-------------------------------------------------------------------------------
CAPITAL SECURITIES GUARANTEE AGREEMENT
Between
ZENITH NATIONAL INSURANCE CORP.
(As Guarantor)
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(As Capital Securities Guarantee Trustee)
Dated as of July 30, 1998
-------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
----
ARTICLE I
Definitions and Interpretation
SECTION 1.01. Definitions and Interpretation................................... 2
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application................................. 6
SECTION 2.02. Lists of Holders of Securities................................... 7
SECTION 2.03. Reports by the Capital Securities Guarantee Trustee.............. 7
SECTION 2.04. Periodic Reports to Capital Securities Guarantee Trustee......... 8
SECTION 2.05. Evidence of Compliance with Conditions Precedent................. 8
SECTION 2.06. Events of Default; Waiver........................................ 8
SECTION 2.07. Event of Default; Notice......................................... 8
SECTION 2.08. Conflicting Interests............................................ 9
ARTICLE III
Powers, Duties and Rights of Capital Securities Guarantee Trustee
SECTION 3.01. Powers and Duties of the Capital Securities Guarantee Trustee.... 9
SECTION 3.02. Certain Rights of Capital Securities Guarantee Trustee........... 12
SECTION 3.03. Not Responsible for Recitals or Issuance of Guarantee............ 15
i
ARTICLE IV
Capital Securities Guarantee Trustee
SECTION 4.01. Capital Securities Guarantee Trustee; Eligibility................ 16
SECTION 4.02. Appointment, Removal and Resignation of Capital Securities
Guarantee Trustee................................................ 17
ARTICLE V
Guarantee
SECTION 5.01. Guarantee........................................................ 19
SECTION 5.02. Subordination.................................................... 19
SECTION 5.03. Waiver of Notice and Demand...................................... 19
SECTION 5.04. Obligations Not Affected......................................... 19
SECTION 5.05. Rights of Holders................................................ 21
SECTION 5.06. Guarantee of Payment............................................. 21
SECTION 5.07. Subrogation...................................................... 22
SECTION 5.08. Independent Obligations.......................................... 22
ARTICLE VI
Limitation of Transactions; Subordination
SECTION 6.01. Limitations of Transactions...................................... 22
SECTION 6.02. Ranking.......................................................... 23
ARTICLE VII
Termination
SECTION 7.01. Termination...................................................... 24
ii
ARTICLE VIII
Indemnification
SECTION 8.01. Exculpation...................................................... 24
SECTION 8.02. Indemnification.................................................. 25
SECTION 8.03. Compensation and Expenses of Capital Securities Guarantee
Trustee.......................................................... 26
ARTICLE IX
Miscellaneous
SECTION 9.01. Successors and Assigns........................................... 27
SECTION 9.02. Amendments....................................................... 27
SECTION 9.03. Notices.......................................................... 27
SECTION 9.04. Benefit.......................................................... 29
SECTION 9.05. Governing Law.................................................... 29
iii
THIS CAPITAL SECURITIES GUARANTEE AGREEMENT ("Capital Securities
Guarantee"), dated as of July 30, 1998 is executed and delivered by ZENITH
NATIONAL INSURANCE CORP., a Delaware corporation (the "Guarantor"), and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as trustee (the "Capital
Securities Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Capital Securities (as defined herein) of
ZENITH NATIONAL INSURANCE CAPITAL TRUST I, a Delaware statutory business
trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of July 30, 1998, among the individual trustees
of the Issuer named therein, the Guarantor, as Sponsor, Norwest Bank
Minnesota, National Association, as Property Trustee, and Wilmington Trust
Company, as Delaware Trustee, for the benefit of the Holders from time to
time of undivided beneficial interests in the assets of the Issuer, the
Issuer is issuing on the date hereof 75,000 Capital Securities having an
aggregate stated liquidation amount of $75,000,000, designated the 8.55%
Capital Securities (the "Capital Securities"); and
WHEREAS as an incentive for the Covered Persons to purchase the
Capital Securities, the Guarantor desires irrevocably and unconditionally to
agree, to the extent set forth in this Capital Securities Guarantee, to pay
to the Holders of the Capital Securities the Guarantee Payments (as defined
herein) and to make certain other payments on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Capital Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Capital Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01. DEFINITIONS AND INTERPRETATION. In this Capital
Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Capital Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to
them in this Section 1.01;
(b) a term defined anywhere in this Capital Securities Guarantee has
the same meaning throughout;
(c) all references to "the Capital Securities Guarantee" or "this
Guarantee" are to this Capital Securities Guarantee as modified,
supplemented or amended from time to time;
(d) all references in this Capital Securities Guarantee to Articles
and Sections are to Articles and Sections of this Capital Securities
Guarantee unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Capital Securities Guarantee unless otherwise defined in
this Capital Securities Guarantee or unless the context otherwise requires;
and
(f) a reference to the singular includes the plural and vice versa.
"AFFILIATE" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
2
"CAPITAL SECURITIES GUARANTEE TRUSTEE" means Norwest Bank Minnesota,
National Association until a Successor Capital Securities Guarantee Trustee has
been appointed and has accepted such appointment pursuant to the terms of this
Capital Securities Guarantee and thereafter means each such Successor Capital
Securities Guarantee Trustee.
"COMMON SECURITIES" means the common securities representing common
undivided beneficial interest in the assets of the Issuer.
"COVERED PERSON" means any Holder or beneficial owner of Capital
Securities.
"DEBENTURES" means the series of subordinated debt securities of the
Guarantor designated the 8.55% Subordinated Deferrable Interest Debentures Due
2028 held by the Property Trustee of the Issuer.
"DECLARATION" has the meaning set forth in the recitals hereto.
"EVENT OF DEFAULT" has the meaning set forth in Section 2.06 hereof.
"GUARANTEE PAYMENTS" means the following payments or distributions,
without duplication, with respect to the Capital Securities, to the extent not
paid or made by or on behalf of the Issuer: (i) any accrued and unpaid
Distributions (as defined in the Declaration) that are required to be paid on
such Capital Securities to the extent the Issuer shall have funds legally
available therefor, (ii) the amount payable upon redemption to the extent the
Issuer has funds legally available therefor, with respect to any Capital
Securities called for redemption by the Issuer, and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Issuer (other than in
connection with the distribution of Debentures to the Holders in exchange for
Capital Securities as provided in
3
the Declaration), the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid Distributions on the Capital Securities to the
date of payment, to the extent the Issuer shall have funds legally available
therefor, and (b) the amount of assets of the Issuer remaining available for
distribution to Holders upon liquidation of the Issuer (in either case, the
"Liquidation Distribution"). If an event of default under the Indenture has
occurred and is continuing, the rights of holders of the Common Securities to
receive payments as provided in the Declaration are subordinated to the
rights of Holders of Capital Securities to receive Guarantee payments.
"HOLDER" means any holder, as registered on the books and records
of the Issuer of any Capital Securities; PROVIDED, HOWEVER, that, in
determining whether the holders of the requisite percentage of Capital
Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor or any Affiliate of the Guarantor.
"INDEMNIFIED PERSON" means the Capital Securities Guarantee
Trustee, any Affiliate of the Capital Securities Guarantee Trustee, or any
officers, directors, shareholders, members, partners, employees,
representatives or agents of the Capital Securities Guarantee Trustee.
"INDENTURE" means the Indenture dated as of July 30, 1998, among
the Guarantor (the "Debenture Issuer") and Norwest Bank Minnesota, National
Association, as trustee, and any indenture supplemental thereto pursuant to
which the Debentures are to be issued to the Property Trustee of the Issuer.
"LIQUIDATION DISTRIBUTION" has the meaning set forth in the
definition of "Guarantee Payments" herein.
"MAJORITY IN LIQUIDATION AMOUNT OF THE CAPITAL SECURITIES" means,
except as provided in the terms of the Capital Securities and the
Declaration, Holder(s) of Capital
4
Securities, voting separately as a class, representing more than 50% of the
aggregate liquidation amount of all Capital Securities then outstanding.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by the chairman of the board, president or a vice
president, and by the treasurer, an assistant treasurer, the controller, the
secretary or an assistant secretary of such Person, and delivered to the
Capital Securities Guarantee Trustee. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Capital Securities Guarantee shall include:
(a) a statement that each officer 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 officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer 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.
"PERSON" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated organization or
association, or government or any agency or political subdivision thereof, or
any other entity of whatever nature.
5
"RESPONSIBLE OFFICER" means, with respect to the Capital Securities
Guarantee Trustee, the chairman of the board of directors, the president, any
vice-president, any assistant vice-president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Capital Securities
Guarantee 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.
"SUCCESSOR CAPITAL SECURITIES GUARANTEE TRUSTEE" means a successor
Capital Securities Guarantee Trustee possessing the qualifications to act as
Capital Securities Guarantee Trustee under Section 4.01. Any entity that
engages in a merger, combination or consolidation with, or acquires all or
substantially all of the corporate trust business of, a Capital Securities
Guarantee Trustee shall be a Successor Capital Securities Guarantee Trustee.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01. TRUST INDENTURE ACT; APPLICATION. This Capital
Securities Guarantee is not required to and will not be qualified under the
Trust Indenture Act. However, this Capital Securities Gurantee is intended
to comply with the requirements of Sections 310 through 317, inclusive, of
the Trust Indenture Act and such provisions are specifically incorporated
herein. If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act specifically incorporated herein, then
the provisions of this Capital Securites Guarantee
6
shall control; provided that any penalties under the Trust Indenture Act
relating to noncompliance shall not be applicable to this Capital Securities
Guarantee, the Guarantor or the Capital Securities Guarantee Trustee.
SECTION 2.02. LISTS OF HOLDERS OF SECURITIES. (a) The Guarantor
shall provide the Capital Securities Guarantee Trustee (i) within 14 days
after each record date for the payment of Distributions (as defined in the
Declaration), a list, in such form as the Capital Securities Guarantee
Trustee may reasonably require, of the names and addresses of the Holders of
the Capital Securities ("List of Holders") as of such date; PROVIDED that the
Guarantor shall not be obligated to provide such List of Holders at any time
the List of Holders does not differ from the most recent List of Holders
given to the Capital Securities Guarantee Trustee by the Guarantor, and (ii)
at any other time, within 30 days of receipt by the Guarantor of a written
request for a List of Holders as of a date no more than 14 days before such
List of Holders is given to the Capital Securities Guarantee Trustee. The
Capital Securities Guarantee Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(b) The Capital Securities Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture
Act.
SECTION 2.03. REPORTS BY THE CAPITAL SECURITIES GUARANTEE TRUSTEE.
Within 60 days after August 1 of each year, commencing August 1, 1999, the
Capital Securities Guarantee Trustee shall provide to the Holders of the
Capital Securities such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313
of the Trust Indenture Act. The Capital Securities Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture
Act.
7
SECTION 2.04. PERIODIC REPORTS TO CAPITAL SECURITIES GUARANTEE
TRUSTEE. The Guarantor shall provide to the Capital Securities Guarantee
Trustee and the Holders such documents, reports and information as required
by Section 314 (if any) and the compliance certificate required by Section
314 of the Trust Indenture Act in the form, in the manner and at the times
required by Section 314 of the Trust Indenture Act.
SECTION 2.05. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Capital Securities Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Capital Securities Guarantee which relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or
opinion required to be given by an officer pursuant to Section 314(c)(1) may
be given in the form of an Officers' Certificate.
SECTION 2.06. EVENTS OF DEFAULT; WAIVER. An event of default
under this Capital Securities Guarantee will occur upon the failure of the
Guarantor to perform any of its payment or other obligations hereunder (an
"Event of Default"); PROVIDED, HOWEVER, that, other than with respect to a
default on any payment under this Capital Securities Guarantee, the Guarantor
shall have received notice of default and shall not have cured such default
within 90 days after receipt of such notice. The Holders of a Majority in
liquidation amount of the Capital Securities may, by vote, on behalf of the
Holders of all of the Capital Securities, waive any past Event of Default and
its consequences. Upon such waiver, any such Event of Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have
been cured, for every purpose of this Capital Securities Guarantee, but no
such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent therefrom.
SECTION 2.07. EVENT OF DEFAULT; NOTICE. (a) The Capital
Securities Guarantee Trustee shall, within 90 days
8
after the occurrence of an Event of Default, transmit by mail, first class
postage prepaid, to the Holders of the Capital Securities, notices of all
Events of Default known to the Capital Securities Guarantee Trustee, unless
such defaults have been cured before the giving of such notice; PROVIDED that
except in the case of a default in the payment of a Guarantee Payment, the
Capital Securities Guarantee Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee, or
a trust committee of directors and/or Responsible Officers of the Capital
Securities Guarantee Trustee in good faith determines that the withholding of
such notice is in the interests of the Holders of the Capital Securities.
(b) The Capital Securities Guarantee Trustee shall not be deemed
to have knowledge of any Event of Default except any Event of Default as to
which the Capital Securities Guarantee Trustee shall have received written
notice or a Responsible Officer charged with the administration of the
Declaration shall have obtained written notice of such Event of Default.
SECTION 2.08. CONFLICTING INTERESTS. The Declaration shall be
deemed to be specifically described in this Capital Securities Guarantee for
the purposes of clause (i) of the first proviso contained in Section 310(b)
of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.01. POWERS AND DUTIES OF THE CAPITAL SECURITIES
GUARANTEE TRUSTEE. (a) This Capital Securities Guarantee shall be held by
the Capital Securities Guarantee Trustee for the benefit of the Holders of
the Capital Securities, and the Capital Securities Guarantee Trustee shall
not transfer this Capital Securities Guarantee to any
9
Person except a Holder of Capital Securities exercising his or her rights
pursuant to Section 5.05(d) or to a Successor Capital Securities Guarantee
Trustee on acceptance by such Successor Capital Securities Guarantee Trustee
of its appointment to act as Successor Capital Securities Guarantee Trustee.
The right, title and interest of the Capital Securities Guarantee Trustee
shall automatically vest in any Successor Capital Securities Guarantee
Trustee, and such vesting and cessation of title shall be effective whether
or not conveyancing documents have been executed and delivered pursuant to
the appointment of such Successor Capital Securities Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Capital Securities Guarantee Trustee shall enforce this Capital Securities
Guarantee for the benefit of the Holders of the Capital Securities.
(c) The Capital Securities Guarantee Trustee, before the
occurrence of any Event of Default and after the curing of all Events of
Default that may have occurred, shall undertake to perform only such duties
as are specifically set forth in this Capital Securities Guarantee, and no
implied covenants shall be read into this Capital Securities Guarantee
against the Capital Securities Guarantee Trustee. In case an Event of
Default has occurred (that has not been cured or waived pursuant to Section
2.06), the Capital Securities Guarantee Trustee shall exercise such of the
rights and powers vested in it by this Capital Securities Guarantee, and use
the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.
(d) No provision of this Capital Securities Guarantee shall be
construed to relieve the Capital Securities Guarantee Trustee from liability
for its own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
10
(i) prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Capital Securities
Guarantee Trustee shall be determined solely by the express
provisions of this Capital Securities Guarantee, and the Capital
Securities Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set
forth in this Capital Securities Guarantee, and no implied
covenants or obligations shall be read into this Capital Securities
Guarantee against the Capital Securities Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Capital
Securities Guarantee Trustee, the Capital Securities Guarantee
Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Capital Securities
Guarantee Trustee and conforming to the requirements of this
Capital Securities Guarantee; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Capital Securities
Guarantee Trustee, the Capital Securities Guarantee Trustee shall
be under a duty to examine the same to determine whether or not
they conform to the requirements of this Capital Securities
Guarantee;
(ii) the Capital Securities Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible
Officer of the Capital Securities Guarantee Trustee, unless it shall be
proved that the Capital Securities Guarantee Trustee was
11
negligent in ascertaining the pertinent facts upon which such judgment
was made;
(iii) the Capital Securities Guarantee 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,
relating to the time, method and place of conducting any proceeding for
any remedy available to the Capital Securities Guarantee Trustee, or
exercising any trust or power conferred upon the Capital Securities
Guarantee Trustee under this Capital Securities Guarantee; and
(iv) no provision of this Capital Securities Guarantee shall
require the Capital Securities Guarantee Trustee to expend or risk its
own funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its rights
or powers, if the Capital Securities Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Capital Securities Guarantee or adequate indemnity against such risk or
liability is not reasonably assured to it.
SECTION 3.02. CERTAIN RIGHTS OF CAPITAL SECURITIES GUARANTEE
TRUSTEE. (a) Subject to the provisions of Section 3.01:
(i) the Capital Securities Guarantee Trustee may rely and
shall be fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be
genuine
12
and to have been signed, sent or presented by the proper party or
parties;
(ii) any direction or act of the Guarantor contemplated by
this Capital Securities Guarantee shall be sufficiently evidenced by an
Officers' Certificate;
(iii) whenever, in the administration of this Capital
Securities Guarantee, the Capital Securities Guarantee Trustee shall
deem it desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Capital Securities
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
rely upon an Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Guarantor;
(iv) the Capital Securities Guarantee Trustee shall have no
duty to see to any recording, filing or registration of any instrument
(or any rerecording, refiling or registration thereof);
(v) the Capital Securities Guarantee Trustee may consult
with legal counsel of its selection, and the written advice or opinion
of such legal counsel with respect to legal matters shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted to be taken by it hereunder in good faith and in
accordance with such advice or opinion. Such legal counsel may be legal
counsel to the Guarantor or any of its Affiliates and may include any of
the Guarantor's employees. The Capital Securities Guarantee Trustee
shall have the right at any time to seek instructions concerning the
administration of this Capital Securities Guarantee from any court of
competent jurisdiction;
(vi) the Capital Securities Guarantee Trustee shall be under
no obligation to exercise any of the
13
rights or powers vested in it by this Capital Securities Guarantee at
the request or direction of any Holder, unless such Holder shall have
provided to the Capital Securities Guarantee Trustee such adequate
security and indemnity as would satisfy a reasonable person in the
position of the Capital Securities Guarantee Trustee, against the costs,
expenses (including reasonable attorneys' fees and expenses) and
liabilities that might be incurred by it in complying with such request
or direction, including such reasonable advances as may be requested by
the Capital Securities Guarantee Trustee; PROVIDED that nothing
contained in this Section 3.02(a)(vi) shall be taken to relieve the
Capital Securities Guarantee Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers vested in
it by this Capital Securities Guarantee;
(vii) the Capital Securities Guarantee 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, direction, consent, order, bond debenture, note, other evidence
of indebtedness or other paper or document, but the Capital Securities
Guarantee Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit;
(viii) the Capital Securities Guarantee Trustee may execute
any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents or attorneys, and the Capital
Securities Guarantee Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due
care by it hereunder;
(ix) any action taken by the Capital Securities Guarantee
Trustee or its agents hereunder shall bind the Holders of the Capital
Securities, and the
14
signature of the Capital Securities Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action; it
being understood that no third party shall be required to inquire as to
the authority of the Capital Securities Guarantee Trustee to so act or
as to its compliance with any of the terms and provisions of this
Capital Securities Guarantee, both of which shall be conclusively
evidenced by the Capital Securities Guarantee Trustee's or its agent's
taking such action; and
(x) whenever in the administration of this Capital
Securities Guarantee the Capital Securities Guarantee Trustee shall deem
it desirable to receive instructions with respect to enforcing any
remedy or right or taking any other action hereunder, the Capital
Securities Guarantee Trustee (i) may request written instructions from
the Holders of the Capital Securities or, other than with respect to
enforcing any remedy or right or taking any action related thereto, the
Guarantor, (ii) may refrain from enforcing such remedy or right or
taking such other action until such written instructions are received,
and (iii) shall be protected in acting in accordance with such written
instructions.
(b) No provision of this Capital Securities Guarantee shall be
deemed to impose any duty or obligation on the Capital Securities Guarantee
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 Capital Securities Guarantee 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 Capital Securities
Guarantee Trustee shall be construed to be a duty.
SECTION 3.03. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
GUARANTEE. The recitals contained in this
15
Capital Securities Guarantee shall be taken as the statements of the
Guarantor, and the Capital Securities Guarantee Trustee does not assume any
responsibility for their correctness. The Capital Securities Guarantee
Trustee makes no representations as to the validity or sufficiency of this
Capital Securities Guarantee.
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.01. CAPITAL SECURITIES GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Capital Securities Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person permitted by
the Securities and Exchange Commission to act as an institutional
trustee under the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus
of at least 50 Million U.S. Dollars (U.S.$50,000,000), and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation 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 4.01(a)(ii), the combined capital and surplus
of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
(b) If at any time the Capital Securities Guarantee Trustee shall
cease to be eligible to so act under
16
Section 4.01(a), the Capital Securities Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 4.02(c).
(c) If the Capital Securities Guarantee Trustee has or shall
acquire any "conflicting interest" within the meaning of Section 3.10(b) of
the Trust Indenture Act, the Capital Securities Guarantee Trustee and
Guarantor shall in all respects comply with the provisions of Section 3.10(b)
of the Trust Indenture Act.
SECTION 4.02. APPOINTMENT, REMOVAL AND RESIGNATION OF CAPITAL
SECURITIES GUARANTEE TRUSTEE. (a) Subject to Section 4.02(b), the Capital
Securities Guarantee Trustee may be appointed or removed without cause at any
time by the Guarantor, except that, if an Event of Default shall have
occurred and be continuing, the Capital Securities Guarantee Trustee may be
removed only by the vote of Holders of a Majority in liquidation amount of
the Capital Securities voting as a class at a meeting of Holders of Capital
Securities.
(b) The Capital Securities Guarantee Trustee shall not be removed
in accordance with Section 4.02(a) until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by each Successor Capital Securities Guarantee
Trustee and delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee appointed to office
shall hold office until a Successor Capital Securities Guarantee Trustee
shall have been appointed or until its removal or resignation. The Capital
Securities Guarantee Trustee may resign from office (without need for prior
or subsequent accounting) by an instrument in writing executed by the Capital
Securities Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Capital
17
Securities Guarantee Trustee and delivered to the Guarantor and the resigning
Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities Guarantee Trustee shall
have been appointed and accepted appointment as provided in this Section 4.02
within 60 days after delivery to the Guarantor of an instrument of removal or
resignation, the Capital Securities Guarantee Trustee resigning or being
removed may petition any court of competent jurisdiction for appointment of a
Successor Capital Securities Guarantee Trustee. Such court may thereupon,
after prescribing such notice, if any, as it may deem proper, appoint a
Successor Capital Securities Guarantee Trustee.
(e) No Capital Securities Guarantee Trustee shall be liable for
the acts or omissions to act of any Successor Capital Securities Guarantee
Trustee. No Successor Capital Securities Guarantee Trustee shall be liable
for the acts or omissions to act of any predecessor Capital Securities
Guarantee Trustee.
(f) Upon termination of this Capital Securities Guarantee or
resignation of the Capital Securities Guarantee Trustee pursuant to this
Section 4.02, the Guarantor shall pay to the Capital Securities Guarantee
Trustee all amounts accrued and owing to the Capital Securities Guarantee
Trustee on the date of such termination, removal or resignation.
(g) The Capital Securities Guarantee Trustee may engage in any
merger, conversion, consolidation or sale of all or substantially all of its
corporate trust business, provided that the Successor Capital Securities
Guarantee Trustee shall be otherwise qualified and eligible under this
Capital Securities Guarantee Agreement.
18
ARTICLE V
GUARANTEE
SECTION 5.01. GUARANTEE. The Guarantor irrevocably and
unconditionally agrees to pay in full to the Holders the Guarantee Payments
(without duplication of amounts theretofore paid by or on behalf of the
Issuer), as and when due, regardless of any defense, right of setoff or
counterclaim that the Issuer may have or assert. The Guarantor's obligation
to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer to
pay such amounts to the Holders.
SECTION 5.02. SUBORDINATION. If an Event of Default (as defined
in the Indenture), has occurred and is continuing, the rights of Holders of
the Common Securities to receive payments as provided in the Declaration are
subordinated to the rights of Holders of Capital Securities to receive
Guarantee Payments under this Capital Securities Guarantee.
SECTION 5.03. WAIVER OF NOTICE AND DEMAND. The Guarantor hereby
waives notice of acceptance of this Capital Securities Guarantee and of any
liability to which it applies or may apply, presentment, demand for payment,
any right to require a proceeding first against the Issuer or any other
Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices
and demands.
SECTION 5.04. OBLIGATIONS NOT AFFECTED. The obligations,
covenants, agreements and duties of the Guarantor under this Capital
Securities Guarantee shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of
the performance or observance by the Issuer of
19
any express or implied agreement, covenant, term or condition relating to the
Capital Securities to be performed or observed by the Issuer;
(b) the deferral of payment by the Issuer of all or any portion of
the Distributions, the amount payable upon redemption, the Liquidation
Distribution or any other sums payable under the terms of the Capital
Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Capital
Securities (other than a deferral of payment of Distributions, the amount
payable upon redemption, Liquidation Distribution or other sum payable that
results from the extension of any interest payment period on the Debentures
permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Capital
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Issuer
or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in the Capital
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.04 that the obligations of the Guarantor
hereunder
20
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders or any other Person to
give notice to, or obtain consent of, the Guarantor with respect to the
happening of any of the foregoing.
SECTION 5.05. RIGHTS OF HOLDERS. The Guarantor expressly
acknowledges that:
(a) This Capital Securities Guarantee will be deposited with the
Capital Securities Guarantee Trustee to be held for the benefit of the
Holders.
(b) The Capital Securities Guarantee Trustee has the right to
enforce this Capital Securities Guarantee on behalf of the Holders.
(c) The Holders of a Majority in liquidation amount of the Capital
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Capital Securities Guarantee
Trustee in respect of this Capital Securities Guarantee or exercising any
power conferred upon the Capital Securities Guarantee Trustee under this
Capital Securities Guarantee.
(d) Any Holder of Capital Securities may institute a legal
proceeding directly against the Guarantor to enforce its rights under this
Capital Securities Guarantee, without first instituting a legal proceeding
against the Issuer, the Capital Securities Guarantee Trustee or any other
Person.
SECTION 5.06. GUARANTEE OF PAYMENT. This Capital Securities
Guarantee creates a guarantee of payment and not of collection. The Capital
Securities Guarantee will not be discharged except by payment of the
Guarantee Payments in full (without duplication of amounts theretofore paid
by the
21
Issuer) or upon distribution of Debentures to Holders as provided in the
Declaration.
SECTION 5.07. SUBROGATION. The Guarantor shall be subrogated to
all (if any) rights of the Holders of Capital Securities against the Issuer
in respect of any amounts paid to such Holders by the Guarantor under this
Capital Securities Guarantee; PROVIDED, HOWEVER, that the Guarantor shall not
(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any right that it may acquire by way of subrogation or
any indemnity, reimbursement or other agreement, in all cases as a result of
payment under this Capital Securities Guarantee, if, at the time of any such
payment, any amounts are due and unpaid under this Capital Securities
Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding sentence, the Guarantor agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.
SECTION 5.08. INDEPENDENT OBLIGATIONS. The Guarantor acknowledges
that its obligations hereunder are independent of the obligations of the
Issuer with respect to the Capital Securities, and that the Guarantor shall
be liable as principal and as debtor hereunder to make Guarantee Payments
pursuant to the terms of this Capital Securities Guarantee notwithstanding
the occurrence of any event referred to in subsections (a) through (g),
inclusive, of Section 5.04 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01. LIMITATIONS OF TRANSACTIONS. If (a) an Event of
Default (as defined in the Indenture) shall have occurred and be continuing,
(b) the Debentures are held by the Property Trustee, and the Guarantor shall
be in default with respect to its payment of any obligations under
22
this Capital Securities Guarantee or (c) the Guarantor shall have given
notice of its election of the exercise of its right to defer the interest
payment period pursuant to the Indenture and any such deferral shall be
continuing, (i) the Guarantor shall not declare or pay any dividend on, or
make any distribution with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock, (ii) the
Guarantor shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the
Guarantor which rank PARI PASSU with or junior to the Debentures and (iii)
shall not make any guarantee payments with respect to the foregoing (other
than (A) dividends or distributions in shares of, or options, warrants,
rights to subscribe for or purchase shares of, common stock of the Guarantor,
(B) any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in
the future, or the redemption or repurchase of any such rights pursuant
thereto, (C) payments under the Capital Securities Guarantee, (D) as a result
of a reclassification of the Guarantor's capital stock or the exchange or the
conversion of one class or series of the Guarantor's capital stock for
another class or series of the Guarantor's capital stock, (E) the purchase of
fractional interests in shares of the Guarantor's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged and (F) purchases of the Guarantor's common
stock in connection with the satisfaction by the Guarantor of its obligations
(including purchases related to the issuance of such common stock or rights)
under any of the Guarantor's benefit plans for its and its subsidiaries'
directors, officers or employees or any of the Guarantor's dividend
reinvestment plans).
SECTION 6.02. RANKING. This Capital Securities Guarantee will
constitute an unsecured obligation of the Guarantor and will rank (i)
subordinate and junior in right of payment to all other liabilities of the
Guarantor, except any liabilities that may be made PARI PASSU expressly by
23
their terms, (ii) PARI PASSU with the most senior preferred or preference
stock now or hereafter issued by the Guarantor and with any guarantee now or
hereafter entered into by the Guarantor in respect of any preferred or
preference stock or preferred security of any Affiliate of the Guarantor, and
(iii) senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.01. TERMINATION. This Capital Securities Guarantee
shall terminate upon (i) full payment of the amount payable upon redemption
of all Capital Securities, (ii) the distribution of the Debentures to the
Holders of all of the Capital Securities or (iii) full payment of the amounts
payable in accordance with the Declaration upon liquidation of the Issuer.
Notwithstanding the foregoing, this Capital Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any Holder of Capital Securities must restore payment of any sums paid
under the Capital Securities or under this Capital Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. EXCULPATION. (a) No Indemnified Person shall be
liable, responsible, or accountable in damages or otherwise to the Guarantor
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
in accordance with this Capital Securities Guarantee and in a manner that
such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Capital Securities
Guarantee or by law, except that an Indemnified
24
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 Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as
to matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, 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 Capital
Securities might properly be paid.
SECTION 8.02. INDEMNIFICATION. (a) The Guarantor agrees to
indemnify each Indemnified Person for, and to hold each Indemnified Person
harmless against, any and all loss, liability or expense including taxes
(other than taxes based on the income of such Indemnified Person) incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against or investigating any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.02
shall survive the termination of this Capital Securities Guarantee.
(b) To the fullest extent permitted by applicable law, expenses
(including reasonable legal fees and expenses) incurred by an Indemnified
Person in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Guarantor prior to the final disposition of
such claim, demand, action, suit or proceeding upon
25
receipt by the Guarantor of an undertaking by or on behalf of the Indemnified
Person to repay such amount if it shall be determined that the Indemnified
Person is not entitled to be indemnified as authorized in Section 8.02(a).
(c) No Indemnified Person shall claim or exact any lien or charge
on any Guarantee Payments as a result of any amount due to it under this
Capital Securities Guarantee.
SECTION 8.03. COMPENSATION AND EXPENSES OF CAPITAL SECURITIES
GUARANTEE TRUSTEE. The Guarantor covenants and agrees to pay to the Capital
Securities Guarantee Trustee from time to time, and the Capital Securities
Guarantee Trustee shall be entitled to, such compensation as shall be agreed
to in writing between the Guarantor and the Capital Securities Guarantee
Trustee (which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and the Guarantor will pay or
reimburse the Capital Securities Guarantee Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Capital Securities Guarantee Trustee in accordance with any of the provisions
of this Capital Securities Guarantee (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as
may arise from the Capital Securities Guarantee Trustee's negligence or bad
faith. The Guarantor also covenants to indemnify each of the Capital
Securities Guarantee Trustee (and its officers, agents, directors and
employees) for, and to hold it harmless against, any and all loss, damage,
claim, liability or expense including taxes (other than taxes based on the
income of the Capital Securities Guarantee Trustee) incurred without
negligence or bad faith on the part of the Capital Securities Guarantee
Trustee and arising out of or in connection with the acceptance or
administration of this Capital Securities Guarantee, including the costs and
26
expenses of defending itself against any claim of liability in the premises.
The provisions of this Article shall survive the termination of
this Capital Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. SUCCESSORS AND ASSIGNS. All guarantees and
agreements contained in this Capital Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Guarantor
and shall inure to the benefit of the Holders of the Capital Securities then
outstanding. Except in connection with any merger or consolidation of the
Guarantor with or into another entity as permitted by the Indenture or any
sale, transfer or lease of the Guarantor's assets to another entity as
permitted by the Indenture, the Guarantor may not assign its rights or
delegate its obligations under the Capital Securities Guarantee without the
prior approval of the Holders of at least 66 2/3% of the aggregate
liquidation amount of the Capital Securities then outstanding.
SECTION 9.02. AMENDMENTS. Except with respect to any changes that
do not adversely affect the rights of Holders (in which case no consent of
Holders will be required), this Capital Securities Guarantee may only be
amended with the prior approval of the Holders of at least 66 2/3% in
liquidation amount of all the outstanding Capital Securities. The provisions
of Section 12.2 of the Declaration with respect to meetings of Holders of the
Capital Securities apply to the giving of such approval.
SECTION 9.03. NOTICES. All notices provided for in this Capital
Securities Guarantee shall be in writing, duly signed by the party giving
such notice, and shall be
27
delivered, telecopied or mailed by first-class mail, as follows:
(a) If given to the Capital Securities Guarantee Trustee, at the
Capital Securities Guarantee Trustee's mailing address set forth below (or
such other address as the Capital Securities Guarantee Trustee may give
notice of to the Holders of the Capital Securities and to the Guarantor):
Norwest Bank Minnesota, National Association
Xxxxx & Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Corporate Trust Administration,
Zenith National Capital Trust I
Telecopy No.: (000) 000-0000
(b) If given to the Guarantor, at the Guarantor's mailing address
set forth below (or such other address as the Guarantor may give notice of to
the Holders of the Capital Securities and the Capital Securities Guarantee
Trustee):
Zenith National Insurance Corp.
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Chairman and President
Telecopy No.: (000)000-0000
(c) If given to any Holder of Capital Securities, at the address
set forth on the books and records of the Issuer.
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
28
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 9.04. BENEFIT. This Capital Securities Guarantee is
solely for the benefit of the Holders of the Capital Securities and, subject
to Section 3.01(a), is not separately transferable from the Capital
Securities.
SECTION 9.05. GOVERNING LAW. THIS CAPITAL SECURITIES GUARANTEE
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
29
THIS CAPITAL SECURITIES GUARANTEE is executed as of the day and year
first above written.
ZENITH NATIONAL INSURANCE CORP.,
as Guarantor
By: /s/ Xxxxxxx X. Xxx
-----------------------------
Xxxxxxx X. Xxx
Chairman and President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Capital Securities
Guarantee Trustee
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------------
Xxxx X. Xxxxxxxxx
Corporate Trust Officer
