EXHIBIT 10.07
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.
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:
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Name:
Title: Administrator
[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.
"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.
The Common Securities shall be redeemable as provided in the
Declaration.
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
agent 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 Guarantee(1)
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(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.