record date shall be at the close of business on the day the
Institutional Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons, shall be entitled to join
in such notice, whether or not such Holders remain Holders after such record
date; PROVIDED, that unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day that is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice that has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 6.7.
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(c) Except as otherwise provided in paragraphs (a) and (b) of this
Section 6.7, the Holders of at least a Majority in liquidation amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default or Event of Default and its consequences. Upon such
waiver, any such default or Event of Default shall cease to exist, and any
default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Declaration, but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon.
ARTICLE VII.
DISSOLUTION AND TERMINATION OF TRUST
SECTION 7.1. DISSOLUTION AND TERMINATION OF TRUST.
(a) The Trust shall dissolve on the first to occur of:
(i) unless earlier dissolved, on December 15, 2039, the
expiration of the term of the Trust;
(ii) upon a Bankruptcy Event with respect to the Sponsor, the
Trust or the Debenture Issuer;
(iii) (other than in connection with a merger, consolidation
or similar transaction not prohibited by the Indenture, this
Declaration or the Guarantee, as the case may be) upon (A) the filing
of a certificate of dissolution or its equivalent with respect to the
Sponsor, and (B)(I) upon the consent of Holders of a Majority in
liquidation amount of the Securities voting together as a single class
to file a certificate of cancellation with respect to the Trust or (II)
upon the revocation of the charter of the Sponsor and the expiration of
90 days after the date of revocation without a reinstatement thereof;
(iv) upon the distribution of the Debentures to the Holders of
the Securities following the exercise of the right of the Holder of all
of the outstanding Common Securities to dissolve the Trust as provided
in Section 3 of Annex I hereto;
(v) upon the entry of a decree of judicial dissolution of the
Holder of the Common Securities, the Sponsor, the Trust or the
Debenture Issuer;
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(vi) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have
been paid to the Holders in accordance with the terms of the
Securities; or
(vii) before the issuance of any Securities, with the consent
of all of the Trustees and the Sponsor.
(b) As soon as is practicable after the occurrence of an event referred
to in Section 7.1(a), and after satisfaction of liabilities to creditors of the
Trust as required by applicable law, including of the Statutory Trust Act, and
subject to the terms set forth in Annex I, the Institutional Trustee shall
terminate the Trust by filing a certificate of cancellation with the Secretary
of State of the State of Delaware.
(c) The provisions of Section 2.9 and Article IX shall survive the
termination of the Trust.
ARTICLE VIII.
TRANSFER OF INTERESTS
SECTION 8.1. GENERAL.
(a) Subject to Section 8.1(c), where Capital Securities are presented
to the Registrar or a co-registrar with a request to register a transfer or to
exchange them for an equal aggregate liquidation amount of Capital Securities
represented by different certificates, the Registrar shall register the transfer
or make the exchange if its requirements for such transactions are met. To
permit registrations of transfer and exchanges, the Trust shall issue and the
Institutional Trustee shall authenticate Capital Securities at the Registrar's
request.
(b) Upon issuance of the Common Securities, the Sponsor shall acquire
and retain beneficial and record ownership of the Common Securities and for so
long as the Securities remain outstanding, the Sponsor shall maintain 100%
ownership of the Common Securities; PROVIDED, HOWEVER, that any permitted
successor of the Sponsor, in its capacity as Debenture Issuer, under the
Indenture that is a U.S. Person may succeed to the Sponsor's ownership of the
Common Securities.
(c) Capital Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Capital Securities. To the fullest extent permitted by
applicable law, any transfer or purported transfer of any Security not made in
accordance with this Declaration shall be null and void and will be deemed to be
of no legal effect whatsoever and any such transferee shall be deemed not to be
the Holder of such Capital Securities for any purpose, including but not limited
to the receipt of Distributions on such Capital Securities, and such transferee
shall be deemed to have no interest whatsoever in such Capital Securities.
(d) The Registrar shall provide for the registration of Securities and
of transfers of Securities, which will be effected without charge but only upon
payment (with such indemnity as the Registrar may require) in respect of any tax
or other governmental charges that may be imposed in relation to it. Upon
surrender for registration of transfer of any Securities, the Registrar shall
cause one or more new Securities of the same tenor to be issued in the name of
the designated transferee or transferees. Any Security issued upon any
registration of transfer or exchange pursuant to the terms of this Declaration
shall evidence the same Security and shall be entitled to the same benefits
under this Declaration as the Security surrendered upon such registration of
transfer or exchange. Every Security surrendered for registration of transfer
shall be accompanied by a written instrument of transfer in form satisfactory to
the Registrar duly executed by the Holder or such Holder's attorney duly
authorized in writing. Each Security surrendered for registration of transfer
shall be canceled by the Institutional Trustee pursuant to Section 6.6. A
transferee of a Security shall be entitled to the rights and subject to the
obligations of a Holder hereunder upon the receipt by such transferee of a
Security. By acceptance of a Security, each transferee shall be deemed to have
agreed to be bound by this Declaration.
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(e) The Trust shall not be required (i) to issue, register the transfer
of, or exchange any Securities during a period beginning at the opening of
business 15 days before the day of any selection of Securities for redemption
and ending at the close of business on the earliest date on which the relevant
notice of redemption is deemed to have been given to all Holders of the
Securities to be redeemed, or (ii) to register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 8.2. TRANSFER PROCEDURES AND RESTRICTIONS.
(a) The Capital Securities shall bear the Restricted Securities Legend,
which shall not be removed unless there is delivered to the Trust such
satisfactory evidence, which may include an opinion of counsel satisfactory to
the Institutional Trustee, as may be reasonably required by the Trust, that
neither the legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of the
Securities Act. Upon provision of such satisfactory evidence, the Institutional
Trustee, at the written direction of the Trust, shall authenticate and deliver
Capital Securities that do not bear the legend.
(b) Except as permitted by Section 8.2(a), each Capital Security shall
bear a legend (the "RESTRICTED SECURITIES LEGEND") in substantially the
following form and a Capital Security shall not be transferred except in
compliance with such legend, unless otherwise determined by the Sponsor, upon
the advice of counsel expert in securities law, in accordance with applicable
law:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS
OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM,
OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY
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BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER
THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A
NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903
OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM IN ACCORDANCE WITH THE DECLARATION (DEFINED HEREIN), A COPY OF
WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING
TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO
AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT,
INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S
INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY
PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS
SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION
96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR
ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION
406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE
OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST
THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING
THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE
MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF
AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING
THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH
PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR
WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
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THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100
SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED
TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS
THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT
WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH
THE FOREGOING RESTRICTIONS.
THIS SECURITY IS IN REGISTERED FORM WITHIN THE MEANING OF
TREASURY REGULATIONS SECTION 1.871-14(c)(1)(i) FOR U.S. FEDERAL INCOME
AND WITHHOLDING TAX PURPOSES.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS MAY BE REQUIRED BY THE DECLARATION TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
(c) To permit registrations of transfers and exchanges, the Trust shall
execute and the Institutional Trustee shall authenticate Capital Securities at
the Registrar's request.
(d) Registrations of transfers or exchanges will be effected without
charge, but only upon payment (with such indemnity as the Registrar or the
Sponsor may require) in respect of any tax or other governmental charge that may
be imposed in relation to it.
(e) All Capital Securities issued upon any registration of transfer or
exchange pursuant to the terms of this Declaration shall evidence the same
security and shall be entitled to the same benefits under this Declaration as
the Capital Securities surrendered upon such registration of transfer or
exchange.
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SECTION 8.3. DEEMED SECURITY HOLDERS. The Trust, the Administrators,
the Trustees, the Paying Agent, the Transfer Agent or the Registrar may treat
the Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole holder of such Certificate and of the
Securities represented by such Certificate for purposes of receiving
Distributions and for all other purposes whatsoever and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
Certificate or in the Securities represented by such Certificate on the part of
any Person, whether or not the Trust, the Administrators, the Trustees, the
Paying Agent, the Transfer Agent or the Registrar shall have actual or other
notice thereof
ARTICLE IX.
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS
SECTION 9.1. LIABILITY.
(a) Except as expressly set forth in this Declaration, the Guarantee
and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the
Securities which shall be made solely from assets of the Trust; or
(ii) required to pay to the Trust or to any Holder of the
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Securities)
to the extent not satisfied out of the Trust's assets.
(c) Pursuant to the Statutory Trust Act, the Holders of the Capital
Securities shall be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware.
SECTION 9.2. EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and, if selected by such Indemnified Person, has been selected by
such Indemnified Person with reasonable care by or on behalf of the Trust,
including information, opinions, reports or statements as to the value and
amount of the assets, liabilities, profits, losses, or any other facts pertinent
to the existence and amount of assets from which Distributions to Holders of
Securities might properly be paid.
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SECTION 9.3. FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity, are agreed by the
parties hereto to replace such other duties and liabilities of the Indemnified
Person.
(b) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and
factors as it desires, including its own interests, and shall have no
duty or obligation to give any consideration to any interest of or
factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard,
the Indemnified Person shall act under such express standard and shall
not be subject to any other or different standard imposed by this
Declaration or by applicable law.
SECTION 9.4. INDEMNIFICATION.
(a) The Sponsor shall indemnify, to the full extent permitted by law,
any Indemnified Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Trust) arising out of or in connection with the acceptance or
administration of this Declaration by reason of the fact that he is or was an
Indemnified Person against expenses (including reasonable attorneys' fees and
expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the Indemnified Person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) The Sponsor shall indemnify, to the full extent permitted by law,
any Indemnified Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Trust to procure a judgment in its favor arising out of or in connection with
the acceptance or administration of this Declaration by reason of the fact that
he is or was an Indemnified Person against expenses (including reasonable
attorneys' fees and expenses) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust; PROVIDED, HOWEVER, that no such indemnification
shall be made in respect of any claim, issue or matter as to which such
Indemnified Person shall have been adjudged to be liable to the Trust unless and
only to the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
(c) To the extent that an Indemnified Person shall be successful on the
merits or otherwise (including dismissal of an action without prejudice or the
settlement of an action without admission of liability) in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) of this Section
9.4, or in defense of any claim, issue or matter therein, he shall be
indemnified, to the full extent permitted by law, against expenses (including
attorneys' fees and expenses) actually and reasonably incurred by him in
connection therewith.
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(d) Any indemnification of an Administrator under paragraphs (a) and
(b) of this Section 9.4 (unless ordered by a court) shall be made by the Sponsor
only as authorized in the specific case upon a determination that
indemnification of the Indemnified Person is proper in the circumstances because
he has met the applicable standard of conduct set forth in paragraphs (a) and
(b). Such determination shall be made (i) by the Administrators by a majority
vote of a Quorum consisting of such Administrators who were not parties to such
action, suit or proceeding, (ii) if such a Quorum is not obtainable, or, even if
obtainable, if a Quorum of disinterested Administrators so directs, by
independent legal counsel in a written opinion, or (iii) by the Common Security
Holder of the Trust.
(e) To the fullest extent permitted by law, expenses (including
reasonable attorneys' fees and expenses) incurred by an Indemnified Person in
defending a civil, criminal, administrative or investigative action, suit or
proceeding referred to in paragraphs (a) and (b) of this Section 9.4 shall be
paid by the Sponsor in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Indemnified
Person to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Sponsor as authorized in this Section 9.4.
Notwithstanding the foregoing, no advance shall be made by the Sponsor if a
determination is reasonably and promptly made (i) by the Administrators by a
majority vote of a Quorum of disinterested Administrators, (ii) if such a Quorum
is not obtainable, or, even if obtainable, if a quorum of disinterested
Administrators so directs, by independent legal counsel in a written opinion, or
(iii) by the Common Security Holder of the Trust, that, based upon the facts
known to the Administrators, counsel or the Common Security Holder at the time
such determination is made, such Indemnified Person acted in bad faith or in a
manner that such Indemnified Person did not believe to be in the best interests
of the Trust, or, with respect to any criminal proceeding, that such Indemnified
Person believed or had reasonable cause to believe his conduct was unlawful. In
no event shall any advance be made in instances where the Administrators,
independent legal counsel or the Common Security Holder reasonably determine
that such Indemnified Person deliberately breached his duty to the Trust or its
Common or Capital Security Holders.
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(f) The Trustees, at the sole cost and expense of the Sponsor, retains
the right to representation by counsel of its own choosing in any action, suit
or any other proceeding for which it is indemnified under paragraphs (a) and (b)
of this Section 9.4, without affecting its right to indemnification hereunder or
waiving any rights afforded to it under this Declaration or applicable law.
(g) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 9.4 shall not be
deemed exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any agreement, vote of
stockholders or disinterested directors of the Sponsor or Capital Security
Holders of the Trust or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office. All rights to
indemnification under this Section 9.4 shall be deemed to be provided by a
contract between the Sponsor and each Indemnified Person who serves in such
capacity at any time while this Section 9.4 is in effect. Any repeal or
modification of this Section 9.4 shall not affect any rights or obligations then
existing.
(h) The Sponsor or the Trust may purchase and maintain insurance on
behalf of any Person who is or was an Indemnified Person against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Sponsor would have the power to indemnify
him against such liability under the provisions of this Section 9.4.
(i) For purposes of this Section 9.4, references to "the Trust" shall
include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger, so that any Person who is or was a director, trustee, officer or
employee of such constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent of another
entity, shall stand in the same position under the provisions of this Section
9.4 with respect to the resulting or surviving entity as he would have with
respect to such constituent entity if its separate existence had continued.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 9.4 shall, unless otherwise provided when
authorized or ratified, (i) continue as to a Person who has ceased to be an
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a Person, and (ii) survive the termination or expiration
of this Declaration or the earlier removal or resignation of an Indemnified
Person.
SECTION 9.5. OUTSIDE BUSINESSES. Any Covered Person, the Sponsor, the
Delaware Trustee and the Institutional Trustee may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, similar or dissimilar to the business of the Trust, and the
Trust and the Holders of Securities shall have no rights by virtue of this
Declaration in and to such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. None of any
Covered Person, the Sponsor, the Delware Trustee or the Institutional Trustee
shall be obligated to present any particular investment or other opportunity to
the Trust even if such opportunity is of a character that, if presented to the
Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the
Delaware Trustee and the Institutional Trustee shall have the right to take for
its own account (individually or as a partner or fiduciary) or to recommend to
others any such particular investment or other opportunity. Any Covered Person,
the Delaware Trustee and the Institutional Trustee may engage or be interested
in any financial or other transaction with the Sponsor or any Affiliate of the
Sponsor, or may act as depositary for, trustee or agent for, or act on any
committee or body of holders of, securities or other obligations of the Sponsor
or its Affiliates.
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SECTION 9.6. COMPENSATION; FEE. The Sponsor agrees:
(a) to pay to the Trustees from time to time such compensation for all
services rendered by them hereunder as the parties shall agree from time to time
(which compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust); and
(b) except as otherwise expressly provided herein, to reimburse the
Trustees Trustee upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any provision of
this Declaration (including the reasonable compensation and the expenses and
disbursements of their respective agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence, bad faith or
willful misconduct.
The provisions of this Section 9.6 shall survive the dissolution of the
Trust and the termination of this Declaration and the removal or resignation of
any Trustee.
No Trustee may claim any lien or charge on any property of the Trust as
a result of any amount due pursuant to this Section 9.6.
ARTICLE X.
TAX AND ACCOUNTING
SECTION 10.1. FISCAL YEAR. The fiscal year ("the FISCAL YEAR") of the
Trust shall be the calendar year, or such other year as is required by the Code.
SECTION 10.2. CERTAIN ACCOUNTING MATTERS.
(a) At all times during the existence of the Trust, the Administrators
shall keep, or cause to be kept at the principal office of the Trust in the
United States, as defined for purposes of Treasury Regulations Section
301.7701-7, full books of account, records and supporting documents, which shall
reflect in reasonable detail each transaction of the Trust. The books of account
shall be maintained, at the Sponsor's expense, in accordance with generally
accepted accounting principles, consistently applied. The books of account and
the records of the Trust shall be examined by and reported upon (either
separately or as part of the Sponsor's regularly prepared consolidated financial
report) as of the end of each Fiscal Year of the Trust by a firm of independent
certified public accountants selected by the Administrators.
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(b) The Administrators shall cause to be duly prepared and delivered to
each of the Holders of Securities all annual United States federal income tax
information statements required by the Code, if any, containing such information
with regard to the Securities held by each Holder as is required by the Code and
the Treasury Regulations. Notwithstanding any right under the Code to deliver
any such statement at a later date, the Administrators shall endeavor to deliver
all such statements within 30 days after the end of each Fiscal Year of the
Trust.
(c) The Administrators, at the Sponsor's expense, shall cause to be
duly prepared at the principal office of the Sponsor in the United States, as
United States is defined in Section 7701(a)(9) of the Code (or at the principal
office of the Trust if the Sponsor has no such principal office in the United
States), and filed an annual United States federal income tax return on a Form
1041 or such other form required by United States federal income tax law, if
any, and any other annual income tax returns required to be filed by the
Administrators on behalf of the Trust with any state or local taxing authority.
SECTION 10.3. BANKING. The Trust shall maintain in the United States,
as defined for purposes of Treasury Regulations Section 301.7701-7, one or more
bank accounts in the name and for the sole benefit of the Trust; PROVIDED,
HOWEVER, that all payments of funds in respect of the Debentures held by the
Institutional Trustee shall be made directly to the Property Account and no
other funds of the Trust shall be deposited in the Property Account. The sole
signatories for such accounts (including the Property Account) shall be
designated by the Institutional Trustee.
SECTION 10.4. WITHHOLDING. The Institutional Trustee or any Paying
Agent and the Administrators shall comply with all withholding requirements
under United States federal, state and local law. The Institutional Trustee or
any Paying Agent shall request, and each Holder shall provide to the
Institutional Trustee or any Paying Agent, such forms or certificates as are
necessary to establish an exemption from withholding with respect to the Holder,
and any representations and forms as shall reasonably be requested by the
Institutional Trustee or any Paying Agent to assist it in determining the extent
of, and in fulfilling, its withholding obligations. The Administrators shall
file required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Institutional Trustee or any Paying Agent is required to withhold and pay over
any amounts to any authority with respect to distributions or allocations to any
Holder, the amount withheld shall be deemed to be a Distribution in the amount
of the withholding to the Holder. In the event of any claimed overwithholding,
Holders shall be limited to an action against the applicable jurisdiction. If
the amount required to be withheld was not withheld from actual Distributions
made, the Institutional Trustee or any Paying Agent may reduce subsequent
Distributions by the amount of such withholding.
SECTION 10.5. INTENTION OF THE PARTIES. It is the intention of the
parties hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Declaration shall be
interpreted to further this intention of the parties.
43
ARTICLE XI.
AMENDMENTS AND MEETINGS
SECTION 11.1. AMENDMENTS.
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed by the Institutional Trustee, or (ii)
if the amendment affects the rights, powers, duties, obligations or immunities
of the Delaware Trustee, by the Delaware Trustee.
(b) Notwithstanding any other provision of this Article XI, an
amendment may be made, and any such purported amendment shall be valid and
effective only if:
(i) the Institutional Trustee shall have first received;
(A) an Officers' Certificate from each of the Trust
and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the
terms of the Securities); and
(B) an opinion of counsel (who may be counsel to the
Sponsor or the Trust) that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the
terms of the Securities); and all conditions precedent to the
execution and delivery of such amendment have been satisfied;
and
(ii) the result of such amendment would not be to
(A) cause the Trust to cease to be classified for
purposes of United States federal income taxation as a grantor
trust; or
(B) cause the Trust to be deemed to be an Investment
Company required to be registered under the Investment Company
Act.
(c) Except as provided in Section 11.1(d), (e) or (h), no amendment
shall be made, and any such purported amendment shall be void and ineffective
unless the Holders of a Majority in liquidation amount of the Capital Securities
shall have consented to such amendment.
(d) In addition to and notwithstanding any other provision in this
Declaration, without the consent of each affected Holder, this Declaration may
not be amended to (i) change the amount or timing of any Distribution on the
Securities or any redemption or liquidation provisions applicable to the
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Securities as of a specified date, or (ii) restrict
the right of a Holder to institute suit for the enforcement of any such payment
on or after such date.
44
(e) Sections 9.1(b) and 9.1(c) and this Section 11.1 shall not be
amended without the consent of all of the Holders of the Securities.
(f) Article III shall not be amended without the consent of the Holders
of a Majority in liquidation amount of the Common Securities.
(g) The rights of the Holders of the Capital Securities or Common
Securities, as applicable, under Article IV to appoint and remove Trustees shall
not be amended without the consent of the Holders of a Majority in liquidation
amount of the Capital Securities or Common Securities, as applicable.
(h) This Declaration may be amended by the Institutional Trustee and
the Holders of a Majority in liquidation amount of the Common Securities without
the consent of the Holders of the Capital Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other provision of this
Declaration;
(iii) add to the covenants, restrictions or obligations of the
Sponsor; or
(iv) modify, eliminate or add to any provision of this
Declaration to such extent as may be necessary to ensure that the Trust
will be classified for United States federal income tax purposes at all
times as a grantor trust and will not be required to register as an
"investment company" under the Investment Company Act (including
without limitation to conform to any change in Rule 3a-5, Rule 3a-7 or
any other applicable rule under the Investment Company Act or written
change in interpretation or application thereof by any legislative
body, court, government agency or regulatory authority) which amendment
does not have a material adverse effect on the rights, preferences or
privileges of the Holders of Securities;
PROVIDED, HOWEVER, that no such modification, elimination or
addition referred to in clauses (i), (ii), (iii) or (iv) shall
adversely affect in any material respect the powers, preferences or
special rights of Holders of Capital Securities.
SECTION 11.2. MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN
CONSENT.
(a) Meetings of the Holders of the Capital Securities or the Common
Securities may be called at any time by the Administrators (or as provided in
the terms of the Securities) to consider and act on any matter on which Holders
of such Securities are entitled to act under the terms of this Declaration or
the terms of the Securities. The Administrators shall call a meeting of the
Holders of such class if directed to do so by the Holders of at least 10% in
liquidation amount of such Securities. Such direction shall be given by
delivering to the Administrators one or more notices in a writing stating that
the signing Holders of such Securities wish to call a meeting and indicating the
general or specific purpose for which the meeting is to be called. Any Holders
of the Securities calling a meeting shall specify in writing the Certificates
held by the Holders of the Securities exercising the right to call a meeting and
only those Securities represented by such Certificates shall be counted for
purposes of determining whether the required percentage set forth in the second
sentence of this paragraph has been met.
45
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of the
Securities:
(i) notice of any such meeting shall be given to all the
Holders of the Securities having a right to vote thereat at least 7
days and not more than 60 days before the date of such meeting.
Whenever a vote, consent or approval of the Holders of the Securities
is permitted or required under this Declaration, such vote, consent or
approval may be given at a meeting of the Holders of the Securities.
Any action that may be taken at a meeting of the Holders of the
Securities may be taken without a meeting if a consent in writing
setting forth the action so taken is signed by the Holders of the
Securities owning not less than the minimum liquidation amount of
Securities that would be necessary to authorize or take such action at
a meeting at which all Holders of the Securities having a right to vote
thereon were present and voting. Prompt notice of the taking of action
without a meeting shall be given to the Holders of the Securities
entitled to vote who have not consented in writing. The Administrators
may specify that any written ballot submitted to the Holders of the
Securities for the purpose of taking any action without a meeting shall
be returned to the Trust within the time specified by the
Administrators;
(ii) each Holder of a Security may authorize any Person to act
for it by proxy on all matters in which a Holder of Securities is
entitled to participate, including waiving notice of any meeting, or
voting or participating at a meeting. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
Holder of the Securities executing it. Except as otherwise provided
herein, all matters relating to the giving, voting or validity of
proxies shall be governed by the General Corporation Law of the State
of Delaware relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corporation and the Holders
of the Securities were stockholders of a Delaware corporation; each
meeting of the Holders of the Securities shall be conducted by the
Administrators or by such other Person that the Administrators may
designate; and
(iii) unless the Statutory Trust Act, this Declaration, or the
terms of the Securities otherwise provides, the Administrators, in
their sole discretion, shall establish all other provisions relating to
meetings of Holders of Securities, including notice of the time, place
or purpose of any meeting at which any matter is to be voted on by any
Holders of the Securities, waiver of any such notice, action by consent
without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote; PROVIDED, HOWEVER,
that each meeting shall be conducted in the United States (as that term
is defined in Treasury Regulations section 301.7701-7).
46
ARTICLE XII.
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND THE DELAWARE TRUSTEE
SECTION 12.1. REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL TRUSTEE.
The initial Institutional Trustee represents and warrants to the Trust and to
the Sponsor at the date of this Declaration, and each Successor Institutional
Trustee represents and warrants to the Trust and the Sponsor at the time of the
Successor Institutional Trustee's acceptance of its appointment as Institutional
Trustee, that:
(a) the Institutional Trustee is a banking corporation or national
association with trust powers, duly organized and validly existing under the
laws of the United States of America or any state thereof with trust power and
authority to execute and deliver, and to carry out and perform its obligations
under the terms of, this Declaration;
(b) the Institutional Trustee has a combined capital and surplus of at
least fifty million U.S. dollars ($50,000,000);
(c) the execution, delivery and performance by the Institutional
Trustee of this Declaration has been duly authorized by all necessary corporate
action on the part of the Institutional Trustee. This Declaration has been duly
executed and delivered by the Institutional Trustee, and it constitutes a legal,
valid and binding obligation of the Institutional Trustee, enforceable against
it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity (regardless of
whether considered in a proceeding in equity or at law);
(d) the execution, delivery and performance of this Declaration by the
Institutional Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Institutional Trustee; and
(e) no consent, approval or authorization of, or registration with or
notice to, any state or federal banking authority is required for the execution,
delivery or performance by the Institutional Trustee of this Declaration.
SECTION 12.2. REPRESENTATIONS OF THE DELAWARE TRUSTEE. The Trustee that
acts as initial Delaware Trustee represents and warrants to the Trust and to the
Sponsor at the date of this Declaration, and each Successor Delaware Trustee
represents and warrants to the Trust and the Sponsor at the time of the
Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee
that:
(a) if it is not a natural person, the Delaware Trustee is duly
organized, validly existing and in good standing under the laws of the State of
Delaware;
(b) if it is not a natural person, the execution, delivery and
performance by the Delaware Trustee of this Declaration has been duly authorized
by all necessary corporate action on the part of the Delaware Trustee. This
Declaration has been duly executed and delivered by the Delaware Trustee, and
under Delaware law (excluding any securities laws) constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether considered in a proceeding in equity or at law);
47
(c) if it is not a natural person, the execution, delivery and
performance of this Declaration by the Delaware Trustee does not conflict with
or constitute a breach of the charter or by-laws of the Delaware Trustee;
(d) it has trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration;
(e) no consent, approval or authorization of, or registration with or
notice to, any state or federal banking authority governing the trust powers of
the Delaware Trustee is required for the execution, delivery or performance by
the Delaware Trustee of this Declaration; and
(f) the Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, it is an entity which has its
principal place of business in the State of Delaware and, in either case, a
Person that satisfies for the Trust the requirements of Section 3807 of the
Statutory Trust Act.
ARTICLE XIII.
MISCELLANEOUS
SECTION 13.1. NOTICES. All notices provided for in this Declaration
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied (which telecopy shall be followed by notice delivered or
mailed by first class mail) or mailed by first class mail, as follows:
(a) if given to the Trust in care of the Administrators at the Trust's
mailing address set forth below (or such other address as the Trust may give
notice of to the Holders of the Securities):
Tower Group Statutory Trust III
c/o Tower Group, Inc.
120 Broadway, 14th Floor
New York, New York 10271
Attention: Francis M. Colalucci
Telecopy: 212-271-5492
(b) if given to the Delaware Trustee, at the Delaware Trustee's mailing
address set forth below (or such other address as the Delaware Trustee may give
notice of to the Holders of the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140
48
(c) if given to the Institutional Trustee, at the Institutional
Trustee's mailing address set forth below (or such other address as the
Institutional Trustee may give notice of to the Holders of the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice of to the Trust):
Tower Group, Inc.
120 Broadway, 14th Floor
New York, New York 10271
Attention: Francis M. Colalucci
Telecopy: 212-271-5492
(e) if given to any other Holder, at the address set forth on the books
and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 13.2. GOVERNING LAW. This Declaration and the rights and
obligations of the parties hereunder shall be governed by and interpreted in
accordance with the law of the State of Delaware and all rights and remedies
shall be governed by such laws without regard to the principles of conflict of
laws of the State of Delaware or any other jurisdiction that would call for the
application of the law of any jurisdiction other than the State of Delaware;
PROVIDED, HOWEVER, that there shall not be applicable to the Trust, the Trustees
or this Declaration any provision of the laws (statutory or common) of the State
of Delaware pertaining to trusts that relate to or regulate, in a manner
inconsistent with the terms hereof (a) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges, (b)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (c) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (d) fees or other sums payable to trustees, officers,
agents or employees of a trust, (e) the allocation of receipts and expenditures
to income or principal, or (f) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets.
49
SECTION 13.3. INTENTION OF THE PARTIES. It is the intention of the
parties hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Declaration shall be
interpreted to further this intention of the parties.
SECTION 13.4. HEADINGS. Headings contained in this Declaration are
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.
SECTION 13.5. SUCCESSORS AND ASSIGNS. Whenever in this Declaration any
of the parties hereto is named or referred to, the successors and assigns of
such party shall be deemed to be included, and all covenants and agreements in
this Declaration by the Sponsor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether or not so expressed.
SECTION 13.6. PARTIAL ENFORCEABILITY. If any provision of this
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
SECTION 13.7. COUNTERPARTS. This Declaration may contain more than one
counterpart of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Trustees and Administrators to any of
such counterpart signature pages. All of such counterpart signature pages shall
be read as though one, and they shall have the same force and effect as though
all of the signers had signed a single signature page.
SIGNATURES APPEAR ON THE FOLLOWING PAGE
50
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
WILMINGTON TRUST COMPANY,
as Institutional Trustee
By: /s/ Christopher J. Slaybaugh
----------------------------------
Name: Christopher J. Slaybaugh
Title: Financial Services Officer
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By: /s/ Christopher J. Slaybaugh
----------------------------------
Name: Christopher J. Slaybaugh
Title: Financial Services Officer
TOWER GROUP, INC., as sponsor
By: /s/ Michael H. Lee
----------------------------------
Name: Michael H. Lee
Title: President and Ceo
TOWER GROUP STATUTORY TRUST III
By: /s/ Michael H. Lee
----------------------------------
Michael H. Lee, Administrator
By: /s/ Francis M. Colalucci
----------------------------------
Francis M. Colalucci, Administrator
By: /s/ Steen G. Fauth
----------------------------------
Steven G. Fauth, Administrator
51
ANNEX I
TERMS OF SECURITIES
Pursuant to Section 6.1 of the Amended and Restated
Declaration of Trust, dated as of December 15, 2004 (as amended from time to
time, the "DECLARATION"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Capital Securities and the
Common Securities are set out below (each capitalized term used but not defined
herein has the meaning set forth in the Declaration):
1. DESIGNATION AND NUMBER.
(a) 13,000 Fixed/Floating Rate Capital Securities of Tower
Group Statutory Trust III (the "Trust"), with an aggregate stated liquidation
amount with respect to the assets of the Trust of thirteen million dollars
($13,000,000) and a stated liquidation amount with respect to the assets of the
Trust of $1,000.00 per Capital Security, are hereby designated for the purposes
of identification only as the "CAPITAL SECURITIES". The Capital Security
Certificates evidencing the Capital Securities shall be substantially in the
form of Exhibit A-1 to the Declaration, with such changes and additions thereto
or deletions therefrom as may be required by ordinary usage, custom or practice.
(b) 403 Fixed/Floating Rate Common Securities of the Trust
(the "COMMON SECURITIES") will be evidenced by Common Security Certificates
substantially in the form of Exhibit A-2 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice.
2. DISTRIBUTIONS.
(a) Distributions will be payable on each Security for the
period beginning on (and including) the date of original issuance and ending on
(but excluding) the Distribution Payment Date in December 2009 at a rate per
annum of 7.40% and shall bear interest for each successive Distribution Period
beginning on (and including) the Distribution Payment Date in December 2009, and
each succeeding Distribution Payment Date, and ending on (but excluding) the
next succeeding Distribution Payment Date (each, a "DISTRIBUTION PERIOD") at a
rate per annum equal to the 3-Month LIBOR, determined as described below, plus
3.40% (the "COUPON RATE"), applied to the stated liquidation amount thereof,
such rate being the rate of interest payable on the Debentures to be held by the
Institutional Trustee. Distributions in arrears for more than one quarterly
period will bear interest thereon compounded quarterly at the applicable
Distribution Rate (to the extent permitted by law). Distributions, as used
herein, include cash distributions, any such compounded distributions and any
Additional Sums payable on the Debentures unless otherwise noted. A Distribution
is payable only to the extent that payments are made in respect of the
Debentures held by the Institutional Trustee and to the extent the Institutional
Trustee has funds available therefor. The amount of the Distribution payable (i)
for any Distribution Period commencing on or after the date of original issuance
but before the Distribution Payment Date in December 2009 will be computed on
the basis of a 360-day year of twelve 30-day months, and (ii) for the
Distribution Period commencing on or after the Distribution Payment Date in
December 2009 and each succeeding Distribution Period will be calculated by
applying the Distribution Rate to the stated liquidation amount outstanding at
the commencement of the Distribution Period and multiplying each such amount by
the actual number of days in the Distribution Period concerned divided by 360.
All percentages resulting from any calculations on the Capital Securities will
be rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar
amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward)).
I-1
"3-MONTH LIBOR" means the London interbank offered interest
rate for three-month, U.S. dollar deposits determined by the Debenture Trustee
in the following order of priority:
(1) the rate (expressed as a percentage per annum) for U.S.
dollar deposits having a three-month maturity that appears on Telerate
Page 3750 as of 11:00 a.m. (London time) on the related Determination
Date (as defined below). "Telerate Page 3750" means the display
designated as "Page 3750" on the Dow Jones Telerate Service or such
other page as may replace Page 3750 on that service or such other
service or services as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits;
(2) if such rate cannot be identified on the related
Determination Date, the Debenture Trustee will request the principal
London offices of four leading banks in the London interbank market to
provide such banks' offered quotations (expressed as percentages per
annum) to prime banks in the London interbank market for U.S. dollar
deposits having a three-month maturity as of 11:00 a.m. (London time)
on such Determination Date. If at least two quotations are provided,
3-Month LIBOR will be the arithmetic mean of such quotations;
(3) if fewer than two such quotations are provided as
requested in clause (2) above, the Debenture Trustee will request four
major New York City banks to provide such banks' offered quotations
(expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such
Determination Date. If at least two such quotations are provided,
3-Month LIBOR will be the arithmetic mean of such quotations; and
(4) if fewer than two such quotations are provided as
requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR
determined with respect to the Distribution Period immediately
preceding such current Distribution Period.
If the rate for U.S. dollar deposits having a three-month
maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London
time) on the related Determination Date is superseded on the Telerate Page 3750
by a corrected rate by 12:00 noon (London time) on such Determination Date, then
the corrected rate as so substituted on the applicable page will be the
applicable 3-Month LIBOR for such Determination Date.
The Interest Rate for any Distribution Period will at no time
be higher than the maximum rate then permitted by New York law as the same may
be modified by United States law.
I-2
"DETERMINATION DATE" means the date that is two London Banking
Days (i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the particular Distribution
Period for which a Coupon Rate is being determined.
"INTEREST RATE" means for the period beginning on (and
including) the date of original issuance and ending on (but excluding) the
Distribution Payment Date in December 2009 the rate per annum of 7.40% and for
each Distribution Period thereafter, the Coupon Rate.
"MATURITY DATE" means December 15, 2034.
(b) Distributions on the Securities will be
cumulative, will accrue from the date of original issuance, and will be payable,
subject to extension of distribution payment periods as described herein,
quarterly in arrears on March 15, June 15, September 15 and December 15 of each
year or if such day is not a Business Day, then the next succeeding Business Day
(each a "DISTRIBUTION PAYMENT DATE"), commencing on the Distribution Payment
Date in March 2005 when, as and if available for payment. The Debenture Issuer
has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Indenture Event of Default has occurred and is
continuing, by deferring the payment of interest on the Debentures for up to 20
consecutive quarterly periods (each an "EXTENSION PERIOD") at any time and from
time to time, subject to the conditions described below, during which Extension
Period no interest shall be due and payable. During any Extension Period,
interest will continue to accrue on the Debentures, and interest on such accrued
interest will accrue at an annual rate equal to the Distribution Rate in effect
for each such Extension Period, compounded quarterly (from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "ADDITIONAL
INTEREST") during any Extension Period. No Extension Period may end on a date
other than a Distribution Payment Date. At the end of any such Extension Period
the Debenture Issuer shall pay all interest then accrued and unpaid on the
Debentures (together with Additional Interest thereon); PROVIDED, HOWEVER, that
no Extension Period may extend beyond the Maturity Date and PROVIDED FURTHER,
HOWEVER, that during any such Extension Period, the Debenture Issuer shall not,
and shall not permit any Affiliate of the Debenture Issuer controlled by the
Debenture Issuer to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Debenture Issuer's or its Affiliates' capital stock (other than payments of
dividends or distributions to the Debenture Issuer or a Subsidiary of the
Debenture Issuer) or make any guarantee payments with respect to the foregoing,
or (ii) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Debenture Issuer or any
Affiliate of the Debenture Issuer controlled by the Debenture Issuer that rank
PARI PASSU in all respects with or junior in interest to the Debentures (other
than, with respect to clauses (i) and (ii) above, (a) repurchases, redemptions
or other acquisitions of shares of capital stock of the Debenture Issuer or any
Subsidiary of the Debenture Issuer in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Debenture Issuer or of such Subsidiary (or
securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the applicable
Extension Period, (b) as a result of any exchange or conversion of any class or
series of the Debenture Issuer's capital stock (or any capital stock of a
Subsidiary of the Debenture Issuer) for any class or series of the Debenture
I-3
Issuer's capital stock (or in the case of a Subsidiary of the Debenture Issuer,
any class or series of such Subsidiary's capital stock) or of any class or
series of the Debenture Issuer's indebtedness for any class or series of the
Debenture Issuer's capital stock (or in the case of indebtedness of a Subsidiary
of the Debenture Issuer, of any class or series of such Subsidiary's
indebtedness for any class or series of such Subsidiary's capital stock), (c)
the purchase of fractional interests in shares of the Debenture Issuer's capital
stock (or the capital stock of a Subsidiary of the Company) pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (d) any declaration of a dividend in connection with any
stockholders' rights plan, or the issuance of rights, stock or other property
under any stockholders' rights plan, or the redemption or repurchase of rights
pursuant thereto, (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks PARI PASSU with or junior to such stock and any
cash payments in lieu of fractional shares issued in connection therewith, or
(f) payments under the Capital Securities Guarantee). Prior to the termination
of any Extension Period, the Debenture Issuer may further extend such period,
provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and
Additional Interest, the Debenture Issuer may commence a new Extension Period,
subject to the foregoing requirements. No interest or Additional Interest shall
be due and payable during an Extension Period, except at the end thereof, but
each installment of interest that would otherwise have been due and payable
during such Extension Period shall bear Additional Interest. During any
Extension Period, Distributions on the Securities shall be deferred for a period
equal to the Extension Period. If Distributions are deferred, the Distributions
due shall be paid on the date that the related Extension Period terminates, to
Holders of the Securities as they appear on the books and records of the Trust
on the record date immediately preceding such date. Distributions on the
Securities must be paid on the dates payable (after giving effect to any
Extension Period) to the extent that the Trust has funds available for the
payment of such distributions in the Property Account of the Trust. The Trust's
funds available for Distribution to the Holders of the Securities will be
limited to payments received from the Debenture Issuer. The payment of
Distributions out of moneys held by the Trust is guaranteed by the Guarantor
pursuant to the Guarantee.
(c) Distributions on the Securities will be payable
to the Holders thereof as they appear on the books and records of the Trust on
the relevant record dates. The relevant record dates shall be 15 days before the
relevant Distribution Payment Date. Distributions payable on any Securities that
are not punctually paid on any Distribution Payment Date, as a result of the
Debenture Issuer having failed to make a payment under the Debentures, as the
case may be, when due (taking into account any Extension Period), will cease to
be payable to the Person in whose name such Securities are registered on the
relevant record date, and such defaulted Distribution will instead be payable to
the Person in whose name such Securities are registered on the special record
date or other specified date determined in accordance with the Indenture.
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(d) In the event that there is any money or other
property held by or for the Trust that is not accounted for hereunder, such
property shall be distributed Pro Rata (as defined herein) among the Holders of
the Securities.
3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. In the event of the
voluntary or involuntary liquidation, dissolution, winding-up or termination of
the Trust (each a "LIQUIDATION") other than in connection with a redemption of
the Debentures, the Holders of the Securities will be entitled to receive out of
the assets of the Trust available for distribution to Holders of the Securities,
after satisfaction of liabilities to creditors of the Trust (to the extent not
satisfied by the Debenture Issuer), distributions equal to the lesser of (i) the
aggregate of the stated liquidation amount of $1,000.00 per Security plus
accrued and unpaid Distributions thereon to the date of payment, to the extent
the Trust shall have funds available therefor, and (ii) the amount of assets of
the Trust remaining available for contributions to Holders in liquidation of the
Trust (such amount being, the "LIQUIDATION DISTRIBUTION"), unless in connection
with such Liquidation, the Debentures in an aggregate stated principal amount
equal to the aggregate stated liquidation amount of such Securities, with an
interest rate equal to the Distribution Rate of, and bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid Distributions on, and
having the same record date as, such Securities, after paying or making
reasonable provision to pay all claims and obligations of the Trust in
accordance with the Statutory Trust Act, shall be distributed on a Pro Rata
basis to the Holders of the Securities in exchange for such Securities.
The Sponsor, as the Holder of all of the Common Securities, has the
right at any time to dissolve the Trust (including, without limitation, upon the
occurrence of a Special Event) and, after satisfaction of liabilities to
creditors of the Trust, cause the Debentures to be distributed to the Holders of
the Securities on a Pro Rata basis in accordance with the aggregate stated
liquidation amount thereof.
If a Liquidation of the Trust occurs as described in clause
(i), (ii), (iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be
liquidated by the Institutional Trustee as expeditiously as it determines to be
possible by distributing, after satisfaction of liabilities to creditors of the
Trust, to the Holders of the Securities, the Debentures on a Pro Rata basis to
the extent not satisfied by the Debenture Issuer, unless such distribution is
determined by the Institutional Trustee not to be practical, in which event such
Holders will be entitled to receive out of the assets of the Trust available for
distribution to the Holders, after satisfaction of liabilities of creditors of
the Trust to the extent not satisfied by the Debenture Issuer, an amount equal
to the Liquidation Distribution. An early Liquidation of the Trust pursuant to
clause (iv) of Section 7.1(a) of the Declaration shall occur if the
Institutional Trustee determines that such Liquidation is possible by
distributing, after satisfaction of liabilities to creditors of the Trust, to
the Holders of the Securities on a Pro Rata basis, the Debentures, and such
distribution occurs.
If, upon any such Liquidation the Liquidation Distribution can
be paid only in part because the Trust has insufficient assets available to pay
in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on such Capital Securities shall be paid to the Holders of
the Securities on a Pro Rata basis, except that if an Event of Default has
occurred and is continuing, the Capital Securities shall have a preference over
the Common Securities with regard to such distributions.
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After the date for any distribution of the Debentures upon
dissolution of the Trust (i) the Securities of the Trust will be deemed to be no
longer outstanding, (ii) upon surrender of a Holder's Securities certificate,
such Holder of the Securities will receive a certificate representing the
Debentures to be delivered upon such distribution, (iii) any certificates
representing the Securities still outstanding will be deemed to represent
undivided beneficial interests in such of the Debentures as have an aggregate
principal amount equal to the aggregate stated liquidation amount with an
interest rate identical to the Distribution Rate of, and bearing accrued and
unpaid interest equal to accrued and unpaid distributions on, the Securities
until such certificates are presented to the Debenture Issuer or its agent for
transfer or reissuance (and until such certificates are so surrendered, no
payments of interest or principal shall be made to Holders of Securities in
respect of any payments due and payable under the Debentures; PROVIDED, HOWEVER
that such failure to pay shall not be deemed to be an Event of Default and shall
not entitle the Holder to the benefits of the Guarantee), and (iv) all rights of
Holders of Securities under the Declaration shall cease, except the right of
such Holders to receive Debentures upon surrender of certificates representing
such Securities.
4. REDEMPTION AND DISTRIBUTION.
(a) The Debentures will mature on December 15, 2034. The Debentures may
be redeemed by the Debenture Issuer, in whole or in part on any Distribution
Payment Date on or after the Distribution Payment Date in December 2009, at the
Optional Redemption Price. In addition, the Debentures may be redeemed by the
Debenture Issuer at the Special Redemption Price, in whole but not in part, at
any Distribution Payment Date, upon the occurrence and continuation of a Special
Event within 120 days following the occurrence of such Special Event at the
Special Redemption Price, upon not less than 30 nor more than 60 days' notice to
holders of such Debentures so long as such Special Event is continuing. The
Sponsor shall appoint a Quotation Agent, which initially shall be U. S. Bank
National Association, for the purpose of performing the services contemplated in
or by reference in, the definition of Special Redemption Price. Any error in the
calculation of the Special Redemption Price by the Quotation Agent or the
Debenture Trustee may be corrected at any time by notice delivered to the
Sponsor and the holders of the Capital Securities. Subject to the corrective
rights set forth above, all certificates, communications, opinions,
determinations, calculations, quotations and decisions given, expressed, made or
obtained for the purposes of the provisions relating to the payment and
calculation of the Special Redemption Price on the Debentures or the Capital
Securities by the Debenture Trustee, the Quotation Agent or the Institutional
Trustee, as the case may be, shall (in the absence of willful default, bad faith
or manifest error) be final, conclusive and binding on the holders of the
Debentures and the Capital Securities, the Trust and the Sponsor, and no
liability shall attach (except as provided above) to the Debenture Trustee, the
Quotation Agent or the Institutional Trustee in connection with the exercise or
non-exercise by any of them of their respective powers, duties and discretion.
"COMPARABLE TREASURY ISSUE" means with respect to any Special
Redemption Date the United States Treasury security selected by the Quotation
Agent as having a maturity comparable to the Fixed Rate Period Remaining Life
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 Fixed Rate Period Remaining Life. If no United
States Treasury security has a maturity which is within a period from three
months before to three months after the Distribution Payment Date in December
2009, the two most closely corresponding fixed, non-callable United States
Treasury securities, as selected by the Quotation Agent, shall be used as the
Comparable Treasury Issue, and the Treasury Rate shall be interpolated and
extrapolated on a straight-line basis, rounding to the nearest month using such
securities.
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"COMPARABLE TREASURY PRICE" means (a) the average of five Reference
Treasury Dealer Quotations for such Special Redemption Date, after excluding the
highest and lowest such Reference Treasury Dealer Quotations, or (b) if the
Quotation Agent obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all such Quotations.
"FEDERAL RESERVE" means the Board of Governors of the Federal Reserve
System and any successor federal agency.
"FIXED RATE PERIOD REMAINING LIFE" means, with respect to any
Debenture, the period from the Special Redemption Date for such Debenture to the
Distribution Payment Date in December 2009.
"INVESTMENT COMPANY EVENT" means the receipt by the Debenture Issuer
and the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or written
change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
the Trust is or, within 90 days of the date of such opinion, will be considered
an Investment Company that is required to be registered under the Investment
Company Act which change or prospective change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of the
Debentures.
"MATURITY DATE" means December 15, 2034.
"OPTIONAL REDEMPTION DATE" shall mean the date fixed for the redemption
of Capital Securities, which shall be any Distribution Payment Date on or after
the Distribution Payment Date in December 2009.
"OPTIONAL REDEMPTION PRICE" means 100% of the principal amount of the
Debentures being redeemed, plus accrued and unpaid interest on such Debentures
to the Optional Redemption Date.
"PRIMARY TREASURY DEALER" means either a nationally recognized primary
United States Government securities dealer or an entity of recognized standing
in matters pertaining to the quotation of treasury securities that is reasonably
acceptable to the Sponsor and the Institutional Trustee.
"QUOTATION AGENT" means U. S. Bank National Association, or its
designee, and its successors; provided, however, that if the foregoing shall
cease to be a Primary Treasury Dealer, the Sponsor shall substitute therefor
another Primary Treasury Dealer.
I-7
"REFERENCE TREASURY DEALER" means (i) the Quotation Agent and (ii) any
other Primary Treasury Dealer selected by the Trustee after consultation with
the Sponsor.
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each
Reference Treasury Dealer and any Special Redemption Date, the average, as
determined by the Quotation Agent, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Debenture Trustee by such Reference
Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day
preceding such Redemption Date.
"SPECIAL EVENT" means a Tax Event or an Investment Company Event.
"SPECIAL REDEMPTION DATE" means a date on which a Special Event
redemption occurs, which shall be any March 15, June 15, September 15 or
December 15.
"SPECIAL REDEMPTION PRICE" means (a) if the Special Redemption Date
occurs before the Distribution Payment Date in December 2009, the greater of (i)
107.5% of the principal amount of the Debentures, plus accrued and unpaid
Interest on the Debentures to the occurrence of the Special Redemption Date, or
(ii) as determined by the Quotation Agent, (A) the sum of the present values of
the scheduled payments of principal and Interest on the Debentures during the
Fixed Rate Period Remaining Life of the Debentures (assuming the Debentures
matured on the Distribution Payment Date in December 2009) discounted to the
Special Redemption Date on a quarterly basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Rate, plus (B) accrued and unpaid
Interest on the Debentures to such Special Redemption Date, or (b) if the
Special Redemption Date occurs on or after the Distribution Payment Date in
December 2009, 100% of the principal amount of the Debentures being redeemed,
plus accrued and unpaid interest (including any Additional Interest) on such
Debentures to the Special Redemption Date.
"TAX EVENT" means the receipt by the Debenture Issuer and the Trust of
an opinion of counsel experienced in such matters to the effect that, as a
result of any amendment to or change (including any announced prospective
change) in the laws or any regulations thereunder of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official administrative pronouncement (including any private letter ruling,
technical advice memorandum, field service advice, regulatory procedure, notice
or announcement including any notice or announcement of intent to adopt such
procedures or regulations (an "ADMINISTRATIVE ACTION")) or judicial decision
interpreting or applying such laws or regulations, regardless of whether such
Administrative Action or judicial decision is issued to or in connection with a
proceeding involving the Debenture Issuer or the Trust and whether or not
subject to review or appeal, which amendment, clarification, change,
Administrative Action or decision is enacted, promulgated or announced, in each
case on or after the date of original issuance of the Debentures, there is more
than an insubstantial risk that: (i) the Trust is, or will be within 90 days of
the date of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Debentures; (ii) interest payable
by the Debenture Issuer on the Debentures is not, or within 90 days of the date
of such opinion, will not be, deductible by the Debenture Issuer, in whole or in
part, for United States federal income tax purposes; or (iii) the Trust is, or
will be within 90 days of the date of such opinion, subject to more than a de
minimis amount of other taxes (excluding withholding taxes), duties or other
governmental charges.
I-8
"TREASURY RATE" means (i) the yield, under the heading which represents
the average for the week immediately prior to the date of calculation, appearing
in the most recently published statistical release designated H.15 (519) or any
successor publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Fixed Rate Period Remaining Life (if no maturity
is within three months before or after the Fixed Rate Period Remaining Life,
yields for the two published maturities most closely corresponding to the Fixed
Rate Period Remaining Life shall be determined and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight-line basis, rounding
to the nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such Special Redemption Date. The
Treasury Rate shall be calculated by the Quotation Agent on the third Business
Day preceding the Special Redemption Date.
(b) Upon the repayment in full at maturity or redemption in
whole or in part of the Debentures (other than following the distribution of the
Debentures to the Holders of the Securities), the proceeds from such repayment
or payment shall concurrently be applied to redeem Pro Rata at the applicable
Optional Redemption Price or Special Redemption Price, as applicable, Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Debentures so repaid or redeemed; PROVIDED, HOWEVER, that holders of such
Securities shall be given not less than 30 nor more than 60 days' notice of such
redemption (other than at the scheduled maturity of the Debentures).
(c) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Capital Securities will be redeemed Pro
Rata and the Capital Securities to be redeemed will be redeemed Pro Rata from
each Holder of Capital Securities.
(d) The Trust may not redeem fewer than all the outstanding
Capital Securities unless all accrued and unpaid Distributions have been paid on
all Capital Securities for all quarterly Distribution periods terminating on or
before the date of redemption.
(e) REDEMPTION OR DISTRIBUTION PROCEDURES.
(i) Notice of any redemption of, or notice of
distribution of the Debentures in exchange for, the Securities
(a "REDEMPTION/DISTRIBUTION NOTICE") will be given by the
Trust by mail to each Holder of Securities to be redeemed or
exchanged not fewer than 30 nor more than 60 days before the
date fixed for redemption or exchange thereof which, in the
case of a redemption, will be the date fixed for redemption of
the Debentures. For purposes of the calculation of the date of
redemption or exchange and the dates on which notices are
given pursuant to this paragraph 4(e)(i), a
Redemption/Distribution Notice shall be deemed to be given on
the day such notice is first mailed by first-class mail,
postage prepaid, to Holders of such Securities. Each
Redemption/Distribution Notice shall be addressed to the
Holders of such Securities at the address of each such Holder
appearing on the books and records of the Trust. No defect in
the Redemption/Distribution Notice or in the mailing thereof
with respect to any Holder shall affect the validity of the
redemption or exchange proceedings with respect to any other
Holder.
I-9
(ii) If the Securities are to be redeemed and the
Trust gives a Redemption/ Distribution Notice, which notice
may only be issued if the Debentures are redeemed as set out
in this paragraph 4 (which notice will be irrevocable), then,
PROVIDED that the Institutional Trustee has a sufficient
amount of cash in connection with the related redemption or
maturity of the Debentures, the Institutional Trustee will pay
the relevant Optional Redemption Price or Special Redemption
Price, as applicable, to the Holders of such Securities by
check mailed to the address of each such Holder appearing on
the books and records of the Trust on the Optional Redemption
Date or Special Redemption Date. If a Redemption/Distribution
Notice shall have been given and funds deposited as required
then immediately prior to the close of business on the date of
such deposit Distributions will cease to accrue on the
Securities so called for redemption and all rights of Holders
of such Securities so called for redemption will cease, except
the right of the Holders of such Securities to receive the
applicable Optional Redemption Price or Special Redemption
Price specified in paragraph 4(a), but without interest on
such Optional Redemption Price or Special Redemption Price. If
any date fixed for redemption of Securities is not a Business
Day, then payment of any such Optional Redemption Price or
Special Redemption Price payable on such date will be made on
the next succeeding day that is a Business Day. If payment of
the Optional Redemption Price or Special Redemption Price in
respect of any Securities is improperly withheld or refused
and not paid either by the Trust or by the Debenture Issuer as
guarantor pursuant to the Guarantee, Distributions on such
Securities will continue to accrue at the Distribution Rate
from the original Optional Redemption Date or Special
Redemption Date to the actual date of payment, in which case
the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Optional Redemption
Price or Special Redemption Price. In the event of any
redemption of the Capital Securities issued by the Trust in
part, the Trust shall not be required to (i) issue, register
the transfer of or exchange any Security during a period
beginning at the opening of business 15 days before any
selection for redemption of the Capital Securities and ending
at the close of business on the earliest date on which the
relevant notice of redemption is deemed to have been given to
all Holders of the Capital Securities to be so redeemed or
(ii) register the transfer of or exchange any Capital
Securities so selected for redemption, in whole or in part,
except for the unredeemed portion of any Capital Securities
being redeemed in part.
(iii) Redemption/Distribution Notices shall be sent
by the Administrators on behalf of the Trust to (A) in respect
of the Capital Securities, the Holders thereof and (B) in
respect of the Common Securities, the Holder thereof.
(iv) Subject to the foregoing and applicable law
(including, without limitation, United States federal
securities laws), and provided that the acquiror is not the
Holder of the Common Securities or the obligor under the
Indenture, the Sponsor or any of its subsidiaries may at any
time and from time to time purchase outstanding Capital
Securities by tender, in the open market or by private
agreement.
I-10
5. VOTING RIGHTS - CAPITAL SECURITIES.
(a) Except as provided under paragraphs 5(b) and 7 and as otherwise
required by law and the Declaration, the Holders of the Capital Securities will
have no voting rights. The Administrators are required to call a meeting of the
Holders of the Capital Securities if directed to do so by Holders of at least
10% in liquidation amount of the Capital Securities.
(b) Subject to the requirements of obtaining a tax opinion by the
Institutional Trustee in certain circumstances set forth in the last sentence of
this paragraph, the Holders of a Majority in liquidation amount of the Capital
Securities, voting separately as a class, have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies
available under the Indenture as the holder of the Debentures, (ii) waive any
past default that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Debentures shall be
due and payable or (iv) consent on behalf of all the Holders of the Capital
Securities to any amendment, modification or termination of the Indenture or the
Debentures where such consent shall be required; PROVIDED, HOWEVER, that, where
a consent or action under the Indenture would require the consent or act of the
holders of greater than a simple majority in aggregate principal amount of
Debentures (a "SUPER MAJORITY") affected thereby, the Institutional Trustee may
only give such consent or take such action at the written direction of the
Holders of at least the proportion in liquidation amount of the Capital
Securities outstanding which the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding. If the Institutional
Trustee fails to enforce its rights under the Debentures after the Holders of a
Majority in liquidation amount of such Capital Securities have so directed the
Institutional Trustee, to the fullest extent permitted by law, a Holder of the
Capital Securities may institute a legal proceeding directly against the
Debenture Issuer to enforce the Institutional Trustee's rights under the
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Debenture Issuer to pay interest or
principal on the Debentures on the date the interest or principal is payable (or
in the case of redemption, the Optional Redemption Date or the Special
Redemption Date, as applicable), then a Holder of record of the Capital
Securities may directly institute a proceeding for enforcement of payment on or
after the respective due dates specified in the Debentures, to such Holder
directly of the principal of or interest on the Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of the Capital
Securities of such Holder. The Institutional Trustee shall notify all Holders of
the Capital Securities of any default actually known to the Institutional
Trustee with respect to the Debentures unless (x) such default has been cured
prior to the giving of such notice or (y) the Institutional Trustee determines
in good faith that the withholding of such notice is in the interest of the
Holders of such Capital Securities, except where the default relates to the
payment of principal of or interest on any of the Debentures. Such notice shall
state that such Indenture Event of Default also constitutes an Event of Default
hereunder. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy, the Institutional Trustee shall not take
any of the actions described in clauses (i), (ii) or (iii) above unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such action, the Trust will not be classified as other than a
grantor trust for United States federal income tax purposes.
I-11
In the event the consent of the Institutional Trustee, as the holder of
the Debentures, is required under the Indenture with respect to any amendment,
modification or termination of the Indenture, the Institutional Trustee shall
request the direction of the Holders of the Securities with respect to such
amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a Majority in liquidation
amount of the Securities voting together as a single class; PROVIDED, HOWEVER,
that where a consent under the Indenture would require the consent of a
Super-Majority, the Institutional Trustee may only give such consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities outstanding which the relevant Super-Majority represents of the
aggregate principal amount of the Debentures outstanding. The Institutional
Trustee shall not take any such action in accordance with the directions of the
Holders of the Securities unless the Institutional Trustee has obtained an
opinion of tax counsel to the effect that, as a result of such action, the Trust
will not be classified as other than a grantor trust for United States federal
income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of
the corresponding Event of Default hereunder. Any required approval or direction
of Holders of the Capital Securities may be given at a separate meeting of
Holders of the Capital Securities convened for such purpose, at a meeting of all
of the Holders of the Securities in the Trust or pursuant to written consent.
The Institutional Trustee will cause a notice of any meeting at which Holders of
the Capital Securities are entitled to vote, or of any matter upon which action
by written consent of such Holders is to be taken, to be mailed to each Holder
of record of the Capital Securities. Each such notice will include a statement
setting forth the following information (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought, and (iii) instructions
for the delivery of proxies or consents. No vote or consent of the Holders of
the Capital Securities will be required for the Trust to redeem and cancel
Capital Securities or to distribute the Debentures in accordance with the
Declaration and the terms of the Securities.
Notwithstanding that Holders of the Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not entitle the Holder thereof to vote or consent and shall, for purposes
of such vote or consent, be treated as if such Capital Securities were not
outstanding.
In no event will Holders of the Capital Securities have the right to
vote to appoint, remove or replace the Administrators, which voting rights are
vested exclusively in the Sponsor as the Holder of all of the Common Securities
of the Trust. Under certain circumstances as more fully described in the
Declaration, Holders of Capital Securities have the right to vote to appoint,
remove or replace the Institutional Trustee and the Delaware Trustee.
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6. VOTING RIGHTS - COMMON SECURITIES.
(a) Except as provided under paragraphs 6(b), 6(c) and 7 and as
otherwise required by law and the Declaration, the Common Securities will have
no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance
with Article IV of the Declaration, to vote to appoint, remove or replace any
Administrators.
(c) Subject to Section 6.7 of the Declaration and only after each Event
of Default (if any) with respect to the Capital Securities has been cured,
waived, or otherwise eliminated and subject to the requirements of the second to
last sentence of this paragraph, the Holders of a Majority in liquidation amount
of the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waiving any past default and its
consequences that is waivable under the Indenture, or (iii) exercising any right
to rescind or annul a declaration that the principal of all the Debentures shall
be due and payable; PROVIDED, HOWEVER, that, where a consent or action under the
Indenture would require a Super Majority, the Institutional Trustee may only
give such consent or take such action at the written direction of the Holders of
at least the proportion in liquidation amount of the Common Securities which the
relevant Super Majority represents of the aggregate principal amount of the
Debentures outstanding. Notwithstanding this paragraph 6(c), the Institutional
Trustee shall not revoke any action previously authorized or approved by a vote
or consent of the Holders of the Capital Securities. Other than with respect to
directing the time, method and place of conducting any proceeding for any remedy
available to the Institutional Trustee or the Debenture Trustee as set forth
above, the Institutional Trustee shall not take any action described in (i),
(ii) or (iii) above, unless the Institutional Trustee has obtained an opinion of
tax counsel to the effect that for the purposes of United States federal income
tax the Trust will not be classified as other than a grantor trust on account of
such action. If the Institutional Trustee fails to enforce its rights under the
Declaration to the fullest extent permitted by law, any Holder of the Common
Securities may institute a legal proceeding directly against any Person to
enforce the Institutional Trustee's rights under the Declaration, without first
instituting a legal proceeding against the Institutional Trustee or any other
Person.
Any approval or direction of Holders of the Common Securities may be
given at a separate meeting of Holders of the Common Securities convened for
such purpose, at a meeting of all of the Holders of the Securities in the Trust
or pursuant to written consent. The Administrators will cause a notice of any
meeting at which Holders of the Common Securities are entitled to vote, or of
any matter upon which action by written consent of such Holders is to be taken,
to be mailed to each Holder of the Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought, and (iii) instructions for the
delivery of proxies or consents.
1-13
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
7. AMENDMENTS TO DECLARATION AND INDENTURE.
(a) In addition to any requirements under Section 11.1 of the
Declaration, if any proposed amendment to the Declaration provides for, or the
Trustees, Sponsor or Administrators otherwise propose to effect, (i) any action
that would adversely affect the powers, preferences or special rights of the
Securities, whether by way of amendment to the Declaration or otherwise, or (ii)
the Liquidation of the Trust, other than as described in Section 7.1 of the
Declaration, then the Holders of outstanding Securities, voting together as a
single class, will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of the
Holders of at least a Majority in liquidation amount of the Securities, affected
thereby; PROVIDED, HOWEVER, if any amendment or proposal referred to in clause
(i) above would adversely affect only the Capital Securities or only the Common
Securities, then only the affected Securities will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in liquidation amount of such class of
Securities.
(b) In the event the consent of the Institutional Trustee as the holder
of the Debentures is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification, or termination as directed by
a Majority in liquidation amount of the Securities voting together as a single
class; PROVIDED, HOWEVER, that where a consent under the Indenture would require
a Super Majority, the Institutional Trustee may only give such consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding.
(c) Notwithstanding the foregoing, no amendment or modification may be
made to the Declaration if such amendment or modification would (i) cause the
Trust to be classified for purposes of United States federal income taxation as
other than a grantor trust, (ii) reduce or otherwise adversely affect the powers
of the Institutional Trustee, or (iii) cause the Trust to be deemed an
Investment Company which is required to be registered under the Investment
Company Act.
(d) Notwithstanding any provision of the Declaration, the right of any
Holder of the Capital Securities to receive payment of Distributions and other
payments upon redemption, liquidation or otherwise, on or after their respective
due dates, or to institute a suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder. For the protection and enforcement of the foregoing
provision, each and every Holder of the Capital Securities shall be entitled to
such relief as can be given either at law or equity.
8. PRO RATA. A reference in these terms of the Securities to any
payment, distribution or treatment as being "PRO RATA" shall mean pro rata to
each Holder of the Securities according to the aggregate liquidation amount of
the Securities held by the relevant Holder in relation to the aggregate
liquidation amount of all Securities then outstanding unless, in relation to a
payment, an Event of Default has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Capital Securities Pro Rata according to the aggregate liquidation amount of the
Capital Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Capital Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Capital Securities, to
each Holder of the Common Securities Pro Rata according to the aggregate
liquidation amount of the Common Securities held by the relevant Holder relative
to the aggregate liquidation amount of all Common Securities outstanding.
I-14
9. RANKING. The Capital Securities rank PARI PASSU with and payment
thereon shall be made Pro Rata with the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to receive payment of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights of the
Holders of the Capital Securities with the result that no payment of any
Distribution on, or Optional Redemption Price (or Special Redemption Price) of,
any Common Security, and no other payment on account of redemption, liquidation
or other acquisition of Common Securities, shall be made unless payment in full
in cash of all accumulated and unpaid Distributions on all outstanding Capital
Securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the Optional Redemption Price (or Special Redemption
Price) the full amount of such Optional Redemption Price (or Special Redemption
Price) on all outstanding Capital Securities then called for redemption, shall
have been made or provided for, and all funds immediately available to the
Institutional Trustee shall first be applied to the payment in full in cash of
all Distributions on, or the Optional Redemption Price (or Special Redemption
Price) of, the Capital Securities then due and payable.
10. ACCEPTANCE OF GUARANTEE AND INDENTURE. Each Holder of the Capital
Securities and the Common Securities, by the acceptance of such Securities,
agrees to the provisions of the Guarantee and the Indenture, including the
subordination provisions therein.
11. NO PREEMPTIVE RIGHTS. The Holders of the Securities shall have no,
and the issuance of the Securities is not subject to, preemptive or similar
rights to subscribe for any additional securities.
12. MISCELLANEOUS. These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the Guarantee, and the
Indenture to a Holder without charge on written request to the Sponsor at its
principal place of business.
I-15
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND
THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION (DEFINED
HEREIN), A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING
TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH THE SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
A-1-1
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND
MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED
TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
THIS SECURITY IS IN REGISTERED FORM WITHIN THE MEANING OF TREASURY
REGULATIONS SECTION 1.871-14(c)(1)(i) FOR U.S. FEDERAL INCOME AND WITHHOLDING
TAX PURPOSES.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.
Certificate Number P-1 13,000 Capital Securities
December 15, 2004
Certificate Evidencing Fixed/Floating Rate Capital Securities
of
Tower Group Statutory Trust III
(liquidation amount $1,000.00 per Capital Security)
Tower Group Statutory Trust III, a statutory trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Hare & Co.
(the "Holder"), as the nominee of The Bank of New York, indenture trustee under
the Indenture dated as of December 15, 2004, among Preferred Term Securities
XVI, Ltd., Preferred Term Securities XVI, Inc. and The Bank of New York, is the
A-1-2
registered owner of capital securities of the Trust representing undivided
beneficial interests in the assets of the Trust, (liquidation amount $1,000.00
per capital security) (the "Capital Securities"). Subject to the Declaration (as
defined below), the Capital Securities are transferable on the books and records
of the Trust in person or by a duly authorized attorney, upon surrender of this
Certificate duly endorsed and in proper form for transfer. The Capital
Securities represented hereby are issued pursuant to, and the designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Capital Securities shall in all respects be subject to, the provisions of
the Amended and Restated Declaration of Trust of the Trust dated as of December
15, 2004, among Michael H. Lee, Francis M. Colalucci and Steven G. Fauth, as
Administrators, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust
Company, as Institutional Trustee, Tower Group, Inc., as Sponsor, and the
holders from time to time of undivided beneficial interests in the assets of the
Trust, including the designation of the terms of the Capital Securities as set
forth in Annex I to such amended and restated declaration as the same may be
amended from time to time (the "Declaration"). Capitalized terms used herein but
not defined shall have the meaning given them in the Declaration. The Holder is
entitled to the benefits of the Guarantee and the Indenture to the extent
provided therein. The Sponsor will provide a copy of the Declaration, the
Guarantee, and the Indenture to the Holder without charge upon written request
to the Sponsor at its principal place of business.
Upon receipt of this Security, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance of this Security, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of beneficial ownership in the Debentures.
This Capital Security is governed by, and shall be construed in
accordance with, the laws of the State of Delaware, without regard to principles
of conflict of laws.
SIGNATURES APPEAR ON FOLLOWING PAGE
A-1-3
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
Tower Group STATUTORY TRUST III
By:
---------------------------------------
Name:
Title: Administrator
CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
WILMINGTON TRUST COMPANY,
as the Institutional Trustee
By:
----------------------------------------
Authorized Officer
A-1-4
[FORM OF REVERSE OF CAPITAL SECURITY]
Distributions payable on each Capital Security will be payable at an
annual rate equal to 7.40% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date (defined
herein) in December 2009 and at an annual rate for each successive period
beginning on (and including) December 2009, and each succeeding Distribution
Payment Date, commencing on the Distribution Payment Date in March 2005, and
ending on (but excluding) the next succeeding Distribution Payment Date (each
such period, a "Distribution Period"), equal to 3-Month LIBOR, determined as
described below, plus 3.40% (the "Coupon Rate"), applied to the stated
liquidation amount of $1,000.00 per Capital Security, such rate being the rate
of interest payable on the Debentures to be held by the Institutional Trustee.
Distributions in arrears will bear interest thereon compounded quarterly at the
Distribution Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes payments of cash distributions and any
such compounded distributions and any Additional Sums payable on the Debentures
unless otherwise noted. A Distribution is payable only to the extent that
payments are made in respect of the Debentures held by the Institutional Trustee
and to the extent the Institutional Trustee has funds available therefor. As
used herein, "Determination Date" means the date that is two London Banking Days
(i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the commencement of the
relevant Distribution Period. The amount of the Distribution payable (i) for any
Distribution Period commencing on or after the date of original issuance but
before the Distribution Payment Date in December 2009 will be computed on the
basis of a 360-day year of twelve 30-day months, and (ii) for the Distribution
Period commencing on or after the Distribution Payment Date in December 2009 and
each succeeding Distribution Period will be computed on the Distribution Rate to
the stated liquidation amount outstanding at the commencement of the
Distribution Period and multiplying each such amount by the actual number of
days in the Distribution Period concerned divided by 360.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two such quotations are provided, 3-Month
LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two
such quotations are provided as requested in clause (ii) above, the Debenture
Trustee will request four major New York City banks to provide such banks'
offered quotations (expressed as percentages per annum) to leading European
banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such
Determination Date. If at least two such quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; and (iv) if fewer than two such
quotations are provided as requested in clause (iii) above, 3-Month LIBOR will
be a 3-Month LIBOR determined with respect to the Distribution Period
immediately preceding such current Distribution Period. If the rate for U.S.
dollar deposits having a three-month maturity that initially appears on Telerate
Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is
superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London
time) on such Determination Date, then the corrected rate as so substituted on
the applicable page will be the applicable 3-Month LIBOR for such Determination
Date.
A-1-5
"Interest Rate" means for the period beginning on (and including) the
date of original issuance and ending on (but excluding) the Distribution Payment
Date in December 2009 the rate per annum of 7.40% and for each Distribution
Period thereafter, the Coupon Rate.
The Interest Rate for any Distribution Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be modified
by United States law.
All percentages resulting from any calculations on the Capital
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward)).
Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year or if such day is not a Business Day, then the next
succeeding Business Day (each such date, a "Distribution Payment Date"),
commencing on the Distribution Payment Date in March 2005. The Debenture Issuer
has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Indenture Event of Default has occurred and is
continuing, by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable. During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period, compounded quarterly from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "Additional
Interest"). No Extension Period may end on a date other than a Distribution
Payment Date. At the end of any such Extension Period the Debenture Issuer shall
pay all interest then accrued and unpaid on the Debentures (together with
Additional Interest thereon); PROVIDED, HOWEVER, that no Extension Period may
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest. During any Extension Period, Distributions on the Capital
Securities shall be deferred for a period equal to the Extension Period. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, to Holders of the Securities as they
appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account of the Trust. The Trust's funds available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.
A-1-6
The Capital Securities shall be redeemable as provided in the
Declaration.
A-1-7
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital
Security Certificate to:
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(Insert assignee's social security or tax identification number)
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
(Insert address and zip code of assignee) and irrevocably appoints
-----------------------------------------------------------------
agent to transfer this Capital Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:
---------------------------------------
Signature:
----------------------------------
(Sign exactly as your name appears on the other side of this Capital
Security Certificate)
Signature Guarantee:(1)
- --------
(1) Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Security registrar, which
requirements include membership or participation in the Securities
Transfer Agents Medallion Program ("STAMP") or such other "signature
guarantee program" as may be determined by the Security registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-1-8
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION
8.1 OF THE DECLARATION (DEFINED HEREIN).
THIS COMMON SECURITY IS IN REGISTERED FORM WITHIN THE MEANING OF
TREASURY REGULATIONS SECTION 1.871-14(c)(1)(i) FOR U.S. FEDERAL INCOME AND
WITHHOLDING TAX PURPOSES.
Certificate Number C-1 403 Common Securities
December 15, 2004
Certificate Evidencing Fixed/Floating Rate Common Securities
of
Tower Group Statutory Trust III
Tower Group Statutory Trust III, a statutory trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Tower Group,
Inc. (the "Holder") is the registered owner of common securities of the Trust
representing undivided beneficial interests in the assets of the Trust (the
"Common Securities"). Subject to the Declaration (as defined below), the Common
Securities are transferable on the books and records of the Trust in person or
by a duly authorized attorney, upon surrender of this Certificate duly endorsed
and in proper form for transfer. The Common Securities represented hereby are
issued pursuant to, and the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities shall in all
respects be subject to, the provisions of the Amended and Restated Declaration
of Trust of the Trust dated as of December 15, 2004, among Michael H. Lee,
Francis M. Colalucci and Steven G. Fauth, as Administrators, Wilmington Trust
Company, as Delaware Trustee, Wilmington Trust Company, as Institutional
Trustee, Tower Group, Inc., as Sponsor, and the holders from time to time of
undivided beneficial interest in the assets of the Trust including the
designation of the terms of the Common Securities as set forth in Annex I to
such amended and restated declaration, as the same may be amended from time to
time (the "Declaration"). Capitalized terms used herein but not defined shall
have the meaning given them in the Declaration. The Holder is entitled to the
benefits of the Guarantee and the Indenture to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Guarantee and the Indenture
to the Holder without charge upon written request to the Sponsor at its
principal place of business.
As set forth in the Declaration, when an Event of Default has occurred
and is continuing, the rights of Holders of Common Securities to payment in
respect of Distributions and payments upon Liquidation, redemption or otherwise
are subordinated to the rights of payment of Holders of the Capital Securities.
A-2-1
Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance of this Certificate, the Holder agrees to treat, for
United States federal income tax purposes, the Floating Rate Junior Subordinated
Deferrable Interest Debentures ("Debentures") as indebtedness and the Common
Securities as evidence of undivided beneficial ownership in the Debentures.
This Common Security is governed by, and shall be construed in
accordance with, the laws of the State of Delaware, without regard to principles
of conflict of laws.
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
Tower Group STATUTORY TRUST III
By:
-------------------------------
Name:
Title: Administrator
A-2-2
[FORM OF REVERSE OF COMMON SECURITY]
Distributions payable on each Common Security will be payable at an
annual rate equal to 7.40% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date (defined
herein) in December 2009 and at an annual rate for each successive period
beginning on (and including) the Distribution Payment Date in December 2009, and
each succeeding Distribution Payment Date, commencing on the Distribution
Payment Date in March 2005, and ending on (but excluding) the next succeeding
Distribution Payment Date (each such period, a "Distribution Period"), equal to
3-Month LIBOR, determined as described below, plus 3.40% (the "Coupon Rate"),
applied to the stated liquidation amount of $1,000.00 per Common Security, such
rate being the rate of interest payable on the Debentures to be held by the
Institutional Trustee. Distributions in arrears will bear interest thereon
compounded quarterly at the Distribution Rate (to the extent permitted by
applicable law). The term "Distributions" as used herein includes cash
distributions and any such compounded distributions and any Additional Sums
payable on the Debentures unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, "Determination Date" means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable (i) for any Distribution Period commencing on or after the date of
original issuance but before the Distribution Payment Date in December 2009 will
be computed on the basis of a 360-day year of twelve 30-day months, and (ii) for
the Distribution Period commencing on or after the Distribution Payment Date in
December 2009 and each succeeding Distribution Period will be calculated by
applying the Distribution Rate to the stated liquidation amount outstanding at
the commencement of the Distribution Period and multiplying each such amount by
the actual number of days in the Distribution Period concerned divided by 360.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.
A-2-3
"Interest Rate" means for the period beginning on (and including) the
date of original issuance and ending on (but excluding) the Distribution Payment
Date in December 2009 the rate per annum of 7.40% and for each Distribution
Period thereafter, the Coupon Rate.
The Interest Rate for any Distribution Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be modified
by United States law.
All percentages resulting from any calculations on the Common
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward)).
Except as otherwise described below, Distributions on the Common
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year or if such day is not a Business Day, then the next
succeeding Business Day (each such date, a "Distribution Payment Date"),
commencing on the Distribution Payment Date in March 2005. The Debenture Issuer
has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Indenture Event of Default has occurred and is
continuing, by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable. During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period, compounded quarterly from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "Additional
Interest"). No Extension Period may end on a date other than a Distribution
Payment Date. At the end of any such Extension Period, the Debenture Issuer
shall pay all interest then accrued and unpaid on the Debentures (together with
Additional Interest thereon); PROVIDED, HOWEVER, that no Extension Period may
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest. During any Extension Period, Distributions on the Common
Securities shall be deferred for a period equal to the Extension Period. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, to Holders of the Common Securities as
they appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Common Securities must be paid on the
dates payable (after giving effect to any Extension Period) to the extent that
the Trust has funds available for the payment of such distributions in the
Property Account of the Trust. The Trust's funds available for Distribution to
the Holders of the Common Securities will be limited to payments received from
the Debenture Issuer.
A-2-4
The Common Securities shall be redeemable as provided in the
Declaration.
A-2-5
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common
Security Certificate to:
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(Insert assignee's social security or tax identification number)
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(Insert address and zip code of assignee) and irrevocably appoints
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agent
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to transfer this Common Security Certificate on the books of the Trust. The
agent may substitute another to act for him or her.
Date:
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Signature:
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(Sign exactly as your name appears on the other side of this Common Security
Certificate)
Signature:
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(Sign exactly as your name appears on the other side of this Common Security
Certificate)
Signature Guarantee(2)
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(2) Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit
union, meeting the requirements of the Security registrar, which
requirements include membership or participation in the Securities
Transfer Agents Medallion Program ("STAMP") or such other "signature
guarantee program" as may be determined by the Security registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-2-6
EXHIBIT B
SPECIMEN OF INITIAL DEBENTURE
EXHIBIT C
PLACEMENT AGREEMENT