EXHIBIT 10.07
TOWER GROUP, INC.
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.
1
Certificate Number C-1 403 Common Securities
December 21, 2004
Certificate Evidencing Floating Rate Common Securities
of
Tower Group Statutory Trust IV
Tower Group Statutory Trust IV, 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 21, 2004, among Michael H. Lee,
Francis M. Colalucci and Steven G. Fauth, as Administrators, Chase Manhattan
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 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.
3
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
TOWER GROUP STATUTORY TRUST IV
By: /s/ Francis M. Colalucci
-------------------------------
Name: Francis M. Colalucci
Title: Administrator
2
[REVERSE OF COMMON SECURITY]
Distributions payable on each Commonl Security will be identical to the
amount of Distributions payable on each Capital Security, which is 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 Interest 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-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.
4
The Common Securities shall be redeemable as provided in the
Declaration.
5
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common
Security Certificate to:
- ------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(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:
------------------------------------------------
Signature:
-------------------------------------------
(Sign exactly as your name appears on the other side
of this Common Security Certificate)
Signature:
-------------------------------------------
(Sign exactly as your name appears on the other side
of this Common 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.
6