EXHIBIT 10.06
TOWER GROUP, INC.
CAPITAL SECURITY CERTIFICATE
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.
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 21, 2004
Certificate Evidencing Floating Rate Capital Securities
of
Tower Group Statutory Trust IV
(liquidation amount $1,000.00 per Capital Security)
Tower Group Statutory Trust IV, a statutory trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Merrill Lynch
International (the "Holder"), is the registered owner of 13,000 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 21, 2004,
among Michael H. Lee, Francis M. Colalucci and Steven G. Fauth, as
Administrators, Chase Mahattan Bank USA, National Association, as Delaware
Trustee, JPMorgan Chase Bank, National Association, 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
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
Tower Group STATUTORY TRUST IV
By: /s/ Francis M. Colalucci
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Name: Francis M. Colalucci
Title: Administrator
CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION,
as the Institutional Trustee
By: /s/ Maria D. Calzado
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Authorized Officer
[REVERSE OF CAPITAL SECURITY]
Distributions payable on each Capital Security will be payable at a
variable per annum rate of interest, reset quarterly, equal to LIBOR (as defined
in the Declaration) plus 3.40% (the "Coupon Rate") of the stated liquidation
amount of $1,000 per Capital Security, such Coupon 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 quaraterly at the then applicable Coupon Rate for each such
quarterly period (to the extent permitted by applicable law). The terms
"Distributions" as used herein includes cash distributions, any such compounded
distributions and any Additional Sums payable on the Debentures unless otherwise
stated. 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 legally available in the Property Account
therefor. The amount of Distributions payable for any period will be computed
for any full quarterly Distribution period on the basis of a 360-day year and
the actual number of days elapsed in the relevant Distribution Payment Period.
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.
The Capital Securities shall be redeemable as provided in the
Declaration.
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)
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(Insert address and zip code of assignee) and irrevocably appoints
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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:
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Signature:
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(Sign exactly as your name appears on the other side of this Capital
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.