PENN-AMERICA GROUP, INC.
15,000 Capital Securities
Floating Rate Capital Securities
(Liquidation Amount $1,000.00 per Capital Security)
PLACEMENT AGREEMENT
____________________
November 21, 2002
FTN Financial Capital Markets
000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Xxxxx, Xxxxxxxx & Xxxxx, Inc.
000 0xx Xxxxxx
0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Penn-America Group, Inc., a Pennsylvania corporation (the "Company"),
and its financing subsidiary, Penn-America Statutory Trust I, a Connecticut
statutory trust (the "Trust," and hereinafter together with the Company, the
"Offerors"), hereby confirm their agreement with you as placement agents (the
"Placement Agents"), as follows:
Section 1. Issuance and Sale of Securities.
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1.1. Introduction. The Offerors propose to issue and sell at the Closing
(as defined in Section 2.3.1 hereof) 15,000 of the Trust's Floating Rate Capital
Securities, with a liquidation amount of $1,000.00 per capital security (the
"Capital Securities"), to I-Preferred Term Securities I, Ltd., a company with
limited liability established under the laws of the Cayman Islands (the
"Purchaser") pursuant to the terms of a Subscription Agreement entered into, or
to be entered into on or prior to the Closing Date (as defined in Section 2.3.1
hereof), between the Offerors and the Purchaser (the "Subscription Agreement"),
the form of which is attached hereto as Exhibit A and incorporated herein by
this reference.
1.2. Operative Agreements. The Capital Securities shall be fully and
unconditionally guaranteed on a subordinated basis by the Company with respect
to distributions and amounts payable upon liquidation, redemption or repayment
(the "Guarantee") pursuant and subject to the Guarantee Agreement (the
"Guarantee Agreement"), to be dated as of the Closing Date and executed and
delivered by the Company and State Street Bank and Trust Company of Connecticut,
National Association ("State Street"), as trustee (the "Guarantee Trustee"), for
the benefit from time to time of the holders of the Capital Securities. The
entire proceeds from the sale by the Trust to the holders of the Capital
Securities shall be combined with the entire proceeds from the sale by the Trust
to the Company of its common securities (the "Common Securities"), and shall be
used by the Trust to purchase $15,464,000.00 in principal amount of the Floating
Rate Junior Subordinated Deferrable Interest Debentures (the "Debentures") of
the Company. The Capital Securities and the Common Securities for the Trust
shall be issued pursuant to an Amended and Restated Declaration of Trust among
State Street, as institutional trustee (the "Institutional Trustee"), the
Administrators named therein, and the Company, to be dated as of
the Closing Date and in substantially the form heretofore delivered to the
Placement Agents (the "Trust Agreement"). The Debentures shall be issued
pursuant to an Indenture (the "Indenture"), to be dated as of the Closing Date,
between the Company and State Street, as indenture trustee (the "Indenture
Trustee"). The documents identified in this Section 1.2 and in Section 1.1 are
referred to herein as the "Operative Documents."
1.3. Rights of Purchaser. The Capital Securities shall be offered and sold
by the Trust directly to the Purchaser without registration of any of the
Capital Securities, the Debentures or the Guarantee under the Securities Act of
1933, as amended (the "Securities Act"), or any other applicable securities laws
in reliance upon exemptions from the registration requirements of the Securities
Act and other applicable securities laws. The Offerors agree that this Agreement
shall be incorporated by reference into the Subscription Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under this Agreement and shall be entitled to enforce obligations
of the Offerors under this Agreement as fully as if the Purchaser were a party
to this Agreement. The Offerors and the Placement Agents have entered into this
Agreement to set forth their understanding as to their relationship and their
respective rights, duties and obligations.
1.4. Legends. Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Securities
Act, the Capital Securities and Debentures certificates shall each contain a
legend as required pursuant to any of the Operative Documents.
Section 2. Purchase of Capital Securities.
2.1. Exclusive Rights; Purchase Price. From the date hereof until the
Closing Date (which date may be extended by mutual agreement of the Offerors and
the Placement Agents), the Offerors hereby grant to the Placement Agents the
exclusive right to arrange for the sale of the Capital Securities to the
Purchaser at a purchase price of $1,000.00 per Capital Security.
2.2. Subscription Agreement. The Offerors hereby agree to evidence their
acceptance of the subscription by countersigning a copy of the Subscription
Agreement and returning the same to the Placement Agents.
2.3. Closing and Delivery of Payment.
2.3.1. Closing; Closing Date. The sale and purchase of the Capital
Securities by the Offerors to the Purchaser shall take place at a closing (the
"Closing") at the offices of LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P., at 10:00
a.m. (New York City time) on December 4, 2002, or such other business day as may
be agreed upon by the Offerors and the Placement Agents (the "Closing Date");
provided, however, that in no event shall the Closing Date occur later than
December 4, 2002 unless consented to by the Purchaser. Payment by the Purchaser
shall be payable in the manner set forth in the Subscription Agreement and shall
be made prior to or on the Closing Date.
2.3.2. Delivery. The certificate for the Capital Securities shall be in
definitive form, registered in the name of the Purchaser and in the aggregate
amount of the Capital Securities purchased by the Purchaser.
2.3.3. Transfer Agent. The Offerors shall deposit the certificate
representing the Capital Securities with the Institutional Trustee or other
appropriate party prior to the Closing Date.
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2.4. Placement Agents' Fees and Expenses.
2.4.1. Placement Agents' Compensation. Because the proceeds from the
sale of the Capital Securities shall be used to purchase the Debentures from the
Company, the Company shall pay an aggregate of $30.00 for each $1,000.00 of
principal amount of Debentures sold to the Trust (excluding the Debentures
related to the Common Securities purchased by the Company). Of this amount,
$15.00 for each $1,000.00 of principal amount of Debentures shall be payable to
FTN Financial Capital Markets and $15.00 for each $1,000.00 of principal amount
of Debentures shall be payable to Xxxxx, Xxxxxxxx & Xxxxx, Inc. Such amount
shall be delivered to the Institutional Trustee or such other person designated
by the Placement Agents on the Closing Date and shall be allocated between and
paid to the respective Placement Agents as directed by the Placement Agents.
2.4.2. Costs and Expenses. Whether or not this Agreement is terminated
or the sale of the Capital Securities is consummated, the Company hereby
covenants and agrees that it shall pay or cause to be paid (directly or by
reimbursement) all reasonable costs and expenses incident to the performance of
the obligations of the Offerors under this Agreement, including all fees,
expenses and disbursements of counsel and accountants for the Offerors; the
reasonable costs and charges of any trustee, transfer agent or registrar and the
fees and disbursements of counsel to any trustee, transfer agent or registrar in
each case only to the extent attributable to the Debentures and the Capital
Securities; all reasonable expenses incurred by the Offerors incident to the
preparation, execution and delivery of the Trust Agreement, the Indenture, and
the Guarantee; and all other reasonable costs and expenses incident to the
performance of the obligations of the Company hereunder and under the Trust
Agreement.
2.5. Failure to Close. If any of the conditions to the Closing specified in
this Agreement shall not have been fulfilled to the satisfaction of the
Placement Agents or if the Closing shall not have occurred on or before 10:00
a.m. (New York City time) on December 4, 2002, then each party hereto,
notwithstanding anything to the contrary in this Agreement, shall be relieved of
all further obligations under this Agreement without thereby waiving any rights
it may have by reason of such nonfulfillment or failure; provided, however, that
the obligations of the parties under Sections 2.4.2, 7.5 and 9 shall not be so
relieved and shall continue in full force and effect.
Section 3. Closing Conditions. The obligations of the Purchaser and the
Placement Agents on the Closing Date shall be subject to the accuracy, at and as
of the Closing Date, of the representations and warranties of the Offerors
contained in this Agreement, to the accuracy, at and as of the Closing Date, of
the statements of the Offerors made in any certificates pursuant to this
Agreement, to the performance by the Offerors of their respective obligations
under this Agreement, to compliance, at and as of the Closing Date, by the
Offerors with their respective agreements herein contained, and to the following
further conditions:
3.1. Opinions of Counsel. On the Closing Date, the Placement Agents shall
have received the following favorable opinions, each dated as of the Closing
Date: (a) from Xxxx Xxxxx LLP, counsel for the Offerors and addressed to the
Purchaser and the Placement Agents in substantially the form set forth on
Exhibit B-1 attached hereto and incorporated herein by this reference, (b) from
Xxxxxxx XxXxxxxxx LLP, special Connecticut counsel to the Offerors and addressed
to the Purchaser, the Placement Agents and the Offerors, in substantially the
form set forth on Exhibit B-2 attached hereto and incorporated herein by this
reference and (c) from LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P., special tax
counsel to the Offerors, and addressed to the Placement Agents and the Offerors,
in substantially the form set forth on Exhibit B-3 attached hereto and
incorporated herein by this reference, subject to the receipt by LeBoeuf, Lamb,
Xxxxxx & XxxXxx, L.L.P. of a representation letter from the Company in the form
set forth in Exhibit B-3 completed in a manner reasonably satisfactory to
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P. (collectively, the "Offerors' Counsel
Opinions"). In rendering the Offerors' Counsel
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Opinions, counsel to the Offerors may rely as to factual matters upon
certificates or other documents furnished by officers, directors and trustees of
the Offerors (copies of which shall be delivered to the Placement Agents and the
Purchaser) and by government officials, and upon such other documents as counsel
to the Offerors may, in their reasonable opinion, deem appropriate as a basis
for the Offerors' Counsel Opinions. Counsel to the Offerors may specify the
jurisdictions in which they are admitted to practice and that they are not
admitted to practice in any other jurisdiction and are not experts in the law of
any other jurisdiction. If the Offerors' counsel is not admitted to practice in
the State of New York, the opinion of Offerors' counsel may assume, for purposes
of the opinion, that the laws of the State of New York are substantively
identical, in all respects material to the opinion, to the internal laws of the
state in which such counsel is admitted to practice. Such Offerors' Counsel
Opinions shall not state that they are to be governed or qualified by, or that
they are otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal Opinion
Accord of the ABA Section of Business Law (1991).
3.2. Officer's Certificate. At the Closing Date, the Purchaser and the
Placement Agents shall have received certificates from the Chief Executive
Officer of the Company, dated as of the Closing Date, stating that (i) the
representations and warranties of the Offerors set forth in Section 5 hereof are
true and correct as of the Closing Date and that the Offerors have complied with
all agreements and satisfied all conditions on their part to be performed or
satisfied at or prior to the Closing Date, (ii) since the date of this Agreement
the Offerors have not incurred any liability or obligation, direct or
contingent, or entered into any material transactions, other than in the
ordinary course of business, which is material to the Offerors, and (iii)
covering such other matters as the Placement Agents may reasonably request.
3.3. Administrator's Certificate. At the Closing Date, the Purchaser and
the Placement Agents shall have received a certificate of one or more
Administrators of the Trust, dated as of the Closing Date, stating that the
representations and warranties of the Trust set forth in Section 5 are true and
correct as of the Closing Date and that the Trust has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Date.
3.4. Purchase Permitted by Applicable Laws; Legal Investment. The purchase
of and payment for the Capital Securities as described in this Agreement and
pursuant to the Subscription Agreement shall (a) not be prohibited by any
applicable law or governmental regulation, (b) not subject the Purchaser or the
Placement Agents to any penalty or, in the reasonable judgment of the Purchaser
and the Placement Agents, other onerous condition under or pursuant to any
applicable law or governmental regulation, and (c) be permitted by the laws and
regulations of the jurisdictions to which the Purchaser and the Placement Agents
are subject.
3.5. Consents and Permits. The Company and the Trust shall have received
all consents, permits and other authorizations, and made all such filings and
declarations, as may be required from any person or entity pursuant to any law,
statute, regulation or rule (federal, state, local and foreign), or pursuant to
any agreement, order or decree to which the Company or the Trust is a party or
to which either is subject, in connection with the transactions contemplated by
this Agreement.
3.6. Sale of Purchaser Securities. The Purchaser shall have sold securities
issued by the Purchaser in an amount such that the net proceeds of such sale
shall be (i) available on the Closing Date and (ii) in an amount sufficient to
purchase the Capital Securities and all other capital or similar securities
contemplated to be purchased by the Purchaser.
3.7. Information. Prior to or on the Closing Date, the Offerors shall have
furnished to the Placement Agents such further information, certificates,
opinions and documents addressed to the Purchaser and the Placement Agents,
which the Placement Agents may reasonably request, including, without
limitation, a complete set of the Operative Documents or any other documents or
certificates
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required by this Section 3; and all proceedings taken by the Offerors in
connection with the issuance, offer and sale of the Capital Securities as herein
contemplated shall be reasonably satisfactory in form and substance to the
Placement Agents.
If any condition specified in this Section 3 shall not have been
fulfilled when and as required in this Agreement, or if any of the opinions or
certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Placement Agents, this
Agreement may be terminated by the Placement Agents by notice to the Offerors at
any time at or prior to the Closing Date. Notice of such termination shall be
given to the Offerors in writing or by telephone or facsimile confirmed in
writing.
Section 4. Conditions to the Offerors' Obligations. The obligations of the
Offerors to sell the Capital Securities to the Purchaser and consummate the
transactions contemplated by this Agreement shall be subject to the accuracy, at
and as of the Closing Date, of the representations and warranties of the
Placement Agents contained in this Agreement and to the following further
conditions:
4.1. Executed Agreement. The Offerors shall have received from the
Placement Agents an executed copy of this Agreement.
4.2. Fulfillment of Other Obligations. The Placement Agents shall have
fulfilled all of their other obligations and duties required to be fulfilled
under this Agreement prior to or at the Closing.
Section 5. Representations and Warranties of the Offerors. The Offerors jointly
and severally represent and warrant to the Placement Agents and the Purchaser as
of the date hereof and as of the Closing Date as follows:
5.1. Securities Law Matters; Authorizations.
(a) Neither the Company nor the Trust, nor any of their "Affiliates"
(as defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation
D")), nor any person acting on any of their behalf has, directly or indirectly,
made offers or sales of any security, or solicited offers to buy any security,
under circumstances that would require the registration under the Securities Act
of any of the Capital Securities, the Guarantee or the Debentures (collectively,
the "Securities") or any other securities to be issued, or which may be issued,
by the Purchaser.
(b) Neither the Company nor the Trust, nor any of their Affiliates, nor
any person acting on its or their behalf has (i) other than the Placement
Agents, offered for sale or solicited offers to purchase the Securities, (ii)
engaged or will engage, in any "directed selling efforts" within the meaning of
Regulation S under the Securities Act ("Regulation S") with respect to the
Securities, or (iii) engaged in any form of offering, general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of any of the Securities.
(c) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(d) Neither the Company nor the Trust is or, after giving effect to the
offering and sale of the Capital Securities and the consummation of the
transactions described in this Agreement, will be an "investment company" or an
entity "controlled" by an "investment company," in each case within the meaning
of Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), without regard to Section 3(c) of the Investment
Company Act.
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(e) Neither the Company nor the Trust has paid or agreed to pay to any
person or entity (other than the Placement Agents) any compensation for
soliciting another to purchase any of the Securities.
(f) No authorization, approval, consent, order, registration or
qualification of or with any court or governmental authority or agency
(including, without limitation, any insurance regulatory agency or body) is
required in connection with the offering and sale of the Securities or the
Guarantee hereunder, or the consummation by the Company or the Trust of any
other transaction contemplated hereby, except such as have been obtained and
made under the federal securities laws or state insurance laws and such as may
be required under state or foreign securities or Blue Sky laws.
5.2. Organization, Standing and Qualification of the Trust. The Trust has
been duly created and is validly existing in good standing as a statutory trust
under the Connecticut Statutory Trust Act (the "Statutory Trust Act") with the
power and authority to own property and to conduct the business it transacts and
proposes to transact and to enter into and perform its obligations under the
Operative Documents. The Trust is duly qualified to transact business as a
foreign entity and is in good standing in each jurisdiction in which such
qualification is necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the Trust. The Trust is not
a party to or otherwise bound by any agreement other than the Operative
Documents. The Trust is and will, under current law, be classified for federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation.
5.3. Trust Agreement. The Trust Agreement has been duly authorized by the
Company and, on the Closing Date, will have been duly executed and delivered by
the Company and the Administrators of the Trust, and, assuming due
authorization, execution and delivery by the Institutional Trustee, will be a
valid and binding obligation of the Company and such Administrators, enforceable
against them in accordance with its terms, subject to (a) applicable bankruptcy,
insolvency, moratorium, receivership, reorganization, liquidation and other laws
relating to or affecting creditors' rights generally, and (b) general principles
of equity (regardless of whether considered and applied in a proceeding in
equity or at law) ("Bankruptcy and Equity"). Each of the Administrators of the
Trust is an employee or a director of the Company or of a subsidiary of the
Company and has been duly authorized by the Company to execute and deliver the
Trust Agreement.
5.4. Guarantee Agreement and the Indenture. Each of the Guarantee and the
Indenture has been duly authorized by the Company and, on the Closing Date will
have been duly executed and delivered by the Company, and, assuming due
authorization, execution and delivery by the Guarantee Trustee, in the case of
the Guarantee, and by the Indenture Trustee, in the case of the Indenture, will
be a valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to Bankruptcy and Equity.
5.5. Capital Securities and Common Securities. The Capital Securities and
the Common Securities have been duly authorized by the Trust Agreement and, when
issued and delivered against payment therefor on the Closing Date to the
Purchaser, in the case of the Capital Securities, and to the Company, in the
case of the Common Securities, will be validly issued and represent undivided
beneficial interests in the assets of the Trust. None of the Capital Securities
or the Common Securities is subject to preemptive or other similar rights. On
the Closing Date, all of the issued and outstanding Common Securities will be
directly owned by the Company free and clear of any pledge, security interest,
claim, lien or other encumbrance.
5.6. Debentures. The Debentures have been duly authorized by the Company
and, at the Closing Date, will have been duly executed and delivered to the
Indenture Trustee for authentication in accordance with the Indenture, and, when
authenticated in the manner provided for in the Indenture
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and delivered against payment therefor by the Trust, will constitute valid and
binding obligations of the Company entitled to the benefits of the Indenture
enforceable against the Company in accordance with their terms, subject to
Bankruptcy and Equity.
5.7. Power and Authority. This Agreement has been duly authorized, executed
and delivered by the Company and the Trust and constitutes the valid and binding
obligation of the Company and the Trust, enforceable against the Company and the
Trust in accordance with its terms, subject to Bankruptcy and Equity.
5.8. No Defaults. The Trust is not in violation of the Trust Agreement or,
to the knowledge of the Administrators, any provision of the Statutory Trust
Act. The execution, delivery and performance by the Company or the Trust of the
Operative Documents to which it is a party, and the consummation of the
transactions contemplated herein or therein and the use of the proceeds
therefrom, will not conflict with or constitute a breach of, or a default under,
or result in the creation or imposition of any lien, charge or other encumbrance
upon any property or assets of the Trust, the Company or any of the Company's
Significant Subsidiaries (as defined in Section 5.10 hereof) pursuant to any
contract, indenture, mortgage, loan agreement, note, lease or other instrument
to which the Trust, the Company or any of its Significant Subsidiaries is a
party or by which it or any of them may be bound, or to which any of the
property or assets of any of them is subject, except for a conflict, breach,
default, lien, charge or encumbrance which could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect (defined
below) nor will such action result in any violation of the Trust Agreement or
the Statutory Trust Act or require the consent, approval, authorization or order
of any court or governmental agency or body. As used herein, the term "Material
Adverse Effect" means any effect that is material and adverse to the Offeror's
ability to consummate the transactions contemplated herein or in the Operative
Documents or any effect that is material and adverse to the condition (financial
or otherwise), earnings, affairs, business prospects or results of operations of
the Company and its Significant Subsidiaries taken as whole, whether or not
occurring in the ordinary course of business.
5.9. Organization, Standing and Qualification of the Company. The Company
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the Commonwealth of Pennsylvania, with all requisite
corporate power and authority to own its properties and conduct the business it
transacts and proposes to transact, and is duly qualified to transact business
and is in good standing as a foreign corporation in each jurisdiction where the
nature of its activities requires such qualification, except where the failure
of the Company to be so qualified would not, singly or in the aggregate, have a
Material Adverse Effect.
5.10. Subsidiaries of the Company. Each of the Company's significant
subsidiaries (as defined in Section 1-02(w) of Regulation S-X to the Securities
Act (the "Significant Subsidiaries")) is listed in Exhibit C attached hereto and
incorporated herein by this reference. Each Significant Subsidiary has been duly
organized and is validly existing and in good standing under the laws of the
jurisdiction in which it is chartered or organized, with all requisite power and
authority to own its properties and conduct the business it transacts and
proposes to transact, and is duly qualified to transact business and is in good
standing as a foreign entity in each jurisdiction where the nature of its
activities requires such qualification, except where the failure of any such
Significant Subsidiaries to be so qualified would not, singly or in the
aggregate, have a Material Adverse Effect. All of the issued and outstanding
shares of capital stock of the Significant Subsidiaries (a) have been duly
authorized and are validly issued, (b) are fully paid and nonassessable, and (c)
are wholly owned, directly or indirectly, by the Company free and clear of any
security interest, mortgage, pledge, lien, encumbrance, restriction upon voting
or transfer, preemptive rights, claim, equity or other defect.
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5.11. Permits. The Company and each of its Significant Subsidiaries have
all requisite power and authority, and all necessary authorizations, approvals,
orders, licenses (including, without limitation, insurance licenses from the
insurance departments of the various states where the Significant Subsidiaries
write insurance business (the "Insurance Licenses")), certificates and permits,
including those that are necessary to own or lease their respective properties
(collectively, "Permits"), of and from regulatory or governmental officials,
bodies and tribunals that are material to the Company and its Significant
Subsidiaries taken as a whole and are necessary to conduct the business now
operated by them; the Company and its Significant Subsidiaries are in compliance
with the terms and conditions of all such Insurance Licenses and Permits, except
where the failure so to comply would not, singly or in the aggregate, result in
a Material Adverse Effect; all of the Insurance Licenses and Permits are valid
and in full force and effect, except where the invalidity of such Insurance
Licenses and Permits or the failure of such Insurance Licenses and Permits to be
in full force and effect would not result in a Material Adverse Effect; and
neither the Company nor any of its Significant Subsidiaries has received any
notice of proceedings relating to the revocation or modification of any such
Insurance Licenses and Permits which, singly or in the aggregate, may reasonably
be expected to result in a Material Adverse Effect.
5.12. Conflicts, Authorizations and Approvals. Except as previously
disclosed to the Placement Agents in writing, neither the Company nor any of its
Significant Subsidiaries is in violation of its respective charter or by-laws or
similar organizational documents or in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which either the Company or any of its Significant Subsidiaries is
a party, or by which it or any of them may be bound or to which any of the
property or assets of the Company or any of its Significant Subsidiaries is
subject, the effect of which violation or default in performance or observance
would have, singly or in the aggregate, a Material Adverse Effect.
5.13. Financial Statements.
(a) The consolidated balance sheets of the Company and all of its
Significant Subsidiaries as of December 31, 2001 and December 31, 2000 and
related consolidated income statements and statements of changes in
shareholders' equity for the 3 years ended December 31, 2001 together with the
notes thereto, and the consolidated balance sheets of the Company and all of its
Significant Subsidiaries as of June 30, 2002 and the related consolidated income
statements and statements of changes in shareholders' equity for the 6 months
then ended, copies of each of which have been provided to the Placement Agents
(together, the "Financial Statements"), have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may be disclosed therein) and fairly present in all material respects the
financial position and the results of operations and changes in shareholders'
equity of the Company and all of its Significant Subsidiaries as of the dates
and for the periods indicated (subject, in the case of interim financial
statements, to normal recurring year-end adjustments, none of which shall be
material). The books and records of the Company and all of its Significant
Subsidiaries have been, and are being, maintained in all material respects in
accordance with generally accepted accounting principles and any other
applicable legal and accounting requirements and reflect only actual
transactions.
(b) The statutory financial statements as of December 31, 2000,
December 31, 2001 and June 30, 2002 (the "Statutory Financial Statements") of
each of the Company's insurance subsidiaries have for each relevant period been
prepared in accordance with accounting practices prescribed or permitted by the
National Association of Insurance Commissioners, and with respect to each
insurance subsidiary, the appropriate Insurance Department of the state of
domicile of such insurance subsidiary, and such accounting practices have been
applied on a consistent basis throughout the periods involved.
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(c) Since the respective dates of the Financial Statements and the
Statutory Financial Statements, there has been no material adverse change or
development with respect to the financial condition or earnings of the Company
and all of its Significant Subsidiaries, taken as a whole.
(d) The accountants of the Company who certified the Financial
Statements are independent public accountants of the Company and its Significant
Subsidiaries within the meaning of the Securities Act and the rules and
regulations thereunder.
5.14. Regulatory Enforcement Matters. Except as previously disclosed to the
Placement Agents in writing, neither the Company nor any of its Significant
Subsidiaries is subject or is party to, or has received any notice or advice
that any of them may become subject or party to, any investigation with respect
to, any cease-and-desist order, agreement, consent agreement, 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 since January 1, 2001, a recipient of
any supervisory letter from, or since January 1, 2001, has adopted any board
resolutions at the request of, any agency charged with the supervision or
regulation of insurance companies (a "Regulatory Agency") that currently
restricts in any material respect the conduct of their business or that in any
material manner relates to their capital adequacy, their ability or authority to
pay dividends or make distributions to their shareholders or make payments of
principal or interest on their debt obligations, their management or their
business (each, a "Regulatory Agreement"), nor has the Company or any of its
Significant Subsidiaries been advised since January 1, 2001, by any Regulatory
Agency that it is considering issuing or requesting any such Regulatory
Agreement. There is no material unresolved violation, criticism or exception by
any Regulatory Agency with respect to any report or statement relating to any
examinations of the Company or any of its Significant Subsidiaries.
5.15. No Material Change. Except as previously disclosed to the Placement
Agents in writing, since December 31, 2001, there has been no material adverse
change or development with respect to the condition (financial or otherwise),
earnings, affairs, business prospects or results of operations of the Company or
its Significant Subsidiaries on a consolidated basis, whether or not arising in
the ordinary course of business.
5.16. No Undisclosed Liabilities. Neither the Company nor any of its
Significant Subsidiaries has any material liability, whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including any liability for taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit, proceeding, hearing, charge, complaint, claim or demand against
the Company or its Significant Subsidiaries giving rise to any such liability),
except (i) for liabilities set forth in the Financial Statements and Statutory
Financial Statements, respectively, (ii) normal fluctuation in the amount of the
liabilities referred to in clause (i) above occurring in the ordinary course of
business of the Company and all of its Significant Subsidiaries since the date
of the most recent balance sheet included in the Financial Statements and
Statutory Financial Statements, respectively, and (iii) as may be specifically
disclosed in writing to the Placement Agents.
5.17. Litigation. Except as previously disclosed to the Placement Agents in
writing, no inquiry, charge, investigation, action, suit or proceeding
(including, without limitation, any proceeding to revoke or deny renewal of any
Insurance Licenses) is pending or, to the knowledge of the Offerors, threatened,
against or affecting the Company or its Significant Subsidiaries or any of their
respective properties before or by any court or any regulatory, administrative
or governmental official, commission, board, agency or other authority or body,
or any arbitrator, wherein an unfavorable decision, ruling or finding could
have, singly or in the aggregate, a Material Adverse Effect.
9
5.18. Deferral of Interest Payments on Debentures. The Company has no
present intention to exercise its option to defer payments of interest on the
Debentures as provided in the Indenture. The Company 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 because of the restrictions that would be imposed on
the Company's ability to declare or pay dividends or distributions on, or to
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Company's capital stock and on the Company's ability to make any payments of
principal, interest or premium on, or repay, repurchase or redeem, any of its
debt securities that rank pari passu in all respects with, or junior in interest
to, the Debentures.
Section 6. Representations and Warranties of the Placement Agents. Each
Placement Agent represents and warrants to the Offerors as to itself (but not as
to the other Placement Agent) as follows:
6.1. Organization, Standing and Qualification.
(a) FTN Financial Capital Markets is a division of First Tennessee
Bank, N.A., a national banking association duly organized, validly existing and
in good standing under the laws of the United States, with full power and
authority to own, lease and operate its properties and conduct its business as
currently being conducted. FTN Financial Capital Markets is duly qualified to
transact business as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases property or conducts its business so as
to require such qualification and in which the failure to so qualify would,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), earnings, business, prospects or results of
operations of FTN Financial Capital Markets.
(b) Xxxxx, Xxxxxxxx & Xxxxx, Inc. is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
with full power and authority to own, lease and operate its properties and
conduct its business as currently being conducted. Xxxxx, Xxxxxxxx & Xxxxx, Inc.
is duly qualified to transact business as a foreign corporation and is in good
standing in each other jurisdiction in which it owns or leases property or
conducts its business so as to require such qualification and in which the
failure to so qualify would, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), earnings, business,
prospects or results of operations of Xxxxx, Xxxxxxxx & Xxxxx, Inc.
6.2. Power and Authority. The Placement Agent has all requisite power and
authority to enter into this Agreement, and this Agreement has been duly and
validly authorized, executed and delivered by the Placement Agent and
constitutes the legal, valid and binding agreement of the Placement Agent,
enforceable against the Placement Agent in accordance with its terms, subject to
Bankruptcy and Equity and except as any indemnification or contribution
provisions thereof may be limited under applicable securities laws.
6.3. General Solicitation. In the case of the offer and sale of the Capital
Securities, no form of general solicitation or general advertising was used by
the Placement Agent 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 Placement Agent nor its
representatives have engaged or will engage in any "directed selling efforts"
within the meaning of Regulation S with respect to the Capital Securities.
6.4. Purchaser. The Placement Agent has made such reasonable inquiry as is
necessary to determine that the Purchaser is acquiring the Capital Securities
for its own account, that the Purchaser does not intend to distribute the
Capital Securities in contravention of the Securities Act or any other
10
applicable securities laws, and that the Purchaser is not a "U.S. person" as
that term is defined under Rule 902 of the Securities Act.
6.5. Qualified Purchasers. The Placement Agent has not offered or sold and
will not arrange for the offer or sale of the Capital Securities except (i) in
an offshore transaction complying with Rule 903 of Regulation S, or (ii) to
those the Placement Agent reasonably believes are "accredited investors" (as
defined in Rule 501 of Regulation D), or (iii) in any other manner that does not
require registration of the Capital Securities under the Securities Act. In
connection with each such sale, the Placement Agent has taken or will take
reasonable steps to ensure that the Purchaser is aware that (a) such sale is
being made in reliance on an exemption under the Securities Act and (b) future
transfers of the Capital Securities will not be made except in compliance with
applicable securities laws.
6.6. Offering Circulars. Neither the Placement Agent nor its
representatives will include any non-public information about the Company, the
Trust or any of their affiliates in any registration statement, prospectus,
offering circular or private placement memorandum used in connection with any
purchase of Capital Securities without the prior written consent of the Trust
and the Company.
Section 7. Covenants of the Offerors. The Offerors covenant and agree with the
Placement Agents and the Purchaser as follows:
7.1. Compliance with Representations and Warranties. During the period from
the date of this Agreement to the Closing Date, the Offerors shall use their
best efforts and take all action necessary or appropriate to cause their
representations and warranties contained in Section 5 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.
7.2. Sale and Registration of Securities. The Offerors and their Affiliates
shall not nor shall any of them permit any person acting on their behalf (other
than the Placement Agents), to directly or indirectly (i) sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) that would or could be integrated with the sale
of the Capital Securities in a manner that would require the registration under
the Securities Act of the Securities or (ii) make offers or sales of any such
Security, or solicit offers to buy any such Security, under circumstances that
would require the registration of any of such Securities under the Securities
Act.
7.3. Use of Proceeds. The Trust shall use the proceeds from the sale of the
Capital Securities to purchase the Debentures from the Company.
7.4. Investment Company. The Offerors shall not engage, or permit any
subsidiary to engage, in any activity which would cause it or any subsidiary to
be an "investment company" under the provisions of the Investment Company Act.
7.5. Reimbursement of Expenses. If the sale of the Capital Securities
provided for herein is not consummated (i) because any condition set forth in
Section 3 hereof is not satisfied, or (ii) because of any refusal, inability or
failure on the part of the Company or the Trust to perform any agreement herein
or comply with any provision hereof other than by reason of a breach by the
Placement Agents, the Company shall reimburse the Placement Agents upon demand
for all of their pro rata share of out-of-pocket expenses (including reasonable
fees and disbursements of counsel) in an amount not to exceed $50,000.00 that
shall have been incurred by them in connection with the proposed purchase and
sale of the Capital Securities. Notwithstanding the foregoing, the Company shall
have no obligation to reimburse the Placement Agents for their out-of-pocket
expenses if the sale of the Capital Securities fails to occur because the
condition set forth in Section 3.6 is not satisfied or because either of the
Placement Agents fails to fulfill a condition set forth in Section 4.
11
7.6. Directed Selling Efforts, Solicitation and Advertising. In connection
with any offer or sale of any of the Securities, the Offerors shall not, nor
shall either of them permit any of their Affiliates or any person acting on
their behalf, other than the Placement Agents, to, (i) engage in any "directed
selling efforts" within the meaning of Regulation S, or (ii) engage in any form
of general solicitation or general advertising (as defined in Regulation D).
7.7. Compliance with Rule 144A(d)(4) under the Securities Act. So long as
any of the Securities are outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act, the Offerors will, during
any period in which they are not subject to and in compliance with Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or the Offerors are not exempt from such reporting requirements pursuant to and
in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each holder
of such restricted securities and to each prospective purchaser (as designated
by such holder) of such restricted securities, upon the request of such holder
or prospective purchaser in connection with any proposed transfer, any
information required to be provided by Rule 144A(d)(4) under the Securities Act,
if applicable. This covenant is intended to be for the benefit of the holders,
and the prospective purchasers designated by such holders, from time to time of
such restricted securities. The information provided by the Offerors pursuant to
this Section 7.7 will not, at the date thereof, contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
7.8. Quarterly Reports. Within 50 days of the end of each of the first
three calendar year quarters and within 100 days of the end of each calendar
year during which the Debentures are issued and outstanding, the Offerors shall
submit to The Bank of New York a completed quarterly report in the form attached
hereto as Exhibit D. The Offerors acknowledge and agree that The Bank of New
York and its successors and assigns is a third party beneficiary of this Section
7.8.
Section 8. Covenants of the Placement Agents. The Placement Agents covenant and
agree with the Offerors that, during the period from the date of this Agreement
to the Closing Date, the Placement Agents shall use their best efforts and take
all action necessary or appropriate to cause their representations and
warranties contained in Section 6 to be true as of Closing Date, after giving
effect to the transactions contemplated by this Agreement, as if made on and as
of the Closing Date. The Placement Agents further covenant and agree not to
engage in hedging transactions with respect to the Capital Securities unless
such transactions are conducted in compliance with the Securities Act.
Section 9. Indemnification.
9.1. Indemnification Obligation. The Offerors shall jointly and severally
indemnify and hold harmless the Placement Agents and the Purchaser and each of
their respective agents, employees, officers and directors and each person that
controls either of the Placement Agents or the Purchaser within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, and agents,
employees, officers and directors or any such controlling person of either of
the Placement Agents or the Purchaser (each such person or entity, an
"Indemnified Party") from and against any and all losses, claims, damages,
judgments, liabilities or expenses, joint or several, to which such Indemnified
Party may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Offerors), insofar as such losses, claims, damages,
judgments, liabilities or expenses (or actions in respect thereof) arise out of,
or are based upon, or relate to, in whole or in part, (a) any untrue statement
or alleged untrue statement of a material fact contained in any information
(whether written or oral) or documents executed in favor of, furnished or made
available to the Placement Agents or the Purchaser by the Offerors, or (b) any
omission or alleged omission to state in
12
any information (whether written or oral) or documents executed in favor of,
furnished or made available to the Placement Agents or the Purchaser by the
Offerors a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse each Indemnified Party
for any legal and other expenses as such expenses are reasonably incurred by
such Indemnified Party in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, judgments, liability,
expense or action described in this Section 9.1. In addition to their other
obligations under this Section 9, the Offerors hereby agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of, or based upon, or related to the matters
described above in this Section 9.1, they shall reimburse each Indemnified Party
on a quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, each Indemnified Party shall promptly
return such amounts to the Offerors together with interest, determined on the
basis of the prime rate (or other commercial lending rate for borrowers of the
highest credit standing) announced from time to time by First Tennessee Bank,
N.A. (the "Prime Rate"). Any such interim reimbursement payments that are not
made to an Indemnified Party within 30 days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
9.2. Conduct of Indemnification Proceedings. Promptly after receipt by an
Indemnified Party under this Section 9 of notice of the commencement of any
action, such Indemnified Party shall, if a claim in respect thereof is to be
made against the Offerors under this Section 9, notify the Offerors in writing
of the commencement thereof; but, subject to Section 9.4, the omission to so
notify the Offerors shall not relieve them from any liability pursuant to
Section 9.1 which the Offerors may have to any Indemnified Party unless and to
the extent that the Offerors did not otherwise learn of such action and such
failure by the Indemnified Party results in the forfeiture by the Offerors of
substantial rights and defenses. In case any such action is brought against any
Indemnified Party and such Indemnified Party seeks or intends to seek indemnity
from the Offerors, the Offerors shall be entitled to participate in, and, to the
extent that they may wish, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Party; provided, however, if the defendants in
any such action include both the Indemnified Party and the Offerors and the
Indemnified Party shall have reasonably concluded that there may be a conflict
between the positions of the Offerors and the Indemnified Party in conducting
the defense of any such action or that there may be legal defenses available to
it and/or other Indemnified Parties which are different from or additional to
those available to the Offerors, the Indemnified Party shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party.
Upon receipt of notice from the Offerors to such Indemnified Party of their
election to so assume the defense of such action and approval by the Indemnified
Party of counsel, the Offerors shall not be liable to such Indemnified Party
under this Section 9 for any legal or other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof unless (i) the
Indemnified Party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso in the preceding
sentence (it being understood, however, that the Offerors shall not be liable
for the expenses of more than one separate counsel representing the Indemnified
Parties who are parties to such action), or (ii) the Offerors shall not have
employed counsel reasonably satisfactory to the Indemnified Party to represent
the Indemnified Party within a reasonable time after notice of commencement of
the action, in each of which cases the fees and expenses of counsel of such
Indemnified Party shall be at the expense of the Offerors.
9.3. Contribution. If the indemnification provided for in this Section 9 is
required by its terms, but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an Indemnified Party under Section 9.1
in respect of any losses, claims, damages, liabilities or expenses
13
referred to herein or therein, then the Offerors shall contribute to the amount
paid or payable by such Indemnified Party as a result of any losses, claims,
damages, judgments, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Offerors, on the one hand, and the Indemnified Party, on the other hand, from
the offering of such Capital Securities, or (ii) if the allocation provided by
clause (i) above 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 Offerors, on the one hand, and the
Placement Agents, on the other hand, in connection with the statements or
omissions or inaccuracies in the representations and warranties herein or other
breaches which resulted in such losses, claims, damages, judgments, liabilities
or expenses, as well as any other relevant equitable considerations. The
respective relative benefits received by the Offerors, on the one hand, and the
Placement Agents, on the other hand, shall be deemed to be in the same
proportion, in the case of the Offerors, as the total price paid to the Offerors
for the Capital Securities sold by the Offerors to the Purchaser (net of the
compensation paid to the Placement Agents hereunder, but before deducting
expenses), and in the case of the Placement Agents, as the compensation received
by them, bears to the total of such amounts paid to the Offerors and received by
the Placement Agents as compensation. The relative fault of the Offerors and the
Placement Agents shall be determined by reference to, among other things,
whether the untrue statement or alleged untrue statement of a material fact or
the omission or alleged omission of a material fact or the inaccurate or the
alleged inaccurate representation and/or warranty relates to information
supplied by the Offerors or the Placement Agents and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The provisions set forth in Section 9.2 with respect
to notice of commencement of any action shall apply if a claim for contribution
is made under this Section 9.3; provided, however, that no additional notice
shall be required with respect to any action for which notice has been given
under Section 9.2 for purposes of indemnification. The Offerors and the
Placement Agents agree that it would not be just and equitable if contribution
pursuant to this Section 9.3 were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable
considerations referred to in this Section 9.3. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages, judgments,
liabilities or expenses referred to in this Section 9.3 shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. In no event shall the liability of the
Placement Agents hereunder be greater in amount than the dollar amount of the
compensation (net of payment of all expenses) received by the Placement Agents
upon the sale of the Capital Securities giving rise to such obligation. No
person found 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 found guilty of such fraudulent misrepresentation.
9.4. Additional Remedies. The indemnity and contribution agreements
contained in this Section 9 are in addition to any liability that the Offerors
may otherwise have to any Indemnified Party.
9.5. Additional Indemnification. The Company shall indemnify and hold
harmless the Trust against all loss, liability, claim, damage and expense
whatsoever, as due from the Trust under Sections 9.1 through 9.4 hereof.
Section 10. Rights and Responsibilities of Placement Agents.
10.1. Reliance. In performing their duties under this Agreement, the
Placement Agents shall be entitled to rely upon any notice, signature or writing
which they shall in good faith believe to be genuine and to be signed or
presented by a proper party or parties. The Placement Agents may rely upon any
opinions or certificates or other documents delivered by the Offerors or their
counsel or designees to either the Placement Agents or the Purchaser.
14
10.2. Rights of Placement Agents. In connection with the performance of
their duties under this Agreement, the Placement Agents shall not be liable for
any error of judgment or any action taken or omitted to be taken unless the
Placement Agents were grossly negligent or engaged in willful misconduct in
connection with such performance or non-performance. No provision of this
Agreement shall require the Placement Agents to expend or risk their own funds
or otherwise incur any financial liability on behalf of the Purchaser in
connection with the performance of any of their duties hereunder. The Placement
Agents shall be under no obligation to exercise any of the rights or powers
vested in them by this Agreement.
Section 11. Miscellaneous.
11.1. Notices. Prior to the Closing, and thereafter with respect to matters
pertaining to this Agreement only, all notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier or overnight air courier guaranteeing next
day delivery:
if to the Placement Agents, to:
FTN Financial Capital Markets
000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Telecopier: 000-000-0000
Telephone: 000-000-0000
Attention: Xxxxx X. Xxxxxxx
and
Xxxxx, Xxxxxxxx & Xxxxx, Inc.
000 0xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: 000-000-0000
Telephone: 000-000-0000
Attention: Xxxxxxxx Xxxxxxxx, General Counsel
with a copy to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: 000-000-0000
Telephone: 000-000-0000
Attention: Xxxxxxxxx X. Xxx, Esq.
and
Sidley Xxxxxx Xxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: 000-000-0000
Telephone: 000-000-0000
Attention: Xxxxxxx Xxxxxx, Esq.
15
if to the Offerors, to:
Penn-America Group, Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Telecopier: 000-000-0000
Telephone: 000-000-0000
Attention: Xxxxxxx X. Xxxxxxxx
with a copy to:
Xxxx Xxxxx LLP
0000 Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Telecopier: 000-000-0000
Telephone: 000-000-0000
Attention: Xxxxxxx Xxxxxxx, Esq.
All such notices and communications shall be deemed to have been duly
given (i) at the time delivered by hand, if personally delivered, (ii) five
business days after being deposited in the mail, postage prepaid, if mailed,
(iii) when answered back, if telexed, (iv) the next business day after being
telecopied, or (v) the next business day after timely delivery to a courier, if
sent by overnight air courier guaranteeing next day delivery. From and after the
Closing, the foregoing notice provisions shall be superseded by any notice
provisions of the Operative Documents under which notice is given. The Placement
Agents, the Company, and their respective counsel, may change their respective
notice addresses from time to time by written notice to all of the foregoing
persons.
11.2. Parties in Interest, Successors and Assigns. Except as expressly set
forth herein, this Agreement is made solely for the benefit of the Placement
Agents, the Purchaser and the Offerors and any person controlling the Placement
Agents, the Purchaser or the Offerors and their respective successors and
assigns; and no other person shall acquire or have any right under or by virtue
of this Agreement. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.
11.3. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
11.4. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
11.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO CONFLICTS OF
LAWS) OF THE STATE OF NEW YORK.
11.6. Entire Agreement. This Agreement, together with the other Operative
Documents and the other documents delivered in connection with the transactions
contemplated by this Agreement, is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, together with the other Operative
16
Documents, supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
11.7. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the Placement Agents' and the Purchaser's rights and
privileges shall be enforceable to the fullest extent permitted by law.
11.8. Survival. The Placement Agents and the Offerors, respectively, agree
that the representations, warranties and agreements made by each of them in this
Agreement and in any certificate or other instrument delivered pursuant hereto
shall remain in full force and effect and shall survive the delivery of, and
payment for, the Capital Securities.
Signatures appear on the following page
17
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance of this Agreement and deliver such counterpart to the Offerors
whereupon this Agreement will become binding between us in accordance with its
terms.
Very truly yours,
PENN-AMERICA GROUP, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
PENN-AMERICA STATUTORY TRUST I
By:
Name:
--------------------------------
Title: Administrator
CONFIRMED AND ACCEPTED,
as of the date first set forth above
FTN FINANCIAL CAPITAL MARKETS,
a division of First Tennessee Bank, N.A.,
as a Placement Agent
By:
--------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Director
XXXXX, XXXXXXXX & XXXXX, INC.
a New York corporation, as a Placement Agent
By:
--------------------------------
Name: Xxxxx X. Xxxxx
Title: Managing Director
EXHIBIT A
FORM OF SUBSCRIPTION AGREEMENT
[TRUST NAME] STATUTORY TRUST [I]
[COMPANY NAME]
SUBSCRIPTION AGREEMENT
[_______________], 2002
THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among [TRUST NAME]
Statutory Trust [I] (the "Trust"), a statutory trust created under the
Connecticut Statutory Trust Act (Chapter 615 of Title 34 of the Connecticut
General Statutes, Section 500, et seq.), [COMPANY NAME], a [STATE] corporation,
with its principal offices located at [ADDRESS] (the "Company" and, collectively
with the Trust, the "Offerors"), and I-Preferred Term Securities I, Ltd. (the
"Purchaser").
RECITALS:
A. The Trust desires to issue [NUMBER OF CAPITAL SECURITIES] of its
Floating Rate Capital Securities (the "Capital Securities"), liquidation amount
$1,000.00 per Capital Security, representing an undivided beneficial interest in
the assets of the Trust (the "Offering"), to be issued pursuant to an Amended
and Restated Declaration of Trust (the "Declaration") by and among the Company,
State Street Bank and Trust Company of Connecticut, National Association ("State
Street"), the administrators named therein, and the holders (as defined
therein), which Capital Securities are to be guaranteed by the Company with
respect to distributions and payments upon liquidation, redemption and otherwise
pursuant to the terms of a Guarantee Agreement between the Company and State
Street, as trustee (the "Guarantee"); and
B. The proceeds from the sale of the Capital Securities will be
combined with the proceeds from the sale by the Trust to the Company of its
common securities, and will be used by the Trust to purchase an equivalent
amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of
the Company (the "Debentures") to be issued by the Company pursuant to an
indenture to be executed by the Company and State Street, as trustee (the
"Indenture"); and
C. In consideration of the premises and the mutual representations and
covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Subscription Agreement, the Purchaser
hereby agrees to purchase from the Trust [NUMBER OF CAPITAL SECURITIES] Capital
Securities at a price equal to $1,000.00 per Capital Security (the "Purchase
Price") and the Trust agrees to sell such Capital Securities to the Purchaser
for said Purchase Price. The rights and preferences of the Capital Securities
are set forth in the Declaration. The Purchase Price is payable in immediately
available funds on [_____________], 2002, or such other business day as may be
designated by the Purchaser, but in no event later than
[_____________], 2002 (the "Closing Date"). The Offerors shall provide the
Purchaser wire transfer instructions no later than 1 day following the date
hereof.
1.2. The certificate for the Capital Securities shall be delivered by the
Trust on the Closing Date to the Purchaser or its designee.
1.3. The Placement Agreement, dated [_____________], 2002 (the "Placement
Agreement"), among the Offerors and the Placement Agents identified therein
includes certain representations and warranties, covenants and conditions to
closing and certain other matters governing the Offering. The Placement
Agreement is hereby incorporated by reference into this Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under the Placement Agreement and shall be entitled to enforce the
obligations of the Offerors under such Placement Agreement as fully as if the
Purchaser were a party to such Placement Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that neither the Capital
Securities, the Debentures nor the Guarantee have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any other
applicable securities law, are being offered for sale by the Trust in
transactions not requiring registration under the Securities Act, and may not be
offered, sold, pledged or otherwise transferred by the Purchaser except in
compliance with the registration requirements of the Securities Act or any other
applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.
2.2. The Purchaser represents, warrants and certifies that (i) it is not a
"U.S. person" as such term is defined in Rule 902 under the Securities Act, (ii)
it is not acquiring the Capital Securities for the account or benefit of any
such U.S. person, (iii) the offer and sale of Capital Securities to the
Purchaser constitutes an "offshore transaction" under Regulation S of the
Securities Act, and (iv) it will not engage in hedging transactions with regard
to the Capital Securities unless such transactions are conducted in compliance
with the Securities Act and the Purchaser agrees to the legends and transfer
restrictions set forth on the Capital Securities certificate.
2.3. The Purchaser represents and warrants that it is purchasing the
Capital Securities for its own account, for investment, and not with a view to,
or for offer or sale in connection with, any distribution thereof in violation
of the Securities Act or other applicable securities laws, subject to any
requirement of law that the disposition of its property be at all times within
its control and subject to its ability to resell such Capital Securities
pursuant to an effective registration statement under the Securities Act or
under Rule 144A or any other exemption from registration available under the
Securities Act or any other applicable Securities law.
2.4. The Purchaser represents and warrants that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties specified herein, and to consummate the transactions contemplated
herein and it has full right and power to subscribe for Capital Securities and
perform its obligations pursuant to this Agreement.
2.5. The Purchaser, a Cayman Islands Company whose business includes
issuance of certain notes and acquiring the Capital Securities and other similar
securities, represents and warrants that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
A-2
and risks of purchasing the Capital Securities, has had the opportunity to ask
questions of, and receive answers and request additional information from, the
Offerors and is aware that it may be required to bear the economic risk of an
investment in the Capital Securities.
2.6. The Purchaser represents and warrants that no filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or
required for the performance by the Purchaser of its obligations under this
Subscription Agreement or to consummate the transactions contemplated herein.
2.7. The Purchaser represents and warrants that this Subscription Agreement
has been duly authorized, executed and delivered by the Purchaser.
2.8. The Purchaser represents and warrants that (i) the Purchaser is not in
violation or default of any term of its Memorandum of Association or Articles of
Association, of any provision of any mortgage, indenture, agreement, instrument
or contract to which it is a party or by which it is bound or of any judgment,
decree, order, writ or, to its knowledge, any statute, rule or regulation
applicable to the Purchaser which would prevent the Purchaser from performing
any material obligation set forth in this Subscription Agreement; and (ii) the
execution, delivery and performance of and compliance with this Subscription
Agreement, and the consummation of the transactions contemplated herein, will
not, with or without the passage of time or giving of notice, result in any such
material violation, or be in conflict with or constitute a default under any
such term, or the suspension, revocation, impairment, forfeiture or non-renewal
of any permit, license, authorization or approval applicable to the Purchaser,
its business or operations or any of its assets or properties which would
prevent the Purchaser from performing any material obligations set forth in this
Subscription Agreement.
2.9. The Purchaser represents and warrants that the Purchaser is an
exempted company with limited liability duly incorporated, validly existing and
in good standing under the laws of the jurisdiction where it is organized, with
full power and authority to perform its obligations under this Subscription
Agreement.
2.10. The Purchaser understands and acknowledges that the Company will rely
upon the truth and accuracy of the foregoing acknowledgments, representations,
warranties and agreements and agrees that, if any of the acknowledgments,
representations, warranties or agreements deemed to have been made by it by its
purchase of the Capital Securities are no longer accurate, it shall promptly
notify the Company.
2.11. The Purchaser understands that no public market exists for any of the
Capital Securities, and that it is unlikely that a public market will ever exist
for the Capital Securities.
ARTICLE III
MISCELLANEOUS
-------------
3.1. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:
A-3
To the Offerors: [COMPANY NAME]
[ADDRESS]
Attention: [________________]
Fax: [____________________]
To the Purchaser: I-Preferred Term Securities I, Ltd.
x/x XXXX Xxxxxxx
X.X. Xxx 0000 XX
Xxxxxxxxxx House
South Church Street
Xxxxxx Town, Grand Cayman
Cayman Islands
Attention: The Directors
Fax: 000-000-0000
Unless otherwise expressly provided herein, notices shall be deemed to
have been given on the date of mailing, except notice of change of address,
which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the Purchaser,
this Agreement shall become a binding obligation of the Purchaser with respect
to the purchase of Capital Securities as herein provided.
3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.5. The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
3.6. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
3.7. In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that all of the Offerors' and the Purchaser's rights and privileges
shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
A-4
IN WITNESS WHEREOF, I have set my hand the day and year first written
above.
I-PREFERRED TERM SECURITIES I, LTD.
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
IN WITNESS WHEREOF, this Subscription Agreement is agreed to and
accepted as of the day and year first written above.
[COMPANY NAME]
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
[TRUST NAME] STATUTORY TRUST [I]
By:
--------------------------------
Name:
--------------------------------
Title: Administrator
X-0
XXXXXXX X-0
-----------
FORM OF COMPANY COUNSEL OPINION
-------------------------------
[CLOSING DATE], 2002
I-Preferred Term Securities I, Ltd. FTN Financial Capital Markets
P. O. Box 1093 GT 000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx Xxxxxxx, Xxxxxxxxx 00000
South Church Street
Xxxxxx Town, Grand Cayman Xxxxx, Xxxxxxxx & Xxxxx, Inc.
Grand Cayman Islands 000 0xx Xxxxxx, 0xx Xxxxx
Xxxxxxx Xxxx Indies Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
We have acted as counsel to [COMPANY NAME] (the "Company"), a [STATE]
corporation in connection with a certain Placement Agreement, dated [DATE OF
PRICING], 2002, (the "Placement Agreement"), between the Company and [TRUST
NAME] Statutory Trust [I] (the "Trust"), on one hand, and FTN Financial Capital
Markets and Xxxxx, Xxxxxxxx & Xxxxx, Inc. (the "Placement Agents"), on the other
hand. Pursuant to the Placement Agreement, and subject to the terms and
conditions stated therein, the Trust will issue and sell to I-Preferred Term
Securities I, Ltd. (the "Purchaser"), $[____________] aggregate principal amount
of Floating Rate Capital Securities (liquidation amount $1,000.00 per capital
security) (the "Capital Securities").
Capitalized terms used herein and not otherwise defined shall have the
same meanings ascribed to them in the Placement Agreement.
The law covered by the opinions expressed herein is limited to the laws
of the United States of America and of the State[s] of [STATE OF INCORPORATION
AND STATE WHERE COMPANY'S PRINCIPAL BUSINESS IS LOCATED].
We have made such investigations of law as, in our judgment, were
necessary to render the following opinions. We have also reviewed (a) the
Company's Articles of Incorporation, as amended, and its By-Laws, as amended;
and (b) such corporate documents, records, information and certificates of the
Company and its Significant Subsidiaries, certificates of public officials or
government authorities and other documents as we have deemed necessary or
appropriate as a basis for the opinions hereinafter expressed. As to certain
facts material to our opinions, we have relied, with your permission, upon
statements, certificates or representations, including those delivered or made
in connection with the above-referenced transaction, of officers and other
representatives of the Company and its Significant Subsidiaries and the Trust.
As used herein, the phrase "to our knowledge" or "to the best of our
knowledge" or other similar phrase means the actual knowledge of the attorneys
who have had active involvement in the transactions described above or who have
prepared or signed this opinion letter, or who otherwise have devoted
substantial attention to legal matters for the Company.
B-1-1
Based upon and subject to the foregoing and the further qualifications
set forth below, we are of the opinion as of the date hereof that:
1. The Company is validly existing and in good standing under the laws
of the State of [STATE]. Each of the Significant Subsidiaries is validly
existing and in good standing under the laws of its jurisdiction of
organization. Each of the Company and the Significant Subsidiaries has full
corporate power and authority to own or lease its properties and to conduct its
business as such business is currently conducted in all material respects. To
the best of our knowledge, all outstanding shares of capital stock of the
Significant Subsidiaries have been duly authorized and validly issued, and are
fully paid and nonassessable and owned of record and beneficially, directly or
indirectly by the Company.
2. The issuance, sale and delivery of the Debentures in accordance with
the terms and conditions of the Placement Agreement and the Operative Documents
have been duly authorized by all necessary actions of the Company. The issuance,
sale and delivery of the Debentures by the Company and the issuance, sale and
delivery of the Trust Securities by the Trust do not give rise to any preemptive
or other rights to subscribe for or to purchase any shares of capital stock or
equity securities of the Company or the Significant Subsidiaries pursuant to the
corporate Articles of Incorporation or Charter, By-Laws or other governing
documents of the Company or the Significant Subsidiaries, or, to the best of our
knowledge, any agreement or other instrument to which either Company or the
Significant Subsidiaries is a party or by which the Company or the Significant
Subsidiaries may be bound.
3. The Company has all requisite corporate power to enter into and
perform its obligations under the Placement Agreement and the Subscription
Agreement, and the Placement Agreement and the Subscription Agreement have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company enforceable
in accordance with their terms, except as the enforcement thereof may be limited
by general principles of equity and by bankruptcy or other laws affecting
creditors' rights generally, and except as the indemnification and contribution
provisions thereof may be limited under applicable laws and certain remedies may
not be available in the case of a non-material breach.
4. Each of the Indenture, the Trust Agreement and the Guarantee
Agreement has been duly authorized, executed and delivered by the Company, and
is a valid and legally binding obligation of the Company enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other laws affecting the rights and
remedies of creditors generally and of general principles of equity.
5. The Debentures have been duly authorized, executed and delivered by
the Company, are entitled to the benefits of the Indenture and are legal, valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other laws affecting the rights and
remedies of creditors generally and of general principles of equity.
6. To the best of our knowledge, neither the Company, the Trust, nor
any Significant Subsidiaries of the Company is in breach or violation of, or
default under, with or without notice or lapse of time or both, its Articles of
Incorporation or Charter, By-Laws or other governing documents (including
without limitation, the Trust Agreement). The execution, delivery and
performance of the Placement Agreement and the Operative Documents and the
consummation of the transactions contemplated by the Placement Agreement and the
Operative Documents do not and will not (i) result in the creation or imposition
of any material lien, claim, charge, encumbrance or restriction upon any
B-1-2
property or assets of the Company or its Significant Subsidiaries, or (ii)
conflict with, 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 (A) the Articles of Incorporation or
Charter, By-Laws or other governing documents of the Company or its Significant
Subsidiaries, or (B) to the best of our knowledge, any material contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease,
franchise, license or any other agreement or instrument to which the Company or
its Significant Subsidiaries is a party or by which any of them or any of their
respective properties may be bound or (C) any order, decree, judgment,
franchise, license, permit, rule or regulation of any court, arbitrator,
government, or governmental agency or instrumentality, domestic or foreign,
known to us having jurisdiction over the Company or its Significant Subsidiaries
or any of their respective properties which, in the case of each of (i) or (ii)
above, is material to the Company and its Significant Subsidiaries on a
consolidated basis.
7. Except for filings, registrations or qualifications that may be
required by applicable securities laws, no authorization, approval, consent or
order of, or filing, registration or qualification with, any person (including,
without limitation, any court, governmental body or authority) is required under
the laws of the State of [STATE WHERE COMPANY'S PRINCIPAL BUSINESS IS LOCATED]
in connection with the transactions contemplated by the Placement Agreement and
the Operative Documents in connection with the offer and sale of the Capital
Securities as contemplated by the Placement Agreement and the Operative
Documents.
8. To the best of our knowledge (i) no action, suit or proceeding at
law or in equity is pending or threatened to which the Offerors or their
Significant Subsidiaries are or may be a party, and (ii) no action, suit or
proceeding is pending or threatened against or affecting the Offerors or their
Significant Subsidiaries or any of their properties, before or by any court or
governmental official, commission, board or other administrative agency,
authority or body, or any arbitrator, wherein an unfavorable decision, ruling or
finding could reasonably be expected to have a material adverse effect on the
consummation of the transactions contemplated by the Placement Agreement and the
Operative Documents or the issuance and sale of the Capital Securities as
contemplated therein or the condition (financial or otherwise), earnings,
affairs, business, or results of operations of the Offerors and their
Significant Subsidiaries on a consolidated basis.
9. Assuming the truth and accuracy of the representations and
warranties of the Placement Agents in the Placement Agreement and the Purchaser
in the Subscription Agreement, it is not necessary in connection with the
offering, sale and delivery of the Capital Securities, the Debentures and the
Guarantee Agreement (or the Guarantee) to register the same under the Securities
Act of 1933, as amended, under the circumstances contemplated in the Placement
Agreement and the Subscription Agreement.
10. Neither the Company nor the Trust is or after giving effect to the
offering and sale of the Capital Securities and the consummation of the
transactions described in the Placement Agreement 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, without
regard to Section 3(c) of such Act.
The opinion expressed in the first two sentences of numbered paragraph
1 of this Opinion Letter is based solely upon certain certificates and
confirmations issued by the applicable governmental officer or authority with
respect to each of the Company and the Significant Subsidiaries.
B-1-3
With respect to the foregoing opinions, since no member of this firm is
actively engaged in the practice of law in the States of Connecticut or New
York, we do not express any opinions as to the laws of such states and have (i)
relied, with your approval, upon the opinion of Xxxxxxx XxXxxxxxx LLP with
respect to matters of Connecticut law and (ii) assumed, with your approval and
without rendering any opinion to such effect, that the laws of the State of New
York are substantively identical to the laws of the State of [STATE WHERE
COMPANY'S PRINCIPAL BUSINESS IS LOCATED], without regard to conflict of law
provisions.
This opinion is rendered to you solely pursuant to Section 3.1(a) of
the Placement Agreement. As such, it may be relied upon by you only and may not
be used or relied upon by any other person for any purpose whatsoever without
our prior written consent.
Very truly yours,
X-0-0
XXXXXXX X-0
-----------
FORM OF CONNECTICUT COUNSEL OPINION
-----------------------------------
TO THE PARTIES LISTED
ON SCHEDULE I HERETO
Ladies and Gentlemen:
We have acted as special counsel in the State of Connecticut (the
"State") for [TRUST NAME] Statutory Trust [I] (the "Trust"), a Connecticut
statutory trust formed pursuant to the Amended and Restated Declaration of Trust
(the "Trust Agreement") dated as of the date hereof, among [COMPANY NAME], a
[STATE] corporation (the "Sponsor"), State Street Bank and Trust Company of
Connecticut, National Association, a national banking association ("State
Street"), in its capacity as Institutional Trustee (the "Institutional
Trustee"), and [NAMES OF ADMINISTRATORS], each, an individual, (each, an
"Administrator") in connection with the issuance by the Trust to the Holders (as
defined in the Trust Agreement) of its capital securities (the "Capital
Securities") pursuant to the Placement Agreement dated as of [______________],
2002 (the "Placement Agreement"), the issuance by the Trust to the Sponsor of
its Common Securities, pursuant to the Trust Agreement and the acquisition by
the Trust from the Sponsor of Debentures, issued pursuant to the Indenture dated
as of the date hereof (the "Indenture").
The Institutional Trustee has requested that we deliver this opinion to
you in accordance with Section 3.1(b) of the Placement Agreement. Capitalized
terms not otherwise defined herein shall have the meanings specified in, or
defined by reference in or set forth in the Operative Documents (as defined
below).
Our representation of the Trust has been as special counsel for the
limited purposes stated above. As to all matters of fact (including factual
conclusions and characterizations and descriptions of purpose, intention or
other state of mind), we have relied, with your permission, entirely upon (i)
the representations and warranties of the parties set forth in the Operative
Documents and (ii) certificates delivered to us by the management of State
Street, and have assumed, with your permission, without independent inquiry, the
accuracy of those representations, warranties and certificates.
We have examined the following documents to which the Trust is a party,
each of which is dated the date hereof, unless otherwise noted:
(i) the Trust Agreement;
(ii) the Placement Agreement;
(iii) the Subscription Agreement;
(iv) the Certificate of Common Securities;
(v) the Certificate of Capital Securities;
(vi) the Guarantee Agreement;
(vii) the Certificate of Trust; and
B-2-1
(viii) a Certificate of Legal Existence for the
Trust obtained from the Secretary of State
of the State of Connecticut dated
[______________] (the "Certificate of Legal
Existence").
The documents referenced in subparagraphs (i) through (vii) above are
hereinafter referred to collectively as the "Operative Documents."
We have also examined originals, or copies, certified or otherwise
identified to our satisfaction, of such other corporate and public records and
agreements, instruments, certificates and other documents as we have deemed
necessary or appropriate for the purposes of rendering this opinion. For
purposes of our opinion rendered in paragraph 1 below, with respect to the legal
existence of the Trust, our opinion relies entirely upon and is limited by the
Certificate of Legal Existence, which is attached hereto as Exhibit A.
We have assumed, with your permission, the genuineness of all
signatures (other than those on behalf of State Street, the Guarantee Trustee,
Indenture Trustee, Institutional Trustee and the Trust), the conformity of the
originals of all documents reviewed by us as copies, the authenticity and
completeness of all original documents reviewed by us in original or copy form
and the legal competence of each individual executing any document (other than
those individuals executing documents on behalf of State Street, the Guarantee
Trustee, Indenture Trustee, Institutional Trustee and the Trust).
When an opinion set forth below is given to the best of our knowledge,
or to our knowledge, or with reference to matters of which we are aware or which
are known to use, or with another similar qualification, the relevant knowledge
or awareness is limited to the actual knowledge or awareness of the individual
lawyers in the firm who have participated directly and substantively in the
specific transactions to which this opinion relates and without any special or
additional investigation undertaken for the purposes of this opinion except as
indicated herein.
For the purposes of this opinion we have made such examination of law
as we have deemed necessary. The opinions expressed below are limited solely to
the internal substantive laws of the State (as applied by courts located in the
State without regard to choice of law) and we express no opinion as to the laws
of any other jurisdiction. To the extent to which this opinion deals with
matters governed by or relating to the laws of any other state or jurisdiction,
we have assumed, with your permission, that the Operative Documents are governed
by the internal substantive laws of the State.
We express no opinion as to (i) the effect of suretyship defenses, or
defenses in the nature thereof, with respect to the obligations of any
applicable guarantor, joint obligor, surety, accommodation party, or other
secondary obligor or any provisions of the Trust Agreement with respect to
indemnification or contribution and (ii) the accuracy or completeness of any
exhibits or schedules to the Operative Documents. No opinion is given herein as
to the choice of law or internal substantive rules of law that any court or
other tribunal may apply to the transactions contemplated by the Operative
Documents. No opinion is expressed herein as to the application or effect of
federal securities laws or as to the securities or so-called "Blue Sky" laws of
Connecticut or of any other state or other jurisdiction.
Our opinion, with your permission, is further subject to the following
exceptions, qualifications and assumptions:
(a) We have assumed without any independent investigation that (i) each
party to the Operative Documents, other than State Street, the Guarantee
Trustee, Indenture Trustee,
B-2-2
Institutional Trustee and the Trust, as applicable, at all times relevant
thereto, is validly existing and in good standing under the laws of the
jurisdiction in which it is organized, and is qualified to do business and in
good standing under the laws of each jurisdiction where such qualification is
required generally or necessary in order for such party to enforce its rights
under such Operative Documents, (ii) each party to the Operative Documents, at
all times relevant thereto, had and has the full power, authority and legal
right under its certificate of incorporation, partnership agreement, by-laws,
and other governing organizational documents, and the applicable corporate,
partnership, or other enterprise legislation and other applicable laws, as the
case may be (other than State Street, the Guarantee Trustee, Indenture Trustee,
Institutional Trustee or the Trust) to execute, deliver and to perform its
obligations under, the Operative Documents, and (iii) each party to the
Operative Documents other than State Street, the Guarantee Trustee, Indenture
Trustee, Institutional Trustee or the Trust has duly executed and delivered each
of such agreements and instruments to which it is a party and that the execution
and delivery of such agreements and instruments and the transactions
contemplated thereby have been duly authorized by proper corporate or other
organizational proceedings as to each such party.
(b) We have assumed without any independent investigation (i) that the
Institutional Trustee, the Sponsor and the Administrators have received the
agreed to and stated consideration for the incurrence of the obligations
applicable to it under the Trust Agreement and each of the other Operative
Documents, (ii) that each of the Operative Documents (other than the Trust
Agreement) is a valid, binding and enforceable obligation of each party thereto
other than the Trust, State Street and the Institutional Trustee, as applicable;
and, for the purposes of this opinion letter, we herein also assume that each of
the Operative Documents (other than the Trust Agreement) constitutes a valid,
binding and enforceable obligation of State Street, the Guarantee Trustee and
the Indenture Trustee, as applicable under Connecticut and federal law (as to
which such matters we are delivering to you a separate opinion letter on this
date, which is subject to the assumptions, qualifications and limitations set
forth therein).
(c) The enforcement of any obligations of State Street, the Sponsor and
the Administrators, as applicable, under the Trust Agreement and the obligations
of the Trust under the other Operative Documents may be limited by the
receivership, conservatorship and supervisory powers of depository institution
regulatory agencies generally, as well as by bankruptcy, insolvency,
reorganization, moratorium, marshaling or other laws and rules of law affecting
the enforcement generally of creditors' rights and remedies (including such as
may deny giving effect to waivers of debtors' or guarantors' rights); and we
express no opinion as to the status under any fraudulent conveyance laws or
fraudulent transfer laws of any of the obligations of State Street, the Sponsor,
the Administrators or the Trust under any of the Operative Documents.
(d) We express no opinion as to the enforceability of any particular
provision of the Trust Agreement or the other Operative Documents relating to
remedies after default.
(e) We express no opinion as the availability of any specific or
equitable relief of any kind.
(f) The enforcement of any rights may in all cases be subject to an
implied duty of good faith and fair dealing and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding at law
or in equity).
B-2-3
(g) We express no opinion as to the enforceability of any particular
provision of any of the Operative Documents relating to (i) waivers of rights to
object to jurisdiction or venue, or consents to jurisdiction or venue, (ii)
waivers of rights to (or methods of) service of process, or rights to trial by
jury, or other rights or benefits bestowed by operation of law, (iii) waivers of
any applicable defenses, setoffs, recoupments, or counterclaims, (iv) waivers or
variations of provisions which are not capable of waiver or variation under
Sections 1-102(3), 9-501(3) or other provisions of the Uniform Commercial Code
("UCC") of the State, (v) the grant of powers of attorney to any person or
entity, or (vi) exculpation or exoneration clauses, indemnity clauses, and
clauses relating to releases or waivers of unmatured claims or rights.
(h) We express no opinion as to the effect of events occurring,
circumstances arising, or changes of law becoming effective or occurring, after
the date hereof on the matters addressed in this opinion letter, and we assume
no responsibility to inform you of additional or changed facts, or changes in
law, of which we may become aware.
(i) We express no opinion as to any requirement that any party to the
Operative Documents (or any other persons or entities purportedly entitled to
the benefits thereof) qualify or register to do business in any jurisdiction in
order to be able to enforce its rights thereunder or obtain the benefits
thereof.
Based upon the foregoing and subject to the limitations and
qualifications set forth herein, we are of the opinion that:
1. The Trust has been duly formed and is validly existing as a statutory
trust under the Connecticut Statutory Trust Act, Chapter 615 of Title 34 of the
Connecticut General Statutes, Section 500, et seq. (the "Act").
2. The Trust Agreement constitutes a valid and binding obligation of State
Street and the Institutional Trustee enforceable against State Street and the
Institutional Trustee in accordance with the terms thereof.
3. The Trust Agreement constitutes a valid and binding obligation of the
Sponsor and the Administrators, enforceable against the Sponsor and the
Administrators in accordance with its terms.
4. The Trust has the requisite trust power and authority to (a) execute and
deliver, and to perform its obligations under, the Operative Documents, and (b)
perform its obligations under such Operative Documents.
5. Each of the Operative Documents to which the Trust is a party
constitutes a valid and binding obligation of the Trust, enforceable against the
Trust in accordance with the terms thereof.
6. The Capital Securities have been duly authorized by the Trust under the
Trust Agreement, and the Capital Securities, when duly executed and delivered to
the Holders in accordance with the Trust Agreement, the Placement Agreement and
the Subscription Agreement, will be validly issued, fully paid and nonassessable
and will evidence undivided beneficial interests in the assets of the Trust and
will be entitled to the benefits of the Trust Agreement.
7. The Common Securities have been duly authorized by the Trust Agreement,
and the Common Securities, when duly executed and delivered to the Company in
accordance with the Trust
B-2-4
Agreement, the Placement Agreement and the Subscription Agreement and delivered
and paid for in accordance therewith, will be validly issued, fully paid and
nonassessable (subject to Section 9.1(b) of the Trust Agreement which provides
that the Holders of Common Securities are liable for debts and obligations of
the Trust to the extent such debts and obligations are not satisfied out of the
Trust's assets) and will evidence undivided beneficial interests in the assets
of the Trust and will be entitled to the benefits of the Trust Agreement.
8. Neither the execution, delivery or performance by the Trust of the
Operative Documents, the consummation by the Trust of the transactions
contemplated thereby, nor compliance by the Trust with any of the terms and
provisions thereof, (a) violates the Trust Agreement, or, to the best of our
knowledge, contravenes or will contravene any provision of, or constitutes a
default under, or results in any breach of, or results in the creation of any
lien (other than as permitted under the Operative Documents) upon property of
the Trust under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement, license or other
agreement or instrument, in each case known to us, to which it is a party or by
which it is bound or (b) violates any applicable Connecticut law governing the
Trust, or, to the best of our knowledge, any judgment or order of any court or
other tribunal, in each case known to us, applicable to or binding on it.
9. No consent, approval, order or authorization of, giving of notice to, or
registration with, or taking of any other action in respect of, any Connecticut
governmental authority regulating the Trust is required for the execution,
delivery, validity or performance of, or the carrying out by, the Trust of any
of the transactions contemplated by the Operative Documents, other than any such
consent, approval, order, authorization, registration, notice or action as has
been duly obtained, given or taken.
10. The Holders, as the beneficial holders of the Capital Securities, will
be entitled to the same limitation of personal liability extended to
shareholders of domestic corporations organized under the laws of the State.
11. Under the Trust Agreement, the issuance of the Capital Securities is
not subject to preemptive rights.
12. Assuming that the Trust will not be taxable as a corporation for
federal income tax purposes, but rather will be classified for such purposes as
a grantor trust, the Trust will not be subject to any tax, fee or other
government charge under the laws of the State of Connecticut or any political
subdivision thereof.
This opinion is rendered solely for the benefit of those institutions
listed on Schedule I hereto and their successors and assigns in connection with
the transactions contemplated by the Operative Documents and may not be used or
relied upon by any other person or for any other purpose.
Very truly yours,
B-2-5
SCHEDULE I
----------
State Street Bank and Trust Company of Connecticut,
National Association
State Street Bank and Trust Company
FTN Financial Capital Markets
Xxxxx, Xxxxxxxx & Xxxxx, Inc.
I-Preferred Term Securities I, Ltd.
I-Preferred Term Securities I, Inc.
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
[COMPANY NAME]
[NAME OF COUNSEL]
EXHIBIT A TO EXHIBIT B-2
-------------------------
CERTIFICATE OF LEGAL EXISTENCE
------------------------------
See attached
EXHIBIT B-3
-----------
FORM OF TAX COUNSEL OPINION
---------------------------
[Date], 2002
[COMPANY NAME]
[ADDRESS]
[TRUST NAME] Statutory Trust [I]
c/o [COMPANY NAME]
[ADDRESS]
FTN Financial Capital Markets
000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Xxxxx, Xxxxxxxx & Xxxxx, Inc.
000 0xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
We are acting as special United States tax counsel to [COMPANY NAME], a
corporation organized and existing under the laws of [STATE] (the "Company"),
and to [TRUST] Statutory Trust [I], a statutory trust created under the laws of
Connecticut (the "Trust"), in connection with the proposed issuance of (i)
Floating Rate Capital Securities, liquidation amount $1,000.00 per Capital
Security (the "Capital Securities") of the Trust, pursuant to the terms of the
Amended and Restated Declaration of Trust dated as of the date hereof by and
among the Company, State Street Bank and Trust Company of Connecticut, National
Association, as institutional trustee, and [ADMINISTRATORS], as Administrators
(the "Trust Agreement"), (ii) Floating Rate Junior Subordinated Deferrable
Interest Debentures (the "Corresponding Debentures") of the Company issued
pursuant to the terms of an Indenture dated as of the date hereof from the
Company to State Street Bank and Trust Company of Connecticut, National
Association, as trustee (the "Indenture"), which Corresponding Debentures are to
be sold by the Company to the Trust, and (iii) the Guarantee Agreement of the
Company with respect to the Capital Securities dated as of the date hereof (the
"Guarantee") between the Company and State Street Bank and Trust Company of
Connecticut, National Association, as guarantee trustee. The Capital Securities
and the Corresponding Debentures are to be issued as contemplated by the
Offering Circular (the "Offering Circular") dated [_______], 2002 prepared by
I-Preferred Term Securities I, Ltd., an entity formed under the Companies Law of
the Cayman Islands, and I-Preferred Term Securities I, Inc., a Delaware
corporation.
In formulating our opinions, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of documents, corporate
records and other instruments as we have deemed necessary or appropriate for
purposes of this opinion including (i) the Offering Circular, (ii) the
Indenture, (iii) the form of the Corresponding Debentures attached as an exhibit
to the Indenture, (iv) the Trust
B-3-1
Agreement, (v) the Guarantee, and (vi) the form of Capital Securities
Certificate attached as an exhibit to the Trust Agreement (collectively the
"Documents"). Furthermore, we have relied upon certain representations made by
the Company and upon the opinion of Xxxxxxx XxXxxxxxx LLP as to certain matters
of Connecticut law.
In such examination, we have assumed the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified photostatic copies, the authenticity of
the originals of such latter documents, the genuineness of all signatures and
the correctness of all representations made therein. We have further assumed
that there are no agreements or understandings contemplated therein other than
those contained in the Documents.
In rendering our opinions, we have assumed that the transactions
described in or contemplated by the Documents have been or will be carried out
strictly in accordance with the Documents, and that such Documents accurately
reflect the material facts of such transactions. Any variance in the facts may
result in United States federal income tax consequences that differ from those
reflected in the opinions set forth herein. Our opinion is also based on the
Internal Revenue Code of 1986, as amended, (the "Code"), Treasury regulations,
administrative rulings, judicial decisions, and other applicable authorities.
The statutory provisions, regulations and interpretations on which our opinion
is based are subject to change, possibly retroactively. In addition, there can
be no assurance that the Internal Revenue Service will not take positions
contrary to those stated in our opinion.
Subject to the foregoing, under current law and based upon the facts,
assumptions and qualifications contained herein, it is our opinion that:
(1) The Corresponding Debentures will be classified as indebtedness of the
Company for United States federal income tax purposes.
(2) The Trust will be characterized as a grantor trust and not as an
association taxable as a corporation for United States federal income
tax purposes.
The opinions we express herein are limited solely to matters governed
by the federal income tax laws of the United States. Our opinion is provided
solely to you as a legal opinion only, and not as a guaranty or warranty, and is
limited to the specific transactions, documents, and matters described above. No
opinion may be implied or inferred beyond that which is expressly stated in this
letter.
We express no opinion with respect to any matter not specifically
addressed by the foregoing opinions, including state or local tax consequences,
or any federal, state, or local issue not specifically referred to and discussed
above including, without limitation, the effect on the matters covered by this
opinion of the laws of any other jurisdiction.
We are furnishing this opinion to you solely for your benefit in
connection with the issuance of the Capital Securities and the Corresponding
Debentures. Notwithstanding the foregoing, copies of this opinion may be
provided for the benefit of [RATING AGENCY]. This opinion is not to be used,
circulated quoted or otherwise referred to for any other purpose or by any other
person without our express written consent. We disclaim any obligation to update
this opinion for events occurring or coming to our attention after the date
hereof.
Very truly yours,
B-3-2
[LETTERHEAD OF INSURANCE COMPANY]
[Date], 0000
XxXxxxx, Xxxx, Xxxxxx & XxxXxx, L.L.P.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx A.N. Xxxx
Re: Representations Concerning the Issuance of Floating Rate Junior
Subordinated Deferrable Interest Debentures (the "Corresponding
Debentures") to [TRUST] Statutory Trust [I] (the "Trust") and Sale
of Trust Securities (the "Trust Securities") of the Trust
Dear Sirs:
In accordance with your request, [COMPANY NAME] (the "Company") hereby
makes the following representations in connection with the preparation of your
opinion letter as to the United States federal income tax consequences of the
issuance by the Company of the Corresponding Debentures to the Trust and the
sale of the Trust Securities.
The Company hereby represents that:
(1) The sole assets of the Trust will be the Corresponding Debentures, any
interest paid on the Corresponding Debentures to the extent not
distributed, proceeds of the Corresponding Debentures, or any of the
foregoing.
(2) The Company intends to use the net proceeds from the sale of the
Corresponding Debentures for general corporate purposes.
(3) The Trust was not formed to conduct any trade or business and is not
authorized to conduct any trade or business. The Trust exists for the
exclusive purposes of (i) issuing and selling the Trust Securities,
(ii) using the proceeds from the sale of Trust Securities to acquire
the Corresponding Debentures, and (iii) engaging only in activities
necessary or incidental thereto.
(4) The Trust was formed to facilitate direct investment in the assets of
the Trust, and the existence of multiple classes of ownership is
incidental to that purpose. There is no intent to provide holders of
such interests in the Trust with diverse interests in the assets of
the Trust.
(5) The Company intends to create a debtor-creditor relationship between
the Company, as debtor, and the Trust, as a creditor, upon the
issuance and sale of the Corresponding Debentures to the Trust by the
Company. The Company will (i) record and at all times continue to
reflect the Corresponding Debentures as indebtedness on its separate
books and records for financial accounting purposes, and (ii) treat
the Corresponding Debentures as indebtedness for all United States
federal, state and local income tax purposes.
B-3-3
(6) During each year, the Trust's income will consist solely of payments
made by the Company with respect to the Corresponding Debentures. Such
payments will not be derived from the active conduct of a financial
business by the Trust. Both the Company's obligation to make such
payments and the measurement of the amounts payable by the Company are
defined by the terms of the Corresponding Debentures. Neither the
Company's obligation to make such payments nor the measurement of the
amounts payable by the Company is dependent on income or profits of
the Company or any affiliate of the Company.
(7) The Company has reviewed projections of earnings, cash flow, capital
and surplus and other relevant financial and economic data relating to
the Company and its affiliates. Based on the current and estimated net
cash flow and the projections of earnings, cash flow, capital and
surplus of the Company and its affiliates, the Company believes its
net cash flow will be in excess of the amount of principal and
interest required to be paid in accordance with the terms of the
Corresponding Debentures and the Company expects that it will be able
to make, and will make, timely payment of principal and interest in
accordance with the terms of the Corresponding Debentures with
available capital or accumulated net cash flow.
(8) The principal insurance operating subsidiary of the Company has
received either a financial strength rating of at least B++ from A.M.
Best Company, Inc., or an investment grade financial strength rating
from either Standard & Poor's Ratings Services, a division of The
XxXxxx-Xxxx Companies, Inc. or Fitch Ratings.
(9) The terms and conditions of the Corresponding Debentures, including
the interest rate, were determined on an arm's length basis.
(10) The Company presently has no intention to defer interest payments on
the Corresponding Debentures, and it considers the likelihood of such
a deferral to be remote because, if it were to exercise its right to
defer payments of interest with respect to the Corresponding
Debentures, it would not be permitted to declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any capital stock of the Company
or any affiliate of the Company (other than payments of dividends or
distributions to the Company) or make any payment of principal of or
interest or premium, if any, on or repay, repurchase, or redeem any
debt securities of the Company or any affiliate of the Company that
rank pari passu in all respects with or junior in interest to the
Corresponding Debentures, in each case subject to limited exceptions
stated in Section 2.11 of the Indenture to be entered into in
connection with the issuance of the Corresponding Debentures.
(11) Immediately after the issuance of the Corresponding Debentures, the
debt-to-equity ratio of the Company (as determined for financial
accounting purposes) will be no higher than three to one (3 : 1). The
Company has no plan or intention to issue debt that would cause such
ratio to exceed three to one (3 : 1). For purposes of this paragraph
11, (i) the Corresponding Debentures will be treated as debt and
payments thereon will be treated as interest, (ii) other debt (as
determined for financial accounting purposes) shall include both
short-term and long-term indebtedness of the Company, and (iii) equity
(as determined for financial accounting purposes) shall include
capital stock, preferred stock, if any, paid in surplus and retained
earnings of the Company.
(12) To the best of our knowledge, the Company's subsidiaries are currently
in compliance with all applicable federal, state, and local capital
requirements, except to the extent that failure to comply with any
such requirements would not have a material adverse effect on the
Company and its subsidiaries.
B-3-4
(13) For purposes hereof, you may rely on the representations made by the
Company in Sections 5.16 and 5.17 of the Placement Agreement dated as
of ____, 2002, by and among FTN Financial Capital Markets, Xxxxx,
Xxxxxxxx & Xxxxx, Inc., the Trust and the Company.
(14) The Company will not issue any class of common stock or preferred
stock senior in rights (such as payment rights and liquidation
preference) to the Corresponding Debentures during their term.
(15) The Internal Revenue Service has not challenged the interest deduction
on any class of the Company's subordinated debt in the last ten (10)
years on the basis that such debt constitutes equity for federal
income tax purposes.
The above representations are accurate as of the date hereof and will
continue to be accurate through the issuance of the Trust Securities, unless you
are otherwise notified by us in writing. The undersigned understands that you
will rely on the foregoing in connection with rendering certain legal opinions,
and possesses the authority to make the representations set forth in this letter
on behalf of the Company.
Very truly yours,
[INSURANCE COMPANY NAME]
By:____________________________
Name:
Title:
B-3-5
EXHIBIT C
---------
SIGNIFICANT SUBSIDIARIES
------------------------
Penn-America Insurance Company (Pennsylvania)
Penn-Star Insurance Company (Pennsylvania)
EXHIBIT D
---------
FORM OF QUARTERLY REPORT
------------------------
I-Preferred Term Securities I, Ltd.
x/x Xxx Xxxx xx Xxx Xxxx
000 Xxxxxxx Xxxxxx, Xxxxx 0-Xxxx
CDO Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx
CDO Relationship Manager
PLEASE COMPLETE FOR THE PRINCIPAL INSURANCE OPERATING SUBSIDIARY
As of Year End _______, 20__
NAIC Risk Based Capital Ratio
(authorized control level) ----------%
As of [March 31, June 30,
September 30, or December 31,] 20___
Total Policyholders' Surplus $----------
Consolidated Debt to Total
Policyholders' Surplus ----------%
Total Assets $----------
NAIC Class 1 & 2 Rated Investments to
Total Fixed Income Investments ----------%
NAIC Class 1 & 2 Rated Investments
to Total Investments ----------%
Return on Policyholders' Surplus ----------%
For Property & Casualty Companies
Expense Ratio ----------%
Loss and LAE Ratio ----------%
Combined Ratio ----------%
Net Premiums Written (annualized) to Policyholders' Surplus ----------%
----------------------------------------------------------- ----------------------------------------------------------
NAIC Risk Based Capital Ratio-P&C (Total Adjusted Capital/Authorized Control Level
Risk-Based Capita/)/2
----------------------------------------------------------- ----------------------------------------------------------
NAIC Risk Based Capital Ratio-Life ((Total Adjusted Capital-Asset Valuation
Reserve)/Authorized Control Level Risk-Based Capita/)/2
----------------------------------------------------------- ----------------------------------------------------------
Total Capital and Surplus-Life Common Capital Stock + Preferred Capital
Stock + Aggregate Write-Ins for other than special surplus funds +
Surplus Notes +Gross Paid-In and Contributed Surplus + Aggregate
Write-Ins for Special Surplus Funds + Unassigned Funds (Surplus) -
Treasury Stock
----------------------------------------------------------- ----------------------------------------------------------
Total Capital and Surplus-P&C Aggregate Write-Ins for Special Surplus
Funds + Common Capital Stock + Preferred Capital Stock + Aggregate
Write-Ins for other than special surplus funds + Surplus Notes +Gross
Paid-In and Contributed Surplus + Unassigned Funds (Surplus) - Treasury
Stock
----------------------------------------------------------- ----------------------------------------------------------
Total Class 1 & 2 Rated Investments to Total Fixed Income (Total Class 1 + Total Class 2 Rated Investments)/Total
Investments Fixed Income Investments
----------------------------------------------------------- ----------------------------------------------------------
Total Class 1 & 2 Rated Investments to Total Investments (Total Class 1 + Total Class 2 Rated Investments)/Total
Investments
----------------------------------------------------------- ----------------------------------------------------------
Total Assets Total Assets
----------------------------------------------------------- ----------------------------------------------------------
Return on Policyholders' Surplus Net Income/Policyholders' Surplus
----------------------------------------------------------- ----------------------------------------------------------
Expense Ratio Other Underwriting Expenses Incurred/Net premiums Earned
----------------------------------------------------------- ----------------------------------------------------------
Loss and LAE Ratio (Losses Incurred + Loss Expenses Incurred)/Net Premiums
Earned
----------------------------------------------------------- ----------------------------------------------------------
Combined Ratio Expense Ratio + Loss and LAE Ratio
----------------------------------------------------------- ----------------------------------------------------------
Net Premiums Written (annualized) to Policyholders' Net Premiums Written/Policyholders' Surplus
Surplus
----------------------------------------------------------- ----------------------------------------------------------
