EXHIBIT 10.01
PURCHASE AGREEMENT
among
TOWER GROUP STATUTORY TRUST V,
Issuer
TOWER GROUP, INC.,
Sponsor
and
BEAR, STEARNS & CO. INC.
Initial Purchaser
Dated as of March 29, 2006
PURCHASE AGREEMENT, dated as of March 29, 2006 (this "Agreement"), among
Tower Group Statutory Trust V, a statutory trust created under the laws of the
State of Delaware (the "Issuer"), Tower Group, Inc., a Delaware corporation, as
Sponsor under the Trust Agreement, as defined below (the "Sponsor" and, together
with the Issuer, the "Trust Parties"), and Bear, Stearns & Co. Inc., as initial
purchaser (the "Initial Purchaser").
WHEREAS, the Issuer proposes to issue U.S. $20,000,000 capital securities
due April 7, 2036 (the "Capital Securities");
WHEREAS, the Capital Securities will be issued pursuant to an Amended and
Restated Declaration of Trust to be dated as of March 31, 2006 (the "Trust
Agreement"), among Tower Group, Inc., as Sponsor, Wells Fargo Bank, National
Association, as Institutional Trustee, Wells Fargo Delaware Trust Company, as
Delaware Trustee, and the Administrators named therein;
WHEREAS, the Issuer has agreed not later than March 31, 2006 (the "Closing
Date"), to provide the Initial Purchaser with a copy of the Trust Agreement and
any other documents required to be delivered pursuant to the terms hereof or the
Trust Agreement;
WHEREAS, the Issuer will use the proceeds from the sale of the Capital
Securities to purchase Debentures (as defined in the Trust Agreement); and
WHEREAS, capitalized terms used herein but not otherwise defined herein
shall have the meaning ascribed thereto in the Trust Agreement.
NOW IT IS HEREBY AGREED as follows:
1. PURCHASE AND SALE.
(a) On the terms and subject to the conditions of this Agreement and in
reliance upon the representations and warranties herein set forth, the Issuer
agrees to sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Issuer, on the Closing Date referred to above, the Capital
Securities in the aggregate principal amount of $20,000,000 less any applicable
discount as set forth in the Flow of Funds Memorandum dated March 31, 2006 (the
"Discount").
(b) The Capital Securities shall be issued and sold free from all liens,
charges and encumbrances, equities and other third party rights of any nature
whatsoever, together with all rights of any nature.
2. CLOSING. On the Closing Date, delivery of and payment for the Capital
Securities shall be made at the offices of Bear, Stearns & Co. Inc., and or such
other location or locations as shall be mutually acceptable to the parties
hereto. Delivery of the Capital Securities shall be made against payment of the
purchase price therefor to the order of the Issuer in same day funds by transfer
to an account designated by the Issuer or by such other means in same day funds
as shall be acceptable to the Initial Purchaser. Such payment shall be made upon
authorization from the Initial Purchaser (such authorization to be given if the
conditions to the Initial Purchaser's obligations set forth herein are either
satisfied or waived) against delivery of the Capital Securities. The Capital
Securities will be in the form requested by the Initial Purchaser in accordance
with the terms of the Trust Agreement.
3. PAYMENT OF EXPENSES. The Sponsor agrees to pay all costs and expenses
incident to the performance of the obligations of the Sponsor and the Issuer
under this Purchase Agreement, whether or not the transactions contemplated
herein are consummated or this Purchase Agreement is terminated, including all
costs and expenses incident to (i) the authorization, issuance, sale and
delivery of the Capital Securities and any taxes payable in connection
therewith; and (ii) the fees and expenses of qualifying the Capital Securities
under the securities laws of applicable jurisdictions.
Notwithstanding the foregoing, if the sale of the Capital Securities
provided for in this Purchase Agreement is not consummated because any condition
set forth herein to be satisfied by either the Sponsor or the Issuer is not
satisfied, because this Purchase Agreement is terminated pursuant to Section 10
or because of any failure, refusal or inability on the part of the Sponsor or
the Issuer to perform all obligations and satisfy all conditions on its part to
be performed or satisfied hereunder other than by reason of a default by the
Initial Purchaser, the Sponsor will reimburse the Initial Purchaser upon demand
for all reasonable out-of-pocket expenses (including the fees and all reasonable
expenses of counsel retained by the Issuer, which fees and expenses shall not
exceed $4,000, and special counsel retained by the Initial Purchaser) that shall
have been incurred by the Initial Purchaser in connection with the proposed
purchase and sale of the Capital Securities.
4. REPRESENTATIONS AND WARRANTIES. Each Trust Party hereby represents,
warrants and agrees to and with the Initial Purchaser that, as of the Closing
Date, and as to itself only and not as to the other:
(a) with respect to the Issuer, it is duly formed and validly existing
under the laws of the State of Delaware and, with respect to the Sponsor, and
its significant subsidiaries (as defined in Rule 1-02 of Regulation S-X) (the
"Significant Subsidiaries"), each is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, in each
case, with all requisite power and authority to own or transfer, as applicable,
the Debentures, to conduct its business as required under the Trust Agreement,
this Agreement or any other documents relating to or otherwise in connection
with the issue and sale of the Capital Securities (collectively, the
"Transaction Documents") and to perform its obligations hereunder and under each
Transaction Document, and is lawfully qualified to do business and is in good
standing in those jurisdictions in which it conducts business and where the
failure to be so qualified or in good standing would have a material adverse
effect on the condition (financial or otherwise), earnings or business of such
Trust Party, whether or not occurring in the ordinary course of business, or
would otherwise be material in context of the issuance of the Capital Securities
("Material Adverse Effect");
(b) this Agreement has been duly authorized, executed and delivered by
such Trust Party and constitutes, and each of the Transaction Documents to which
such Trust Party is a party has been duly authorized by such Trust Party and,
when duly executed and delivered by the other parties thereto, on the Closing
Date, will constitute, legal, valid and binding obligations of such Trust Party,
except as such obligations may be limited by bankruptcy, insolvency,
reorganization and other similar laws affecting the rights of creditors
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generally and the application of general equitable principles (regardless of
whether the issue of enforceability is considered in a proceeding in equity or
at law);
(c) neither the Issuer nor the Sponsor nor any of the Significant
Subsidiaries is in breach or violation of, or default under, with or without
notice or lapse of time or both, its corporate charter, bylaws or other
governing documents (including without limitation, the Trust Agreement);
(d) with respect to the Issuer, on the Closing Date, the Capital
Securities have been duly authorized by the Issuer and, when duly executed,
authenticated, issued and delivered in accordance with the Trust Agreement
against payment therefor as contemplated herein, will be validly issued and
represent undivided beneficial interests in the assets of the Issuer, entitled
to the benefits provided by the Trust Agreement;
(e) with respect to the Issuer, no consent, approval, authorization,
order, registration or qualification of or with any court or governmental agency
or body is required for the issue, sale or delivery of the Capital Securities,
except for those which have been obtained and are in full force and effect, and
no consent, approval, authorization, order, registration or qualification of or
with any court or governmental agency or body is required for the consummation
of the other transactions contemplated by the Transaction Documents, except for
those which have been obtained and are in full force and effect, and except
where the failure to obtain such consent, approval, authorization, order,
registration or qualification would not have a Material Adverse Effect;
(f) the execution and delivery of the Transaction Documents, the issue of
the Capital Securities and the consummation of the other transactions
contemplated by the Transaction Documents (and compliance with the terms
thereof) do not and will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under the organizational
documents of such Trust Party; and the execution and delivery of the Transaction
Documents, the issue of the Capital Securities and the consummation of the other
transactions contemplated by the Transaction Documents (and compliance with the
terms thereof) do not and will not conflict with or result in a breach of any
indenture, trust deed, mortgage or other agreement or instrument to which such
Trust Party is a party or by which it or any of its properties is bound, or
infringe any existing applicable law, rule, regulation, judgment, order or
decree of any government, governmental body or court, domestic or foreign,
having jurisdiction over such Trust Party or any of its properties, except for
such conflicts, breaches, defaults or infringements that would not have a
Material Adverse Effect;
(g) there are no pending actions, suits or proceedings against or
affecting such Trust Party or any of its properties and, to the best of such
Trust Party's knowledge, no such suits or proceedings are threatened or
contemplated that individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect on the Issuer's issuance of the Capital
Securities;
(h) no event has occurred which, had the applicable Capital Securities
already been issued, would reasonably be expected to (whether or not with the
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giving of notice and/or the passage of time and/or the fulfillment of any other
requirement) constitute an Event of Default;
(i) the Trust Agreement does not require qualification under the U.S.
Trust Indenture Act of 1939, as amended;
(j) neither the Issuer nor any affiliate of the Issuer nor any person
acting on behalf thereof has made offers or sales of the Capital Securities
under circumstances that would require the registration of the Capital
Securities under the U.S. Securities Act of 1933, as amended (the "Securities
Act");
(k) the Issuer is not an "investment company" or an entity controlled by
an "investment company" as defined in Section 3(a) of the U.S. Investment
Company Act of 1940, as amended;
(l) with respect to the Issuer, any taxes, fees and other governmental
charges in connection with the execution and delivery of this Agreement and any
Transaction Document or the execution, delivery and sale of the Capital
Securities have been or will be paid on or prior to the Closing Date;
(m) there are no contracts, agreements or understandings between any of
the Trust Parties or any affiliate thereof and any person granting such person
the right to require the Issuer to file a registration statement under the
Securities Act, with respect to any Capital Securities owned or to be owned by
such person;
(n) the sale of the Capital Securities pursuant to this Agreement is
exempt from the registration and prospectus delivery requirements of the
Securities Act. In the case of each offer or sale of Capital Securities, no form
of general solicitation or general advertising was used by the Issuer or its
representatives, including, but not limited to, advertisements, articles,
notices or other communications published in any newspaper, magazine or similar
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
Neither the Issuer nor any person acting on its behalf (other than the Initial
Purchaser) has offered or sold, nor will the Issuer or any person acting on its
behalf (other than the Initial Purchaser) offer or sell directly or indirectly,
any Capital Securities or any other security in any manner that, assuming the
accuracy of the representations and warranties and the performance of the
covenants given by the Initial Purchaser, would render the issuance and sale of
any of the Capital Securities as contemplated hereby a violation of Section 5 of
the Securities Act or the registration or qualification requirements of any
state securities laws, nor has the Issuer authorized, nor will it authorize, any
person to act in such manner;
(o) The audited consolidated financial statements (including the notes
thereto) and schedules of the Sponsor and its consolidated subsidiaries for the
year ended December 31, 2005 (the "Financial Statements") provided to the
Initial Purchaser are the most recent available audited consolidated financial
statements of the Sponsor and its consolidated subsidiaries, respectively, and
fairly present in all material respects, in accordance with
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generally accepted accounting principles, the financial position of the Sponsor
and its consolidated subsidiaries, and the results of operations and changes in
financial condition as of the dates and for the periods therein specified. Such
consolidated financial statements and schedules have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved (except as otherwise noted therein). The accountants of the
Sponsor who certified the Financial Statements are independent public
accountants of the Sponsor and its Subsidiaries within the meaning of the
Securities Act and the rules and regulations thereunder as in effect on the date
of this Agreement;
(p) The Sponsor's insurance subsidiaries' statutory annual reports dated
December 31, 2005, provided to the Initial Purchaser are the most recent
available such reports and the information therein fairly presents in all
material respects the financial position of the Sponsor's insurance subsidiaries
on a statutory basis of accounting ;
(q) Since the respective dates of the Financial Statements and the
statutory quarterly reports, there has been no material adverse change or
development with respect to the financial condition or earnings of the Sponsor
and its subsidiaries, taken as a whole;
(r) Neither the Sponsor nor any of its Significant Subsidiaries is subject
to or party to, or has received any notice or advice that any of them may become
subject to any investigation with respect to, any cease-and-desist order,
agreement, consent decree, memorandum of understanding or other regulatory
enforcement action, proceeding or order with or by, or is a party to any
commitment letter or similar undertaking to, or is subject to any directive by,
or has been a recipient of any supervisory letter from, or has adopted any board
resolutions at the request of, any Regulatory Agency (as defined below) that
currently restricts in any material respect the conduct of their business or
that in any material manner relates to their capital adequacy, their credit
policies, their management or their business (each, a "Regulatory Agreement"),
nor has the Sponsor or any of its subsidiaries been advised by any Regulatory
Agency that it is considering issuing or requesting any such Regulatory
Agreement; and there is no unresolved violation, criticism or exception by any
Regulatory Agency with respect to any report or statement relating to any
examinations of the Sponsor or any of its Significant Subsidiaries which, in the
reasonable judgment of the Sponsor, is expected to result in a Material Adverse
Effect. As used herein, the term "Regulatory Agency" means any federal or state
agency charged with the supervision or regulation of insurance companies or any
court, administrative agency or commission or other governmental agency,
authority or instrumentality having supervisory or regulatory authority with
respect to the Sponsor or its Significant Subsidiaries;
(s) The Sponsor has no present intention to exercise its option to defer
payments of interest on the Debentures as provided in the Indenture. The Sponsor
believes that the likelihood that it would exercise its right to defer payments
of interest on the Debentures as provided in the Indenture at any time during
which the Debentures are outstanding is remote; and
(t) All of the issued and outstanding capital stock of the Sponsor has
been duly authorized and validly issued and is fully paid and nonassessable; all
of the issued and outstanding capital stock of each Significant Subsidiary of
the Sponsor has been duly authorized and validly issued, is fully paid and
nonassessable and, except for Capital Securities issued by the Trust, is owned
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by the Sponsor, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equitable right; and
none of the issued and outstanding capital stock of the Sponsor or its
Significant Subsidiaries was issued in violation of any preemptive or similar
rights arising by operation of law, under the charter, by-laws or code of
regulations of the Sponsor or any of its Significant Subsidiaries or under any
agreement to which the Sponsor or any of its Significant Subsidiaries is a
party.
5. UNDERTAKINGS BY THE ISSUER. The Issuer agrees with the Initial
Purchaser as follows:
(a) Neither the Issuer, nor any of its affiliates nor any person
authorized to act on its behalf, will engage in any directed selling efforts
with respect to the Capital Securities to any U.S. Person except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act. Terms used in this paragraph have the
meanings given to them by Regulation S under the Securities Act.
(b) Neither the Issuer, nor any of its affiliates nor any person
authorized to act on its behalf, will make offers or sales of Capital Securities
under circumstances that would require the registration of the Capital
Securities under the Securities Act.
(c) For so long as any of the Capital Securities are outstanding and are
"restricted securities" within the meaning of Rule 144A, the Issuer will provide
or cause to be provided to any holder of Capital Securities and any prospective
purchaser of the Capital Securities designated by such a holder, upon the
request of such holder or prospective purchaser, the information required to be
provided to such holder or prospective purchaser by Rule 144A(d)(4).
(d) During the period from the date of this Agreement to the Closing Date,
the Sponsor and the Issuer shall use their best efforts to cause their
representations and warranties contained in Section 4 hereof to be true as of
the Closing Date, after giving effect to the transactions contemplated by this
Agreement, as if made on and as of the Closing Date.
(e) The Sponsor and the Issuer will not claim, and will actively resist
any attempts by others to claim, the benefits of any usury laws against holders
of the Capital Securities or the Debentures.
(f) The Sponsor shall not identify the Initial Purchaser in a press
release or any other public statement without the consent of such Initial
Purchaser.
6. SELLING RESTRICTIONS. The Initial Purchaser represents and warrants to
the Issuer that:
(a) It understands that the Capital Securities have not been and will not
be registered under the Securities Act and may not be offered or sold within the
United States except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act. It has not
offered or sold, and will not offer or sell, the Capital Securities within the
United States except to persons whom it reasonably believes to be Qualified
Institutional Buyers (as defined in Rule 144A under the Securities Act),
institutional Accredited Investors (as defined in Rule 501(a)(1), (2), (3) or
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(7) under the Securities Act) or to certain persons in transactions outside the
United States in accordance with Regulation S under the Securities Act. In
connection with any offer or sale in the United States or to or for the benefit
of a U.S. Person, it will take reasonable steps to ensure that the purchaser of
such Capital Securities is aware that such offer or sale is being made in
reliance on Rule 144A or Regulation D in a manner that would not require
registration of the Capital Securities under the Securities Act or any blue sky
law of any State and that future transfers of the Capital Securities may not be
made except in compliance with applicable securities laws.
(b) Neither it nor any person acting on its behalf has engaged or will
engage in any form of general solicitation or general advertising (as those
terms are used in Rule 502(c) of Regulation D) in connection with any offer or
sale of the Capital Securities in the United States.
(c) It will not offer or sell the Capital Securities outside the United
States, except in accordance with the representations described herein and the
restrictions set forth below:
It has offered and sold the Capital Securities, and will offer and sell the
Capital Securities, during the applicable Distribution Compliance Period
(as defined in Rule 902 of Regulation S), only in accordance with Rule 903
or 904 of Regulation S under the Securities Act. Accordingly, it represents
and agrees that neither it, nor any of its affiliates nor any person acting
on its or their behalf has engaged or will engage in any directed selling
efforts with respect to the Capital Securities, and that it and they have
complied and will comply with the offering restriction requirements of
Regulation S. It agrees that, at or prior to the confirmation of sale of
Capital Securities, it shall have sent to each distributor, dealer or
person receiving a selling concession, fee or other remuneration that
purchases the Capital Securities through it during the applicable
Distribution Compliance Period a confirmation or notice of substantially
the following effect:
"The Capital Securities offered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered or sold within the United States or to, or for the account or
benefit of, U.S. Persons (i) as part of their distribution at any time
or (ii) until forty calendar days after the later of the commencement
of the offering of the Capital Securities or the Closing Date, to
persons other than the Initial Purchaser or other distributors in
reliance on Regulation S, except in either case in accordance with
Regulation S, Rule 144A, Regulation D or other exemptive provisions
under the Securities Act. Terms used above have the meanings given to
them by Regulation S."
(d) It acknowledges that no action has been or will be taken by the Issuer
or any other person that would permit the offer or sale of the Capital
Securities in any jurisdiction where action to implement such offer or sale of
the Capital Securities is required. The Initial Purchaser shall not offer or
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sell any Capital Securities in any jurisdiction except in compliance with
applicable law, and the Initial Purchaser agrees, at its own expense, to comply
with all such laws. The Initial Purchaser shall at its own expense obtain any
consent, approval or authorization required for it to offer or sell the Capital
Securities under the laws or regulations of any jurisdiction where it proposes
to make offers or sales of Capital Securities.
7. CONDITIONS PRECEDENT. The obligations of the Initial Purchaser
hereunder shall be subject to the accuracy of the representations and warranties
of each Trust Party contained herein as of the date hereof, and, as of the
Closing Date (as if made on the Closing Date), to the accuracy of the statements
of each Trust Party made in any certificates delivered pursuant hereto on such
date, to the performance by each Trust Party of its obligations hereunder, and
to the following additional conditions:
(a) The Issuer shall have obtained all governmental authorizations
required in connection with the issue and sale of the Capital Securities and the
performance of its obligations hereunder and under the Transaction Documents to
which it is a party.
(b) Each Trust Party shall have furnished to the Initial Purchaser a
certificate of such Trust Party signed by, in the case of the Issuer, an
Administrator and, in the case of the Sponsor, the principal executive,
financial or accounting officer, dated the Closing Date, to the effect that such
signatory has examined this Agreement and that the representations and
warranties of such party in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as if made on the
Closing Date, and such party has performed all its obligations and satisfied all
the conditions on its part to be satisfied at or prior to the Closing Date.
(c) The Trust Parties shall have furnished to the Initial Purchaser the
opinions of counsel for the Trust Parties, dated the Closing Date, in
substantially the form set out in Annex A and Annex B hereto, in a form
reasonably acceptable to the Initial Purchaser.
(d) The conditions precedent to the performance by the Issuer of its
obligations under the Trust Agreement shall have been satisfied or waived.
(e) Prior to the Closing Date, the Issuer shall furnish to the Initial
Purchaser such further information, certificates and documents as the Initial
Purchaser may reasonably request.
If any of the conditions specified in this Section 7 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates referred to in or contemplated by this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchaser and its counsel, this Agreement and all
obligations of the Initial Purchaser hereunder may be canceled by the Initial
Purchaser at, or at any time prior to, the Closing Date. Notice of such
cancellation shall be given to the Issuer in writing or by telephone or
facsimile confirmed in writing.
8. INDEMNIFICATION.
(a) Each Trust Party agrees, jointly and severally, to indemnify and hold
harmless the Initial Purchaser and each person, if any, who controls the Initial
Purchaser within the meaning of the Securities Act, or the U.S. Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the respective
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affiliates, officers, directors and employees of the Initial Purchaser and each
such person (and each and all referred to in Section 8(b) as an "indemnified
party"), against any losses, claims, damages or liabilities, joint or several,
to which the Initial Purchaser or such controlling person and the respective
affiliates, officers, directors and employees of the Initial Purchaser and each
such person may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are connected with the execution and delivery
by such Trust Party, and the consummation by such Trust Party of the
transactions contemplated by, this Agreement or any other Transaction Document.
Each Trust Party agrees, jointly and severally, to reimburse the Initial
Purchaser and each such affiliate, officer, director, employee or controlling
person for any legal or other expenses reasonably incurred by the Initial
Purchaser and each such affiliate, officer, director, employee or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action arising out of or being connected with the execution
and delivery by such Trust Party, and the consummation by such Trust Party of
the transactions contemplated by, this Agreement or the other Transaction
Documents. This indemnity agreement will be in addition to any liability that
any of the Trust Parties may otherwise have.
(b) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party of the commencement thereof; but the
omission and/or delay to so notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party unless such
omission and/or delay caused actual prejudice to the indemnifying party; in case
any such action is brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may elect by written
notice, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. Counsel provided by the indemnifying party may represent
the indemnifying party as well as all indemnified parties hereunder subject to
the following provisions. Notwithstanding anything to the contrary contained
herein, such indemnified party may continue any such action on its own at its
own expense. If the defendants in any action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties that are different from or additional to or in conflict with
those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assert such legal defenses
and to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. The reasonable fees and expenses of such separate
counsel for the indemnified party shall be paid by the indemnifying party. The
indemnifying party may avoid its duty to indemnify under this Section 8 if the
indemnified party, without the prior written consent of the indemnifying party
(which consent shall not be unreasonably withheld), effects any settlement or
compromise of, or consents to the entry of any judgment in, any pending or
threatened action in respect of which any indemnifying party is or could have
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been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnifying party from all liability on any claims that are the subject matter
of such action. The indemnifying party shall not be liable for any settlement of
any claim effected without its consent.
9. CONTRIBUTION.
(a) In order to provide for just and equitable contribution in
circumstances under which the indemnification provided for in Section 8 hereof
is for any reason held to be unenforceable for the benefit of an indemnified
party in respect of any losses, liabilities, claims, damages or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Sponsor and the
Issuer, on the one hand, and the Initial Purchaser, on the other hand, from the
offering of the Capital Securities or (ii) if the allocation provided by clause
(i) is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above, but also
the relative fault of the Sponsor and the Issuer, on the one hand, and the
Initial Purchaser, on the other hand, in connection with the statements,
omissions or breaches, which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
(b) The relative benefits received by the Sponsor and the Issuer, on the
one hand, and the Initial Purchaser, on the other hand, in connection with the
offering of the Capital Securities shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Capital
Securities (before deducting expenses) received by the Sponsor and the Issuer
and the benefit received by the Initial Purchaser bear to the aggregate of such
net proceeds and commissions.
(c) The Sponsor and the Issuer and the Initial Purchaser agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
Section 9. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
9 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement, omission or alleged omission or breach or
alleged breach.
(d) Notwithstanding any provision of this Section 9 to the contrary, the
Initial Purchaser shall not be required to contribute any amount in excess of
the benefit received.
(e) No person guilty of fraudulent misrepresentation (within the meaning
of section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(f) For purposes of this Section 9, the Initial Purchaser, each person, if
any, who controls the Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act and the respective partners,
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directors, officers, employees and agents of the Initial Purchaser or any such
controlling person shall have the same rights to contribution as the Initial
Purchaser, while each officer and director of the Sponsor, each trustee of the
Issuer and each person, if any, who controls the Sponsor within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as the Sponsor and the Issuer.
10. TERMINATION. This Agreement shall be subject to termination in the
absolute discretion of the Initial Purchaser, by notice given to the Sponsor and
the Issuer prior to delivery of and payment for the Capital Securities, if prior
to such time (i) a downgrading shall have occurred in the rating accorded the
Sponsor's debt securities or preferred stock by any "nationally recognized
statistical rating organization," as that term is used by the Commission in Rule
15c3-1(c)(2)(vi)(F) under the Exchange Act, or such organization shall have
publicly announced that it has under surveillance or review, with possible
negative implications, its rating of the Sponsor's debt securities or preferred
stock, (ii) the Issuer shall be unable to sell and deliver to the Initial
Purchaser at least $20,000,000 stated liquidation value of Capital Securities,
(iii) any formal administrative or judicial action is taken by any appropriate
regulatory agency against the Sponsor or any such insured subsidiary for unsafe
and unsound practices or violations of law, (iv) a suspension or material
limitation in trading in securities generally shall have occurred on the New
York Stock Exchange, (v) a suspension or material limitation in trading in any
of the Sponsor's securities shall have occurred on the exchange or quotation
system upon which the Sponsor's securities are traded, if any, (vi) a general
moratorium on commercial banking activities shall have been declared either by
federal or Delaware authorities or (vii) there shall have occurred any outbreak
or escalation of hostilities, or declaration by the United States of a national
emergency or war or other calamity or crisis, including acts of terrorism, the
effect of which on financial markets is such as to make it, in the Initial
Purchaser's judgment, impracticable or inadvisable to proceed with the offering
or delivery of the Capital Securities.
11. SURVIVAL OF REPRESENTATIONS AND OBLIGATIONS. The representations,
warranties, agreements and undertakings in this Agreement shall continue in full
force and effect despite completion of the arrangements for the purchase and
issue of the Capital Securities or any investigation made by or on behalf of the
Initial Purchaser.
12. NOTICES.
(a) Any communication shall be given by letter or facsimile, in the case
of notices to the Issuer, to it at:
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Tower Group Statutory Trust V
c/o Tower Group, Inc.
120 Broadway, 14th Floor
New York, New York 10271-1699
Facsimile: (212) 271-5492
Attention: Francis M. Colalucci
in the case of notices to the Sponsor, to it at:
Tower Group, Inc.
120 Broadway, 14th Floor
New York, New York 10271-1699
Facsimile: (212) 271-5492
Attention: Francis M. Colalucci
and in the case of notices to the Initial Purchaser, to it at:
Bear, Stearns & Co. Inc.
383 Madison Avenue
New York, New York 10179
Facsimile: 212-272-3182
Attention: Asset Backed Securities
(b) Any such communication shall take effect, in the case of a letter, at
the time of delivery and in the case of telex, at the time of dispatch.
(c) Any communication not by telex shall be confirmed by letter but
failure to send or receive the letter of confirmation shall not invalidate the
original communication.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to its
conflict of laws provisions.
14. JURISDICTION. Each of the parties hereto hereby irrevocably submits to
the non-exclusive jurisdiction of any New York State or United States federal
court sitting in The City and County of New York over any suit, action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby which is brought by the Initial Purchaser, the Issuer or the
Sponsor and irrevocably waives, to the fullest extent it may effectively do so,
any objection which it may now or hereafter have to the laying of venue of any
such proceeding.
15. NO BANKRUPTCY PETITION. The Initial Purchaser covenants and agrees
that, prior to the date which is one year and one day after the payment in full
of all Capital Securities issued by the Issuer, it will not institute against,
or join any other Person in instituting against, the Issuer any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
proceedings under any Federal or state bankruptcy or similar law. The provisions
of this Section shall survive termination of this Agreement for any reason
whatsoever.
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16. SUCCESSORS. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns, and no
other person will have any right or obligations hereunder.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
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IN WITNESS WHEREOF, this Agreement has been entered into as of the date
hereinabove set forth.
TOWER GROUP, INC.
By: /s/ Francis M. Colalucci
------------------------------------
Name: Francis M. Colalucci
----------------------------------
Title: Senior Vice President and Chief
---------------------------------
Financial Officer
---------------------------------
TOWER GROUP STATUTORY TRUST V
By: TOWER GROUP, INC., as Sponsor
By: /s/ Francis M. Colalucci
------------------------------------
Name: Francis M. Colalucci
----------------------------------
Title: Senior Vice President and Chief
---------------------------------
Financial Officer
---------------------------------
BEAR, STEARNS & CO. INC., as Initial
Purchaser
By: /s/ Thomas S. Dunstan
------------------------------------
Name: Thomas S. Dunstan
----------------------------------
Title: Senior Managing Director
---------------------------------
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ANNEX A
Pursuant to Section 7(c) of the Purchase Agreement, special counsel for the
Sponsor shall deliver an opinion in substantially the following form:
1. The Sponsor has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware. The Sponsor is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction which requires such qualification wherein it owns
or leases properties or conducts business, except where the failure to be so
qualified would not, singularly or in the aggregate, have a Material Adverse
Effect, and holds all approvals, authorizations, orders, licenses, certificates
and permits from governmental authorities necessary for the conduct of its
business, except where the failure to hold such approvals, authorizations,
orders, licenses, certificates and/or permits would not, singularly or in the
aggregate, have a Material Adverse Effect. Each of the Significant Subsidiaries
is duly organized, validly existing and in good standing under the laws of their
jurisdiction of organization and each of the Sponsor and such subsidiaries has
full corporate power and authority to own or lease its properties and conduct
its business as such business is currently conducted in all material respects.
Each of the Significant Subsidiaries is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
which requires such qualification wherein it owns or leases properties or
conducts business, except where the failure to be so qualified would not,
singularly or in the aggregate, have a Material Adverse Effect, and holds all
approvals, authorizations, orders, licenses, certificates and permits from
governmental authorities necessary for the conduct of its business, except where
the failure to hold such approvals, authorizations, orders, licenses,
certificate and/or permits would not, singularly or in the aggregate, have a
Material Adverse Effect.
2. The issuance, sale and delivery of the Capital Securities and Debt
Securities in accordance with the terms and conditions of the Purchase
Agreement, the Debenture Subscription Agreement and the Transaction Documents
have been duly authorized by all necessary actions of the Sponsor's Board of
Directors (the "Board"), and when delivered in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, and
will conform to the descriptions therein.
3. Neither the issue and sale of the Capital Securities or the Debt
Securities, the execution and delivery of the Transaction Documents by the
Sponsor or the Trust and the consummation of any other of the transactions
contemplated in any Transaction Document nor the fulfillment of the terms
thereof will conflict with, result in a breach or violation of, or constitute a
default under any rule or regulation, or the charter or by-laws of the Sponsor
or any of its Significant Subsidiaries, the terms of any indenture or other
agreement or instrument to which the Sponsor or any of its Significant
Subsidiaries is a party, or otherwise bound, or any judgment, order, decree of
any court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Sponsor or any of its Significant
Subsidiaries, or any rule or regulation applicable to the Sponsor or any of its
Significant Subsidiaries, except for such conflicts, breaches, violations or
defaults which are not, in the aggregate, material to the Sponsor and its
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subsidiaries taken as a whole and which do not adversely affect the consummation
of the transactions contemplated in the Purchase Agreement and the Transaction
Documents.
4. The Sponsor has all requisite corporate and trust power to enter into
and perform their obligations under the Purchase Agreement, which has been duly
and validly authorized, executed and delivered by the Sponsor, constitutes the
legal, valid and binding obligations of the Sponsor enforceable against the
Sponsor in accordance with its terms, except as the enforcement thereof may be
limited by general principles of equity and by bankruptcy, insolvency,
reorganization, receivership, moratorium, fraudulent conveyance or other laws
relating to or affecting creditors' rights generally, and except as the
indemnification and contribution provisions thereof may be limited under
applicable laws and as to certain remedies which may not be available in the
case of a non-material breach.
5. Each of the Indenture and the Guarantee Agreement has been duly
authorized, executed and delivered by the Sponsor and (in the case of the
Indenture and the Guarantee, respectively, assuming it is duly authorized,
executed and delivered by the respective trustees) constitutes a valid and
legally binding obligation of the Sponsor enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
receivership, moratorium, fraudulent conveyance and other laws affecting the
rights and remedies of creditors generally and to general principles of equity.
6. The Declaration has been duly authorized, executed and delivered by
the Sponsor and the Administrators.
7. The Debt Securities have been duly authorized, executed and delivered
by the Sponsor, are entitled to the benefits of the Indenture and when
authenticated in accordance with the provisions of the Indenture and delivered
to and paid for by the Trust, will constitute legal, valid and binding
obligations of the Sponsor enforceable against the Sponsor in accordance with
their terms, subject to the effect of bankruptcy, insolvency, reorganization,
receivership, moratorium, fraudulent conveyance and other laws affecting the
rights and remedies of creditors generally and to general principles of equity.
8. The execution, delivery and performance of the Purchase Agreement and
the consummation of the transactions contemplated by the Purchase Agreement and
the Transaction Documents do not and will not constitute a material breach or
violation of, or constitute a material default under, with or without notice or
lapse of time or both, any of the terms, provisions or conditions of the
articles of incorporation or charter, by-laws or other governing documents
(including without limitation, the Declaration) of the Sponsor or any order,
decree, judgment, franchise, license, permit, rule or regulation of any court,
arbitrator, government, or governmental agency or instrumentality, domestic or
foreign, having jurisdiction over the Sponsor.
9. No consent, approval, authorization or order of any court,
governmental agency or body, or any other regulatory agency with jurisdiction
over the Sponsor is required for the consummation of the transactions
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contemplated in the Transaction Documents, in connection with the solicitation
of the purchase and sale of the Capital Securities by you or the purchase of the
Debt Securities by the Trust except such approvals as have been obtained.
10. Assuming the accuracy of the representations and warranties and
compliance with the agreements contained in the Purchase Agreement, it is not
necessary in connection with the offering, sale and delivery of the Capital
Securities, the Debt Securities and the Common Securities to register the same
under the Securities Act of 1933, as amended, under the circumstances
contemplated in the Purchase Agreement, and the Indenture, Declaration and
Guarantee Agreement are not required to be qualified under the Trust Indenture
Act of 1939.
11. Neither the Sponsor nor the Trust is, and, following the issuance of
the Capital Securities and the consummation of the transactions contemplated by
the Operating Documents and the application of the proceeds therefrom, will be
an "investment company" or an entity "controlled" by an "investment company", in
each case within the meaning of the Investment Company Act of 1940, as amended.
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ANNEX B
Pursuant to Section 7(c) of the Purchase Agreement, tax counsel for the
Sponsor shall deliver an opinion in substantially the following form:
It is our opinion that, under current law and assuming the performance of
the Transaction Documents in accordance with the terms described therein, the
Subordinated Debt Securities will be treated for United States federal income
tax purposes as indebtedness of the Sponsor.
It is our opinion that the Trust will be classified for United States
federal income tax purposes as a grantor trust and not as an association taxable
as a corporation.
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