INSURANCE FINANCIAL RATINGS AND IMSA CERTIFICATION
The Company's principal insurance subsidiaries are rated by various rating
agencies. Additional information regarding the rating processes and ratings
definitions for each agency is included in the Company's Annual Report on Form
10-K for the year ended December 31, 2001 in "Business -- Insurance Financial
Ratings and IMSA Certification." Each of the ratings below is unchanged from
December 31, 2001 with the exception of A.M. Best's rating for the Company's
property and casualty subsidiaries and Moody's outlook for the Company's
financial strength ratings.
On May 9, 2002 following its annual review of Horace Mann's ratings, A.M.
Best Company, Inc. ("A.M. Best") announced that it was affirming the "A
(Excellent)" financial strength rating of the Company's principal life insurance
subsidiary. A.M. Best downgraded the financial strength ratings of the Company's
property and casualty subsidiaries one notch from "A+ (Superior)" to "A
(Excellent)" reflecting capitalization of these subsidiaries being below A.M.
Best's standard for the Superior rating and the impact on earnings in 2000 and
2001 of prior years' reserve strengthening. A.M. Best has identified the outlook
for the ratings as "Stable."
[SEAL]
43
As affirmed on May 2, 2002, each of HMEC's principal insurance subsidiaries
is rated "A+ (Strong)" for financial strength by Standard & Poor's Corporation
("S&P") with a ratings outlook of "Stable", with the exception of Horace Mann
Lloyds which is not yet rated by S&P.
Each of HMEC's principal insurance subsidiaries is rated "AA- (Very
Strong)" for financial strength by Fitch, Inc. ("Fitch") with a rating outlook
of "Stable".
Moody's Investors Service, Inc. ("Moody's") has assigned a financial
strength rating of "A2 (Good)" to each of HMEC's principal subsidiaries, with
the exception of Horace Mann Lloyds which is not yet rated by Moody's. On July
25, 2002, Moody's affirmed these ratings, but revised the outlook for the
ratings to "Negative" from "Stable." This change in outlook was the result of
the Company's second quarter 2002 investment losses stemming from the impact on
the financial markets from the announced SEC investigation into the accounting
practices of WorldCom, Inc. Moody's announcement indicated that material adverse
deviations from the Company's expected level of capital growth and earnings
could trigger a subsequent ratings downgrade.
As of 2001, Horace Mann is one of only two insurance groups that have been
named to The Ward's Financial Group's ("Wards") Top 50 for both its property and
casualty and life subsidiaries in each of the last eight years. Identified
annually, the Top 50 represent benchmark groups of 50 life insurance companies
and 50 property and casualty insurance companies that, over the prior five
years, have in Ward's opinion excelled at balancing safety, consistency and
performance.
In July 2001, Horace Mann Life Insurance Company, the Company's principal
life insurance subsidiary, earned membership in the Insurance Marketplace
Standards Association ("IMSA"). HMLIC is an IMSA member for three years, after
which it must demonstrate continuous improvement and repeat the self- and
independent assessment process to retain its membership. As of June 30, 2002,
fewer than 250 companies had earned IMSA membership.
MARKET VALUE RISK
Market value risk is the risk that the Company's invested assets will
decrease in value. This decrease in value may be due to a change in (1) the
yields realized on the Company's assets and prevailing market yields for similar
assets, (2) an unfavorable change in the liquidity of the investment, (3) an
unfavorable change in the financial prospects of the issuer of the investment,
or (4) a downgrade in the credit rating of the issuer of the investment. See
also "Results of Operations -- Realized Investment Gains and Losses."
Significant changes in interest rates expose the Company to the risk of
experiencing losses or earning a reduced level of income based on the difference
between the interest rates earned on the Company's investments and the credited
interest rates on the Company's insurance liabilities.
The Company manages its market value risk by coordinating the projected
cash outflows of assets with the projected cash outflows of liabilities. For all
its assets and liabilities, the Company seeks to maintain reasonable durations,
consistent with the maximization of income without sacrificing investment
quality while providing for liquidity and diversification. The investment risk
associated with variable annuity products and the underlying mutual funds is
assumed by those contractholders, and not by the Company.
[SEAL]
44
A more detailed description of the Company's exposure to market value risks
and the management of those risks is presented in the Company's 2001 Form 10-K
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Market Risk."
RECENT ACCOUNTING CHANGES
SFAS No. 143
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for
Asset Retirement Obligations," effective for fiscal years beginning after June
15, 2002. The accounting practices in this statement apply to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and (or) the normal operation of a
long-lived asset. This statement will not have a material impact on the Company
because it does not own a significant amount of property and equipment.
SFAS No. 145
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections," effective for fiscal years beginning after May 15, 2002. Under
SFAS No. 4, all gains and losses from the extinguishment of debt, exclusive of
an exception identified in SFAS No. 64, were required to be aggregated and, if
material, classified as an extraordinary item, net of related income tax effect.
With adoption of SFAS No. 145, gains and losses from extinguishment of debt
should be classified as extraordinary only if they meet the criteria of
Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations
- Reporting the Effects of Disposal of a Segment of a Business, Extraordinary,
Unusual and Infrequently Occurring Events and Transactions." Applying the
provisions of Opinion No. 30 will distinguish transactions that are part of an
entity's recurring operations from those that are unusual or infrequent or that
meet the criteria for classification as an extraordinary item. In the six months
ended June 30, 2002, the Company recorded a charge for the extinguishment of
debt and did not report this charge as an extraordinary item.
SFAS No. 44 was not applicable to the Company. Although the evaluation of
the impact of the remaining provisions of SFAS No. 145 is not yet complete, at
this time management anticipates that the impact will not be material.
SFAS No. 146
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," effective for exit or disposal
activities that are initiated after December 31, 2002. This statement nullifies
Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." The principal difference
between SFAS No. 146 and EITF No. 94-3 relates to the requirements for
recognition of a liability for a cost associated with an exit or disposal
activity. SFAS No. 146 requires that such liability be recognized when the
liability is incurred. Under EITF No. 94-3, a liability for defined exit costs
was recognized at the date of an entity's commitment to an exit plan. Management
anticipates that the impact of this statement will not be material.
[SEAL]
45
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by Item 305 of Regulation S-K is contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in this Form 10-Q.
PART II: OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on May 14, 2002.
The results of the matters submitted to a vote of security holders are shown in
the table below.
Votes Votes
For Against Abstentions
----------- --------- ------------
Votes representing 36,788,830 shares of
Common Stock were represented and cast
regarding Proposal 1.
Election of the following nominees to hold
the office of Director until the next Annual
Meeting of Shareholders and until their
respective successors have been duly
elected and qualified:
William W. Abbott 35,923,225 865,605 -
Mary H. Futrell 28,051,523 8,737,307 -
Donald E. Kiernan 34,872,475 1,916,355 -
Louis G. Lower II 35,924,425 864,405 -
Joseph J. Melone 29,068,830 7,720,000 -
Jeffrey L. Morby 28,112,853 8,675,977 -
Shaun F. O'Malley 36,064,675 724,155 -
Charles A. Parker 36,064,675 724,155 -
William J. Schoen 36,064,675 724,155 -
Votes representing 33,941,411 shares of
Common Stock were represented and cast
regarding Proposal 2.
Approval of the Company's 2002 Incentive
Compensation Plan. 28,218,350 4,690,942 582,119
[SEAL]
46
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
No. Description
(a) The following items are filed as Exhibits. Management contracts
and compensatory plans are indicated by an asterisk (*).
(4) Instruments defining the rights of security holders,
including indentures:
4.1 Indenture dated as of May 14, 2002, between HMEC and
JPMorgan Chase Bank as trustee, with regard to HMEC's
1.425% Senior Convertible Notes Due 2032
(10) Material contracts:
10.1 Credit Agreement dated as of May 29, 2002 (the "Bank
Credit Facility") among HMEC, certain financial
institutions named therein and Bank of America, N.A.,
as administrative agent (the "Agent").
10.2* Horace Mann Educators Corporation 2002 Incentive
Compensation Plan.
10.2(a)* Specimen Employee Stock Option Agreement under the
Horace Mann Educators Corporation 2002 Incentive
Compensation Plan.
10.2(b) Specimen Regular Employee Stock Option Agreement
under the Horace Mann Educators Corporation 2002
Incentive Compensation Plan.
10.2(c)* Specimen Director Stock Option Agreement under the
Horace Mann Educators Corporation 2002 Incentive
Compensation Plan.
(11) Statement re computation of per share earnings.
(15) KPMG LLP letter regarding unaudited interim financial
information.
(99) Additional exhibits:
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, Louis G. Lower II, Chief Executive
Officer of Horace Mann Educators Corporation.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, Peter H. Heckman, Chief Financial
Officer of Horace Mann Educators Corporation.
(b) No reports on Form 8-K were filed by the Company during the second
quarter of 2002.
[SEAL]
47
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HORACE MANN EDUCATORS CORPORATION
(Registrant)
Date August 13, 2002 /s/ Louis G. Lower II
--------------- -----------------------------------------
Louis G. Lower II
President and Chief Executive Officer
Date August 13, 2002 /s/ Peter H. Heckman
--------------- -----------------------------------------
Peter H. Heckman
Executive Vice President
and Chief Financial Officer
Date August 13, 2002 /s/ Bret A. Conklin
--------------- -----------------------------------------
Bret A. Conklin
Senior Vice President
and Controller
[SEAL]
* Note: This Cross Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
TABLE OF CONTENTS*
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions............................................................... 1
SECTION 1.02 Other Definitions......................................................... 7
SECTION 1.03 Incorporation by Reference of Trust Indenture Act......................... 8
SECTION 1.04 Rules of Construction..................................................... 8
SECTION 1.05 Acts of Holders........................................................... 9
ARTICLE 2
THE SECURITIES
SECTION 2.01 Form and Dating........................................................... 10
SECTION 2.02 Execution and Authentication.............................................. 12
SECTION 2.03 Registrar, Paying Agent, Conversion Agent and Bid Calculation Agent....... 12
SECTION 2.04 Paying Agent to Hold Money and Securities in Trust........................ 13
SECTION 2.05 Securityholder Lists...................................................... 13
SECTION 2.06 Transfer and Exchange..................................................... 13
SECTION 2.07 Replacement Securities.................................................... 15
SECTION 2.08 Outstanding Securities; Determinations of Holders' Action................. 16
SECTION 2.09 Temporary Securities...................................................... 16
SECTION 2.10 Cancellation.............................................................. 17
SECTION 2.11 Persons Deemed Owners..................................................... 17
SECTION 2.12 Global Securities......................................................... 17
SECTION 2.13 CUSIP Numbers............................................................. 22
ARTICLE 3
REDEMPTION AND PURCHASES
SECTION 3.01 Right to Redeem; Notices to Trustee....................................... 22
SECTION 3.02 Selection of Securities to Be Redeemed.................................... 22
SECTION 3.03 Notice of Redemption...................................................... 23
SECTION 3.04 Effect of Notice of Redemption............................................ 24
SECTION 3.05 Deposit of Redemption Price............................................... 24
SECTION 3.06 Securities Redeemed in Part............................................... 24
SECTION 3.07 Conversion Arrangement on Call for Redemption............................. 24
SECTION 3.08 Purchase of Securities at Option of the Holder............................ 25
SECTION 3.09 Purchase of Securities at Option of the Holder upon Change in Control..... 31
* Note: This Table of Contents shall not, for any purpose, be deemed to be
part of the Indenture.
i
SECTION 3.10 Effect of Purchase Notice or Change in Control Purchase Notice........... 34
SECTION 3.11 Deposit of Purchase Price or Change in Control Purchase Price............ 35
SECTION 3.12 Securities Purchased in Part............................................. 36
SECTION 3.13 Repayment to the Company................................................. 36
ARTICLE 4
COVENANTS
SECTION 4.01 Payment of Securities.................................................... 36
SECTION 4.02 SEC and Other Reports.................................................... 37
SECTION 4.03 Compliance Certificate................................................... 37
SECTION 4.04 Further Instruments and Acts............................................. 37
SECTION 4.05 Maintenance of Office or Agency.......................................... 37
SECTION 4.06 Delivery of Certain Information.......................................... 38
SECTION 4.07 Covenant to Comply With Securities Laws Upon Purchase of Securities...... 38
SECTION 4.08 Waiver of Compliance..................................................... 38
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01 When Company May Merge or Transfer Assets................................ 38
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default........................................................ 40
SECTION 6.02 Acceleration............................................................. 41
SECTION 6.03 Other Remedies........................................................... 42
SECTION 6.04 Waiver of Past Defaults.................................................. 42
SECTION 6.05 Control by Majority...................................................... 42
SECTION 6.06 Limitation on Suits...................................................... 42
SECTION 6.07 Rights of Holders to Receive Payment..................................... 43
SECTION 6.08 Collection Suit by Trustee............................................... 43
SECTION 6.09 Trustee May File Proofs of Claim......................................... 43
SECTION 6.10 Priorities............................................................... 44
SECTION 6.11 Undertaking for Costs.................................................... 44
SECTION 6.12 Waiver of Stay, Extension or Usury Laws.................................. 45
ARTICLE 7
TRUSTEE
SECTION 7.01 Duties of Trustee........................................................ 45
SECTION 7.02 Rights of Trustee........................................................ 46
SECTION 7.03 Individual Rights of Trustee............................................. 48
SECTION 7.04 Trustee's Disclaimer..................................................... 48
SECTION 7.05 Notice of Defaults....................................................... 48
SECTION 7.06 Reports by Trustee to Holders............................................ 48
SECTION 7.07 Compensation and Indemnity............................................... 49
ii
SECTION 7.08 Replacement of Trustee.................................................. 49
SECTION 7.09 Successor Trustee by Merger............................................. 50
SECTION 7.10 Eligibility; Disqualification........................................... 50
SECTION 7.11 Preferential Collection of Claims Against Company....................... 50
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01 Discharge of Liability on Securities.................................... 50
SECTION 8.02 Repayment to the Company................................................ 51
ARTICLE 9
AMENDMENTS
SECTION 9.01 Without Consent of Holders.............................................. 51
SECTION 9.02 With Consent of Holders................................................. 52
SECTION 9.03 Compliance with Trust Indenture Act..................................... 52
SECTION 9.04 Revocation and Effect of Consents, Waivers and Actions.................. 52
SECTION 9.05 Notation on or Exchange of Securities................................... 53
SECTION 9.06 Trustee to Sign Supplemental Indentures................................. 53
SECTION 9.07 Effect of Supplemental Indentures....................................... 53
ARTICLE 10
SPECIAL TAX EVENT CONVERSION
SECTION 10.01 Optional Conversion to Semiannual Coupon Note upon Tax Event............ 53
ARTICLE 11
CONVERSION
SECTION 11.01 Conversion Privilege.................................................... 54
SECTION 11.02 Conversion Procedure.................................................... 54
SECTION 11.03 Fractional Shares....................................................... 56
SECTION 11.04 Taxes on Conversion..................................................... 56
SECTION 11.05 Company to Provide Stock................................................ 56
SECTION 11.06 Adjustment for Change in Capital Stock.................................. 56
SECTION 11.07 Adjustment for Rights Issue............................................. 57
SECTION 11.08 Adjustment for Other Distributions...................................... 58
SECTION 11.09 When Adjustment May Be Deferred......................................... 59
SECTION 11.10 When No Adjustment Required............................................. 59
SECTION 11.11 Notice of Adjustment.................................................... 60
SECTION 11.12 Voluntary Increase...................................................... 60
SECTION 11.13 Notice of Certain Transactions.......................................... 60
SECTION 11.14 Reorganization of Company; Special Distributions........................ 60
SECTION 11.15 Company Determination Final............................................. 61
SECTION 11.16 Trustee's Adjustment Disclaimer......................................... 61
SECTION 11.17 Simultaneous Adjustments................................................ 61
SECTION 11.18 Successive Adjustments.................................................. 62
iii
SECTION 11.19 Rights Issued in Respect of Common Stock Issued Upon Conversion.......... 62
SECTION 11.20 Company's Right to Elect to Pay Cash or Common Stock..................... 62
ARTICLE 12
PAYMENT OF INTEREST
SECTION 12.01 Interest Payments........................................................ 63
SECTION 12.02 Defaulted Interest....................................................... 63
SECTION 12.03 Interest Rights Preserved................................................ 64
ARTICLE 13
CONTINGENT CASH INTEREST
SECTION 13.01 Contingent Cash Interest................................................. 64
SECTION 13.02 Payment of Contingent Cash Interest; Contingent Cash Interest Rights
Preserved............................................................. 65
SECTION 13.03 Bid Calculation Agent.................................................... 65
ARTICLE 13A
TAX MATTERS
SECTION 13A.01 Tax Treatment............................................................ 66
SECTION 13A.02 Comparable Yield and Projected Payment Schedule.......................... 66
ARTICLE 14
MISCELLANEOUS
SECTION 14.01 Trust Indenture Act Controls............................................. 67
SECTION 14.02 Notices.................................................................. 67
SECTION 14.03 Communication by Holders with Other Holders.............................. 68
SECTION 14.04 Certificate and Opinion as to Conditions Precedent....................... 68
SECTION 14.05 Statements Required in Certificate or Opinion............................ 68
SECTION 14.06 Separability Clause...................................................... 69
SECTION 14.07 Rules by Trustee, Paying Agent, Conversion Agent and Registrar........... 69
SECTION 14.08 Calculations............................................................. 69
SECTION 14.09 Legal Holidays........................................................... 69
SECTION 14.10 GOVERNING LAW............................................................ 69
SECTION 14.11 No Recourse Against Others............................................... 69
SECTION 14.12 Successors............................................................... 69
SECTION 14.13 Multiple Originals....................................................... 69
Appendix 1 Projected Payment Schedule
Exhibit A-1 Form of Face of Global Security
Exhibit A-2 Form of Certificated Security
Exhibit B-1 Transfer Certificate
iv
Exhibit B-2 Form of Letter to be Delivered by Accredited Investors
v
INDENTURE dated as of May 14, 2002 by and among HORACE MANN EDUCATORS
CORPORATION, a Delaware corporation (the "Company") and JPMORGAN CHASE BANK a
New York banking corporation (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of Senior
Convertible Notes due 2032 (collectively, the "Securities" and each,
individually, a "Security") having the terms, tenor, amount and other provisions
hereinafter set forth, and, to provide therefor, the Company has duly authorized
the execution and delivery of this Indenture.
All things necessary to make the Securities, when the Securities are
duly executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company, and to make this
Indenture a valid and binding agreement of the Company, in accordance with their
and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"144A Global Security" means a permanent Global Security in the form
of the Security attached hereto as Exhibit A-1, and that is deposited with and
registered in the name of the Depositary, representing Securities sold in
reliance on Rule 144A under the Securities Act.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct or cause the direction of the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security, in each case to the
extent applicable to such transaction and as in effect from time to time.
"Average Sale Price" means the average of the Sale Prices of the
Common Stock for the shorter of:
(a) 30 consecutive Trading Days ending on the last full Trading Day
prior to the Time of Determination with respect to the rights,
warrants or options or distribution in respect of which the Average
Sale Price is being calculated, or
(b) the period (x) commencing on the date next succeeding the first
public announcement of (i) the issuance of rights, warrants or options
or (ii) the distribution, in each case, in respect of which the
Average Sale Price is being calculated and (y) proceeding through the
last full Trading Day prior to the Time of Determination with respect
to the rights, warrants or options or distribution in respect of which
the Average Sale Price is being calculated (excluding days within such
period, if any, which are not Trading Days), or
(c) the period, if any, (x) commencing on the date next succeeding
the Ex-Dividend Time with respect to the next preceding (i) issuance
of rights, warrants or options or (ii) distribution, in each case, for
which an adjustment is required by the provisions of Section 11.06(c),
11.07 or 11.08 hereof and (y) proceeding through the last full Trading
Day prior to the Time of Determination with respect to the rights,
warrants or options or distribution in respect of which the Average
Sale Price is being calculated (excluding days within such period, if
any, which are not Trading Days).
In the event that the Ex-Dividend Time (or in the case of a
subdivision, combination or reclassification, the effective date with respect
thereto) with respect to a dividend, subdivision, combination or
reclassification to which Section 11.06(a), (b), (d) or (e) hereof applies
occurs during the period applicable for calculating "Average Sale Price"
pursuant to the definition in the preceding sentence, "Average Sale Price" shall
be calculated for such period in a manner determined by the Board of Directors
to reflect the impact of such dividend, subdivision, combination or
reclassification on the Sale Price of the Common Stock during such period.
"Bankruptcy Law" means title 11, United States Code, or any similar
Federal or state law for the relief of debtors.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of such board.
"Business Day" means each day of the year other than a Saturday or a
Sunday or other day on which banking institutions in The City of New York are
required or authorized to close.
"Capital Stock" for any corporation means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock or other equity issued
by that corporation.
"Certificated Securities" means any of the Securities that are in the
form of the Securities attached hereto as Exhibit A-2.
2
"Common Stock" shall mean the shares of Common Stock, $0.001 par value
per share, of the Company as it exists on the date of this Indenture or any
other shares of Capital Stock of the Company into which the Common Stock shall
be reclassified or changed.
"Company" means the party named as the "Company" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent such
successor or successors.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any two Officers.
"Contingent Cash Interest" shall mean such cash interest payable, as
described in Article 13 hereof.
"Corporate Trust Office" means the principal office of the Trustee at
which at any time its corporate trust business shall be administered, which
office at the date hereof is located at 450 West 33rd Street, 15th Floor, New
York, New York 10001, Attention: Institutional Trust Services, or such other
address as the Trustee may designate from time to time by notice to the Company,
or the principal corporate trust office of any successor Trustee (or such other
address as a successor Trustee may designate from time to time by notice to the
Company).
"Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
"Debt" means with respect to the Company at any date, without
duplication, obligations (other than nonrecourse obligations) for borrowed money
or evidenced by bonds, debentures, notes or similar instruments.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Ex-Dividend Time" means with respect to stockholders of the Company
entitled to receive rights, warrants or options or a distribution, the time
immediately prior to the commencement of "ex-dividend" trading for such rights,
warrants or options or distribution on the NYSE or such other national or
regional exchange or market on which the Common Stock is then listed or quoted.
"Global Securities" means any of the Securities that are in the form
of the Securities attached hereto as Exhibit A-1, and to the extent that such
Securities are required to bear the Legend required by Section 2.06 hereof, such
Securities will be in the form of a 144A Global Security.
"Holder" or "Securityholder" means a person in whose name a Security
is registered on the Registrar's books.
3
"Indenture" means this instrument, as amended or supplemented from
time to time in accordance with the terms hereof, including, if applicable, the
provisions of the TIA that are deemed to be a part hereof.
"Institutional Accredited Investor Security" means a Security in the
form of the Security attached hereto as Exhibit A-2, representing Securities
sold to Institutional Accredited Investors.
"Issue Date" of any Security means the date on which the Security was
originally issued or deemed issued as set forth on the face of the Security.
"Issue Price" of any Security means, in connection with the original
issuance of such Security, the initial issue price at which the Security is sold
as set forth on the face of the Security.
"NYSE" means the New York Stock Exchange.
"Officer" means the Chairman of the Board, the Vice Chairman, the
Chief Executive Officer, the President, any Executive Vice President, any Senior
Vice President, any Vice President, the Treasurer or the Secretary or any
Assistant Treasurer or Assistant Secretary of the Company.
"Officers' Certificate" means a written certificate containing the
information specified in Sections 14.04 and 14.05 hereof, signed in the name of
the Company by any two Officers, and delivered to the Trustee. An Officers'
Certificate given pursuant to Section 4.03 hereof shall be signed by the
principal executive financial or accounting Officer of the Company but need not
contain the information specified in Sections 14.04 and 14.05 hereof.
"Opinion of Counsel" means a written opinion containing the
information specified in Sections 14.04 and 14.05, from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of, or counsel to, the
Company or the Trustee.
"Original Issue Discount" of any Security means the difference between
the Issue Price and the Principal Amount at Maturity of the Security as set
forth on the face of the Security, which shall accrue as set forth in the form
of Security.
"person" or "Person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, or government or any agency or political
subdivision thereof.
"Principal Amount at Maturity" of a Security means the principal
amount at maturity as set forth on the face of the Security.
"Record Date" means either a Regular Record Date or a Contingent Cash
Interest Record Date.
"Redemption Date" or "redemption date" means the date specified for
redemption of the Securities in accordance with the terms of the Securities and
this Indenture.
4
"Redemption Price" or "redemption price" shall have the meaning set
forth in paragraph 6 of the Securities.
"Regular Cash Dividends" means quarterly or other periodic cash
dividends on the Common Stock as declared by the Board of Directors as part of
its cash dividend payment practices that are not designated by the Board of
Directors as extraordinary or special or other non-recurring dividends.
"Responsible Officer" means, when used with respect to the Trustee,
any officer within the corporate trust department of the Trustee, with direct
responsibility for the administration of this Indenture and also means, any
other officer to whom any corporate trust matter is referred because of such
person's knowledge of and familiarity with the particular subject.
"Restricted Security" means a Security required to bear the
restrictive legend set forth in the form of Security set forth in Exhibits A-1
and A-2 of this Indenture.
"Rule 144" means Rule 144 under the Securities Act (or any successor
rule having substantially similar provisions), as it may be amended from time to
time.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
rule having substantially similar provisions), as it may be amended from time to
time.
"Sale Price" of Capital Stock on any date means (a) the closing per
share sale price (or, if no closing sale price is reported, the average of the
bid and ask prices or, if more than one in either case, the average of the
average bid and the average ask prices) on such date as reported on the NYSE or
such other United States securities exchange on which the Capital Stock is
traded or, if the Capital Stock is not listed on a United States national or
regional securities exchange, as reported by the National Association of
Securities Dealers Automated Quotation System or by the National Quotation
Bureau Incorporated or (b) in the absence of such quotation, such price as the
Company shall reasonably determine on the basis of such quotations as most
accurately reflecting the price that a fully-informed buyer, acting on his own
accord, would pay to a fully-informed seller, acting on his own accord in an
arms-length transaction, for a share of such Capital Stock.
"SEC" means the United States Securities and Exchange Commission.
"Security" or "Securities" means any of the Company's Senior
Convertible Notes due 2032, as amended or supplemented from time to time, issued
under this Indenture.
"Securityholder" or "Holder" means a person in whose name a Security
is registered on the Registrar's books.
"Stated Maturity", when used with respect to any Security, means the
date specified in such Security as the fixed date on which an amount equal to
the Principal Amount at Maturity of such Security is due and payable.
5
"Subsidiary" means (a) a corporation, a majority of whose Capital
Stock with voting power, under ordinary circumstances, to elect directors is, at
the date of determination, directly or indirectly owned by the Company, by one
or more Subsidiaries of the Company or by the Company and one or more
Subsidiaries of the Company, (b) a partnership in which the Company or a
Subsidiary of the Company holds a majority interest in the equity capital or
profits of such partnership, or (c) any other person (other than a corporation
or a partnership) in which the Company, a Subsidiary of the Company or the
Company and one or more Subsidiaries of the Company, directly or indirectly, at
the date of determination, has (x) at least a majority ownership interest or (y)
the power to elect or direct the election of a majority of the directors or
other governing body of such person.
"Tax Event" means that the Company shall have received an opinion from
independent tax counsel experienced in such matters to the effect that, on or
after May 14, 2002, as a result of (a) any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof or
therein or (b) any amendment to, or change in, an interpretation or application
(including through litigation or a settlement involving the Company) of such
laws or regulations by any legislative body, court, governmental agency or
regulatory authority, in each case which amendment or change is enacted,
promulgated, issued or announced or which interpretation is issued or announced
or which action is taken, on or after May 14, 2002, there is more than an
insubstantial risk that accrued Original Issue Discount payable on the
Securities either (i) would not be deductible on a current accrual basis or (ii)
would not be deductible under any other method, in either case in whole or in
part, by the Company (by reason of deferral, disallowance, or otherwise) for
United States federal income tax purposes.
"TIA" means the Trust Indenture Act of 1939 as in effect on the date
of this Indenture, provided, however, that in the event the TIA is amended after
such date, TIA means, to the extent required by any such amendment, the TIA as
so amended.
"Time of Determination" means the time and date of the earlier of (a)
the determination of stockholders entitled to receive rights, warrants or
options or a distribution, in each case, to which Section 11.07 or 11.08 hereof
applies and (b) the Ex-Dividend Time.
"Trading Day" means a day during which trading in securities generally
occurs on the NYSE or, if the Common Stock is not listed on the NYSE, on the
principal other national or regional securities exchange on which the Common
Stock is then listed or, if the Common Stock is not listed on a national or
regional securities exchange, on the National Association of Securities Dealers
Automated Quotation System or, if the Common Stock is not quoted on the National
Association of Securities Dealers Automated Quotation System, on the principal
other market on which the Common Stock is then traded.
"Trustee" means the party named as the "Trustee" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent such
successor or successors.
SECTION 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, such provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04 Rules of Construction. Unless the context otherwise
requires:
(a) a defined term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with United States generally accepted
accounting principles as in effect from time to time;
(c) "or" is not exclusive;
(d) "including" means including, without limitation; and
(e) words in the singular include the plural, and words in the plural
include the singular.
8
SECTION 1.05 Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments (which may
take the form of an electronic writing or messaging or otherwise be in
accordance with customary procedures of the Depositary or the Trustee) of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing (which may be in electronic form); and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, when it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
(either of which may be in electronic form) shall be sufficient for any purpose
of this Indenture and conclusive in favor of the Trustee and the Company, if
made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution (or electronic delivery) or by a certificate of a notary public or
other officer authorized by law to take acknowledgments of deeds, certifying
that the individual signing or delivering such instrument or writing
acknowledged to such officer the execution (or electronic delivery) thereof.
When such execution is by a signer acting in a capacity other than such signer's
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of such signer's authority. The fact and date of the execution
of any such instrument or writing (electronic or otherwise), or the authority of
the Person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the register
maintained by the Registrar.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
(e) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Company may, at its option, by or pursuant to a resolution of the Board of
Directors, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
If such a record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other Act may be given before or after such record
date, but only the Holders of record at the close of business on such record
date shall be deemed to be Holders for the purposes of determining whether
Holders of the requisite proportion of outstanding Securities have authorized or
agreed or consented to such request, demand, authorization, direction, notice,
consent, waiver or other
9
Act, and for that purpose the outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture within six months after
the record date.
ARTICLE 2
THE SECURITIES
SECTION 2.01 Form and Dating. The Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibits A-1
and A-2 attached hereto, which are a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule or
usage (provided that any such notation, legend or endorsement required by usage
is in a form acceptable to the Company). The Company shall provide any such
notations, legends or endorsements to the Trustee in writing. Each Security
shall be dated the date of its authentication.
(a) 144A Global Securities. Securities offered and sold within the
United States to "qualified institutional buyers" as defined in Rule 144A
("QIBs") in reliance on Rule 144A shall be issued initially in the form of a
144A Global Security, which shall be deposited with the Trustee at its Corporate
Trust Office, as custodian for the Depositary and registered in the name of The
Depository Trust Company ("DTC") or the nominee thereof (such depositary, or any
successor thereto, and any such nominee being hereinafter referred to as the
"Depositary") duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate Principal Amount at Maturity of the 144A
Global Securities may from time to time be increased or decreased by adjustments
made on the records of the Trustee and the Depositary as hereinafter provided.
(b) Institutional Accredited Investor Securities. Except as provided
in Section 2.12(f)(i) and in this Section 2.01, 2.06 or the remainder of Section
2.12 hereof, owners of beneficial interests in Global Securities will not be
entitled to receive physical delivery of Certificated Securities. Securities
offered and sold within the United States to institutional "accredited
investors" as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities
Act ("Institutional Accredited Investors") shall be issued, if in the form of
Certificated Securities, initially in the form of an Institutional Accredited
Investor Security, duly executed by the Company and authenticated by the Trustee
as hereinafter provided.
(c) Global Securities in General. Each Global Security shall
represent such of the outstanding Securities as shall be specified therein and
each shall provide that it shall represent the aggregate Principal Amount at
Maturity of outstanding Securities from time to time endorsed thereon and that
the aggregate Principal Amount at Maturity of outstanding Securities represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges, redemptions and conversions.
Any adjustment of the aggregate Principal Amount at Maturity of a
Global Security to reflect the amount of any increase or decrease in the
Principal Amount at Maturity of outstanding Securities represented thereby shall
be made by the Trustee in accordance with
10
instructions given by the Holder thereof as required by Section 2.12 hereof and
shall be made on the records of the Trustee and the Depositary.
(d) Book-Entry Provisions. This Section 2.01(d) shall apply only to
Global Securities deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(d), authenticate and deliver initially one or more Global
Securities that (i) shall be registered in the name of the Depositary, (ii)
shall be delivered by the Trustee to the Depositary or pursuant to the
Depositary's instructions or held by the Trustee as custodian for such
Depositary and (iii) shall bear legends substantially to the following effect:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS,
IN WHOLE BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST
COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF."
(e) Certificated Securities. Securities not issued as interests in
the Global Securities will be issued in certificated form substantially in the
form of Exhibit A-2 attached hereto.
(f) U.S. Tax Legend. All Securities shall bear the following legend:
THIS NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT, FOR PURPOSES OF
SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF
1986, AS AMENDED. THE ISSUE PRICE OF THIS NOTE WAS $475.00 PER $1,000 OF
PRINCIPAL AMOUNT AT MATURITY; THE AMOUNT OF ORIGINAL ISSUE DISCOUNT,
INCLUDING CASH INTEREST PAYABLE THROUGH MAY 14, 2007 TAXABLE AS ORIGINAL
ISSUE DISCOUNT UNDER TREASURY REGULATION SECTION 1.1273-1, IS $2,378.67 PER
$1,000
11
OF PRINCIPAL AMOUNT AT MATURITY; THE ISSUE DATE IS MAY 14, 2002; AND THE
YIELD TO MATURITY FOR THE PURPOSES OF ACCRUING TAX ORIGINAL ISSUE DISCOUNT
IS 6.90% PER ANNUM, CALCULATED ON A SEMIANNUAL BOND EQUIVALENT BASIS.
SECTION 2.02 Execution and Authentication. The Securities shall be
executed on behalf of the Company by any Officer. The signature of the Officer
on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of an individual
who was at the time of the execution of the Securities the proper Officer of the
Company shall bind the Company, notwithstanding that such individual has ceased
to hold such office prior to the authentication and delivery of such Securities
or did not hold such office at the date of authentication of such Securities.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized officer of the
Trustee and such certificate upon any Security shall be conclusive evidence, and
the only evidence, that such Security has been duly authenticated and delivered
hereunder.
The Trustee shall authenticate and deliver Securities for original
issue in an aggregate Principal Amount at Maturity of up to $368,500,000 upon a
Company Order without any further action by the Company. The aggregate Principal
Amount at Maturity of Securities outstanding at any time may not exceed the
amount set forth in the foregoing sentence, except as provided in Section 2.07
hereof
The Securities shall be issued only in registered form without coupons
and only in denominations of $1,000 of Principal Amount at Maturity and any
integral multiple thereof.
SECTION 2.03 Registrar, Paying Agent, Conversion Agent and Bid
Calculation Agent. The Company shall maintain an office or agency where
Securities may be presented for registration of transfer or for exchange
("Registrar"), an office or agency where Securities may be presented for
purchase or payment ("Paying Agent") and an office or agency where Securities
may be presented for conversion ("Conversion Agent"). The Company shall also
appoint a bid calculation agent (the "Bid Calculation Agent") to act pursuant to
Article 13. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company may have one or more co-registrars, one or
more additional paying agents and one or more additional conversion agents. The
term Paying Agent includes any additional paying agent, including any named
pursuant to Section 4.05 hereof. The term Conversion Agent includes any
additional conversion agent, including any named pursuant to Section 4.05
hereof.
The Company shall enter into an appropriate agency agreement with any
Registrar or co-registrar, Paying Agent, Conversion Agent or Bid Calculation
Agent (other than the Trustee). The agreement shall implement the provisions of
this Indenture that relate to such agent. The Company shall notify the Trustee
of the name and address of any such agent. If the
12
Company fails to maintain a Registrar, Paying Agent, Conversion Agent or Bid
Calculation Agent, the Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section 7.07 hereof. The Company
or any Subsidiary or an Affiliate of either of them may act as Paying Agent,
Registrar, Conversion Agent or co-registrar. None of the Company or any
Subsidiary or any Affiliate of either of them may act as Bid Calculation Agent.
The Company initially appoints the Trustee as Registrar, Conversion
Agent, Paying Agent and Bid Calculation Agent in connection with the Securities.
SECTION 2.04 Paying Agent to Hold Money and Securities in Trust.
Except as otherwise provided herein, not later than 10:00 a.m., New York City
time, on each due date of payments in respect of any Security, the Company shall
deposit with the Paying Agent a sum of money (in immediately available funds if
deposited on the due date) or Common Stock sufficient to make such payments when
so becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money and Common Stock held by the
Paying Agent for the making of payments in respect of the Securities and shall
notify the Trustee of any default by the Company in making any such payment. At
any time during the continuance of any such default, the Paying Agent shall,
upon the written request of the Trustee, forthwith pay to the Trustee all money
and Common Stock so held in trust. If the Company, a Subsidiary or an Affiliate
of either of them acts as Paying Agent, it shall segregate the money and Common
Stock held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money and Common Stock
held by it to the Trustee and to account for any funds and Common Stock
disbursed by it. Upon doing so, the Paying Agent shall have no further liability
for the money or Common Stock.
SECTION 2.05 Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall cause to be furnished to the Trustee at least
semiannually on April 29 and October 30 a listing of Securityholders dated
within 15 days of the date on which the list is furnished and at such other
times as the Trustee may request in writing a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of
Securityholders.
SECTION 2.06 Transfer and Exchange. Subject to Section 2.12 hereof,
(a) Upon surrender for registration of transfer of any Security,
together with a written instrument of transfer satisfactory to the Registrar
duly executed by the Securityholder or such Securityholder's attorney duly
authorized in writing, at the office or agency of the Company designated as
Registrar or co-registrar pursuant to Section 2.03 hereof, the Company shall
execute, and the Trustee upon receipt of a Company Order shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denomination or denominations, of a like
aggregate Principal Amount at Maturity. The Company shall not charge a service
charge for any registration of transfer or exchange, but the Company or the
Trustee may require payment of a sum sufficient to pay all taxes, assessments or
other governmental charges that may be imposed in connection with the
registration of transfer
13
or exchange of the Securities from the Securityholder requesting such
registration of transfer or exchange.
At the option of the Holder, Certificated Securities may be exchanged
for other Securities of any authorized denomination or denominations, of a like
aggregate Principal Amount at Maturity, upon surrender of the Securities to be
exchanged, together with a written instrument of transfer satisfactory to the
Registrar duly executed by the Securityholder or such Securityholder's attorney
duly authorized in writing, at such office or agency. Whenever any Securities
are so surrendered for exchange, the Company shall execute, and the Trustee upon
receipt of a Company Order shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
The Company shall not be required to make, and the Registrar need not
register, transfers or exchanges of Securities selected for redemption (except,
in the case of Securities to be redeemed in part, the portion thereof not to be
redeemed) or any Securities in respect of which a Purchase Notice or Change in
Control Purchase Notice has been given and not withdrawn by the Holder thereof
in accordance with the terms of this Indenture (except, in the case of
Securities to be purchased in part, the portion thereof not to be purchased) or
any Securities for a period of 15 days before the mailing of a notice of
redemption of Securities to be redeemed.
(b) Notwithstanding any provision to the contrary herein, so long as
a Global Security remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Security, in whole or in part, shall be made
only in accordance with Section 2.12 hereof and this Section 2.06(b). Transfers
of a Global Security shall be limited to transfers of such Global Security in
whole, or in part, to nominees of the Depositary or to a successor of the
Depositary or such successor's nominee.
(c) Successive registrations and registrations of transfers and
exchanges as aforesaid may be made from time to time as desired, and each such
registration shall be noted on the register for the Securities.
(d) Any Registrar appointed pursuant to Section 2.03 hereof shall
provide to the Trustee such information as the Trustee may reasonably require in
connection with the delivery by such Registrar of Securities upon registration
of transfer or exchange of Securities.
(e) No Registrar shall be required to make registrations of transfer
or exchange of Securities during any periods designated in the text of the
Securities or in this Indenture as periods during which such registration of
transfers and exchanges need not be made.
(f) If Securities are issued upon the registration of transfer,
exchange or replacement of Securities subject to restrictions on transfer and
bearing the legends set forth on the form of Security attached hereto as
Exhibits A-1 and A-2 setting forth such restrictions (collectively, the
"Legend"), or if a request is made to remove the Legend on a Security, the
Securities so issued shall bear the Legend, or the Legend shall not be removed,
as the case may be, unless there is delivered to the Company and the Registrar
such satisfactory evidence, which shall include an Opinion of Counsel, as may be
reasonably required by the Company and the Registrar, that neither the Legend
nor the restrictions on transfer set forth therein are required to
14
ensure that transfers thereof comply with the provisions of Rule 144A or Rule
144 or that such Securities are not "restricted" within the meaning of Rule 144.
Upon (i) provision of such satisfactory evidence, or (ii) notification by the
Company to the Trustee and Registrar of the sale of such Security pursuant to a
registration statement that is effective at the time of such sale, the Trustee,
upon receipt of a Company Order, shall authenticate and deliver a Security that
does not bear the Legend. If the Legend is removed from the face of a Security
and the Security is subsequently held by an Affiliate of the Company, the
Company shall use reasonable efforts to reinstate the Legend.
The Trustee and the Registrar shall have no obligation or duty to
monitor, determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between or
among Depositary participants or beneficial owners of interests in any Global
Security) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and when
expressly required by the terms of, this Indenture, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
SECTION 2.07 Replacement Securities. If (a) any mutilated Security
is surrendered to the Trustee, or (b) the Company and the Trustee receive
evidence to their satisfaction of the destruction, loss or theft of any
Security, and there is delivered to the Company and the Trustee such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security has been
acquired by a protected purchaser within the meaning of Article 8 of the Uniform
Commercial Code (a "Protected Purchaser"), the Company shall execute and upon
receipt of a Company Order, the Trustee shall authenticate and deliver, in
exchange for any such mutilated Security or in lieu of any such destroyed, lost
or stolen Security, a new Security of like tenor and Principal Amount at
Maturity, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be purchased by the
Company pursuant to Article 3 hereof, the Company in its discretion may, instead
of issuing a new Security, pay or purchase such Security, as the case may be.
Upon the issuance of any new Securities under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
15
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.08 Outstanding Securities; Determinations of Holders'
Action. Securities outstanding at any time are all the Securities authenticated
by the Trustee, except for those cancelled by it, those paid pursuant to Section
2.10 hereof and delivered to it for cancellation and those described in this
Section 2.08 as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate thereof holds the Security; provided,
however, that in determining whether the Holders of the requisite Principal
Amount at Maturity of Securities have given or concurred in any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded. Subject to the foregoing,
only Securities outstanding at the time of such determination shall be
considered in any such determination (including, without limitation,
determinations pursuant to Articles 6 and 9).
If a Security is replaced pursuant to Section 2.07 hereof, the
replaced Security ceases to be outstanding unless the Trustee and the Company
receive proof satisfactory to each of them that the replaced Security is held by
a Protected Purchaser unaware that such Security has been replaced, in which
case the replacement security shall be deemed not to be outstanding.
If the Paying Agent holds, in accordance with this Indenture, on a
Redemption Date, or on the Business Day following the Purchase Date or a Change
in Control Purchase Date, or on Stated Maturity, money or securities, if
permitted hereunder, sufficient to pay Securities payable on that date, then
immediately after such Redemption Date, Purchase Date, Change in Control
Purchase Date or Stated Maturity, as the case may be, such Securities shall
cease to be outstanding and Original Issue Discount or any cash interest on such
Securities shall cease to accrue; provided, that if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture.
If a Security is converted in accordance with Article 11, then from
and after the time of conversion on the Conversion Date, such Security shall
cease to be outstanding and Original Issue Discount or cash interest shall cease
to accrue on such Security.
SECTION 2.09 Temporary Securities. Pending the preparation of
definitive Securities, the Company may execute, and upon a Company Order, the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
16
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 2.03,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities the Company shall execute and upon Company Order the
Trustee shall authenticate and deliver in exchange therefor a like Principal
Amount at Maturity of definitive Securities of authorized denominations. Until
so exchanged the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 2.10 Cancellation. All Securities surrendered for payment,
purchase by the Company pursuant to Article 3 hereof, conversion, redemption or
registration of transfer or exchange shall, if surrendered to any person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. The Company may not issue new
Securities to replace Securities it has paid or delivered to the Trustee for
cancellation or that any Holder has converted pursuant to Article 11 hereof. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Securities held by the Trustee shall be disposed of by
the Trustee.
SECTION 2.11 Persons Deemed Owners. Prior to due presentment of a
Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of the Security or the payment of any Redemption Price, Purchase Price
or Change in Control Purchase Price in respect thereof or cash interest thereon,
for the purpose of conversion and for all other purposes whatsoever, whether or
not such Security be overdue, and neither the Company, the Trustee nor any agent
of the Company or the Trustee shall be affected by notice to the contrary.
SECTION 2.12 Global Securities.
(a) Notwithstanding any other provisions of this Indenture or the
Securities, (i) transfers of a Global Security, in whole or in part, shall be
made only in accordance with Sections 2.06 and 2.12(b)(i) hereof, (ii) transfer
of a beneficial interest in a Global Security for a Certificated Security shall
comply with Sections 2.06 and 2.12(b)(i) hereof, and (iii) transfers of a
Certificated Security shall comply with Sections 2.06 and 2.12(b)(ii) hereof and
transfer of a Certificated Security for a Beneficial Interest in a Global
Security shall comply with Sections 2.06 and 2.12(b)(iii) hereof.
(b) Transfer of Global Security. A Global Security may not be
transferred, in whole or in part, to any Person other than the Depositary or a
nominee or any successor thereof, and no such transfer to any such other Person
may be registered; provided that this Section 2.12(b) shall not prohibit any
transfer of a Security that is issued in exchange for a Global Security but is
not itself a Global Security. No transfer of a Security to any Person shall be
17
effective under this Indenture or the Securities unless and until such Security
has been registered in the name of such Person. Nothing in this Section 2.12(b)
shall prohibit or render ineffective any transfer of a beneficial interest in a
Global Security effected in accordance with the other provisions of this Section
2.12(b).
(i) Restrictions on Transfer of a Beneficial Interest in a Global
Security for a Certificated Security. A beneficial interest in a Global
Security may not be exchanged for a Certificated Security except upon
satisfaction of the requirements set forth below. Upon receipt by the
Trustee of a request for transfer of a beneficial interest in a Global
Security in accordance with Applicable Procedures for a Certificated
Security in the form satisfactory to the Trustee, together with:
(A) so long as the Securities are Restricted Securities,
certification, in the form set forth in Exhibit B-1 attached hereto,
and, if requested by the Company or the Registrar, certification in
the form set forth in Exhibit B-2 attached hereto, that such
beneficial interest in the Global Security is being transferred to an
Institutional Accredited Investor that satisfies the definitions set
forth in subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act;
(B) written instructions to the Trustee to make, or direct the
Registrar to make, an adjustment on its books and records with respect
to such Global Security to reflect a decrease in the aggregate
Principal Amount at Maturity of the Securities represented by the
Global Security, such instructions to contain information regarding
the Depositary account to be credited with such decrease; and
(C) if the Company or Registrar so requests, an Opinion of
Counsel or other evidence reasonably satisfactory to them as to the
compliance with the restrictions set forth in the Legend,
then the Trustee shall cause, or direct the Registrar to cause, in
accordance with the standing instructions and procedures existing between
the Depositary and the Registrar, the aggregate Principal Amount at
Maturity of Securities represented by the Global Security to be decreased
by the aggregate Principal Amount at Maturity of the Certificated Security
to be issued, shall authenticate and deliver such Certificated Security and
shall debit or cause to be debited to the account of the Person specified
in such instructions a beneficial interest in the Global Security equal to
the Principal Amount at Maturity of the Certificated Security so issued.
(ii) Transfer and Exchange of Certificated Securities. When
Certificated Securities are presented to the Registrar with a request:
(x) to register the transfer of such Certificated Securities;
or
(y) to exchange such Certificated Securities for an equal
Principal Amount at Maturity of Certificated Securities of
other authorized denominations,
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the Registrar shall register the transfer or make the exchange as requested
if its reasonable requirements for such transaction are met; provided,
however, that the Certificated Securities surrendered for registration of
transfer or exchange:
(A) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; and
(B) so long as such Securities are Restricted Securities, such
Securities are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act or, if being
transferred pursuant to clause (1), (2) or (3) of this Section
2.12(b)(ii)B, are accompanied by the additional information and
documents specified in each such clause, as applicable:
(1) if such Certificated Securities are being delivered
to the Registrar by a Holder for registration in the
name of such Holder, without transfer, a
certification from such Holder to that effect; or
(2) if such Certificated Securities are being transferred
to the Company, a certification to that effect; or
(3) if such Certificated Securities are being transferred
pursuant to an exemption from registration (1) a
certification to that effect (in the form set forth
in Exhibit B-1 and B-2 attached hereto, if
applicable) and (2) if the Company or Registrar so
requests, an opinion of counsel or other evidence
reasonably satisfactory to them as to the compliance
with the restrictions set forth in the Legend.
(iii) Restrictions on Transfer of a Certificated Security for a
Beneficial Interest in a Global Security. A Certificated Security may not
be exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below.
Upon receipt by the Trustee of a Certificated Security, duly endorsed
or accompanied by appropriate instruments of transfer, in form
satisfactory to the Trustee, together with:
(A) so long as the Securities are Restricted Securities,
certification, in the form set forth in Exhibit B-1 attached hereto,
that such Certificated Security is being transferred to a QIB in
accordance with Rule 144A; and
(B) written instructions directing the Trustee to make, or to
direct the Registrar to make, an adjustment on its books and records
with respect to such Global Security to reflect an increase in the
aggregate Principal Amount at Maturity of the Securities represented
by the Global Security, such instructions to contain information
regarding the Depositary account to be credited with such increase;
and
19
then the Trustee shall cancel such Certificated Security and cause, or direct
the Registrar to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Registrar, the aggregate
Principal Amount at Maturity of Securities represented by the Global Security to
be increased by the aggregate Principal Amount at Maturity of the Certificated
Security to be exchanged, and shall credit or cause to be credited to the
account of the Person specified in such instructions a beneficial interest in
the Global Security equal to the Principal Amount at Maturity of the
Certificated Security so cancelled. If no Global Securities are then
outstanding, the Company shall issue and the Trustee, upon receipt of a Company
Order, shall authenticate a new Global Security in the appropriate Principal
Amount at Maturity.
(c) Subject to the succeeding paragraph, every Security shall be
subject to the restrictions on transfer provided in the Legend including the
requirement of the delivery of an Opinion of Counsel, if so provided. Whenever
any Restricted Security is presented or surrendered for registration of transfer
or for exchange for a Security registered in a name other than that of the
Holder, such Security must be accompanied by a certificate in substantially the
form set forth in Exhibit B-1 attached hereto, dated the date of such surrender
and signed by the Holder of such Security, as to compliance with such
restrictions on transfer. The Registrar shall not be required to accept for such
registration of transfer or exchange any Security not so accompanied by a
properly completed certificate.
(d) The restrictions imposed by the Legend upon the transferability
of any Security shall cease and terminate when such Security has been sold
pursuant to an effective registration statement under the Securities Act or
transferred in compliance with Rule 144 or, if earlier, upon the expiration of
the holding period applicable to sales thereof under paragraph (k) of Rule 144.
Any Security as to which such restrictions on transfer shall have expired in
accordance with their terms or shall have terminated may, upon a surrender of
such Security for exchange to the Registrar in accordance with the provisions of
this Section 2.12 (accompanied, in the event that such restrictions on transfer
have terminated by reason of a transfer in compliance with Rule 144, by an
opinion of counsel having substantial experience in practice under the
Securities Act and otherwise reasonably acceptable to the Company, addressed to
the Company, the Trustee and the Registrar and in form acceptable to the
Company, to the effect that the transfer of such Security has been made in
compliance with Rule 144), be exchanged for a new Security, of like tenor and
aggregate Principal Amount at Maturity, which shall not bear the restrictive
Legend. The Company shall inform the Trustee of the effective date of any
registration statement registering the Securities under the Securities Act. The
Trustee and the Registrar shall not be liable for any action taken or omitted to
be taken by it in good faith in accordance with the aforementioned opinion of
counsel or registration statement.
(e) As used in the preceding two paragraphs of this Section 2.12, the
term "transfer" encompasses any sale, pledge, transfer, hypothecation or other
disposition of any Security.
(f) The provisions of clauses (i), (ii), (iii), (iv) and (v) of this
Section 2.12(f) shall apply only to Global Securities:
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(i) Notwithstanding any other provisions of this Indenture or the
Securities, except as provided in Section 2.12(b)(i) hereof, a Global
Security shall not be exchanged in whole or in part for a Security
registered in the name of any Person other than the Depositary or one or
more nominees thereof, provided that a Global Security may be exchanged for
Securities registered in the names of any person designated by the
Depositary in the event that (A) the Depositary has notified the Company
that it is unwilling or unable to continue as Depositary for such Global
Security or such Depositary has ceased to be a "clearing agency" registered
under the Exchange Act, and a successor Depositary is not appointed by the
Company within 90 days; (B) the Company elects to discontinue use of the
system of book-entry transfer through DTC (or any successor depositary); or
(C) an Event of Default has occurred and is continuing with respect to the
Securities. Any Global Security exchanged pursuant to clause (A) of this
sub-section shall be so exchanged in whole and not in part, and any Global
Security exchanged pursuant to clause (B) of this sub-section may be
exchanged in whole or from time to time in part as directed by the
Depositary. Any Security issued in exchange for a Global Security or any
portion thereof shall be a Global Security; provided that any such Security
so issued that is registered in the name of a person other than the
Depositary or a nominee thereof shall not be a Global Security.
(ii) Securities issued in exchange for a Global Security or any
portion thereof shall be issued in definitive, fully registered form,
without interest coupons, shall have an aggregate Principal Amount at
Maturity equal to that of such Global Security or portion thereof to be so
exchanged, shall be registered in such names and be in such authorized
denominations as the Depositary shall designate and shall bear the
applicable legends provided for herein. Any Global Security to be exchanged
in whole shall be surrendered by the Depositary to the Registrar. With
regard to any Global Security to be exchanged in part, to give effect to
any conversion, redemption or other disposition of such part or otherwise,
either such Global Security shall be so surrendered for exchange or, if the
Trustee is acting as custodian for the Depositary or its nominee with
respect to such Global Security, the Principal Amount at Maturity thereof
shall be reduced, by an amount equal to the portion thereof to be so
exchanged, by means of an appropriate adjustment made on the records of the
Trustee. Upon any such surrender or adjustment, the Trustee shall
authenticate and deliver the Security issuable on such exchange to or upon
the order of the Depositary or an authorized representative thereof.
(iii) Subject to the provisions of clause (v) of this Section
2.12(f), the registered Holder may grant proxies and otherwise authorize
any Person, including Agent Members (as defined below) and persons that may
hold interests through Agent Members, to take any action which a holder is
entitled to take under this Indenture or the Securities.
(iv) In the event of the occurrence of any of the events specified
in clause (i) above, the Company will promptly make available to the
Trustee a reasonable supply of Certificated Securities in definitive, fully
registered form, without interest coupons.
(v) Neither any members of, or participants in, the Depositary
(collectively, the "Agent Members") nor any other Persons on whose behalf
Agent Members may act
21
shall have any rights under this Indenture with respect to any Global
Security registered in the name of the Depositary or any nominee thereof,
or under any such Global Security, and the Depositary or such nominee, as
the case may be, may be treated by the Company, the Trustee and any agent
of the Company or the Trustee as the absolute owner and holder of such
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or such nominee,
as the case may be, or impair, as between the Depositary, its Agent Members
and any other person on whose behalf an Agent Member may act, the operation
of customary practices of such Persons governing the exercise of the rights
of a holder of any Security.
SECTION 2.13 CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE 3
REDEMPTION AND PURCHASES
SECTION 3.01 Right to Redeem; Notices to Trustee. The Company, at
its option, may redeem the Securities in accordance with the provisions of
paragraphs 6 and 8 of the Securities. Prior to May 14, 2007, the Company may not
redeem the Securities. Beginning on May 14, 2007, the Company may redeem the
Securities for cash in whole at any time, or in part from time to time. If the
Company elects to redeem Securities pursuant to paragraph 6 of the Securities,
it shall notify the Trustee in writing of the Redemption Date, the Principal
Amount at Maturity of Securities to be redeemed, the Redemption Price and the
amount of accrued and unpaid cash interest, if any, payable on the Redemption
Date.
The Company shall give the notice to the Trustee provided for in this
Section 3.01 by a Company Order, at least 45 days before the Redemption Date
(unless a shorter notice shall be satisfactory to the Trustee). If fewer than
all the Securities are to be redeemed, the record date relating to such
redemption shall be selected by the Company and given to the Trustee, which
record date shall not be less than ten days after the date of notice to the
Trustee.
SECTION 3.02 Selection of Securities to Be Redeemed. If less than
all the outstanding Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by any other method the Trustee
considers fair and appropriate (so long as such method is not prohibited by the
rules of any stock exchange on which the Securities are then listed). The
Trustee shall make the selection at least 30 days but not more than 60 days
before the Redemption Date from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the Principal
Amount at Maturity of Securities that have denominations larger than $1,000.
22
Securities and portions of them the Trustee selects shall be in
Principal Amounts at Maturity of $1,000 or an integral multiple of $1,000.
Provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption. The Trustee shall
promptly notify the Company in writing of the Securities or portions of
Securities to be redeemed.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed may be treated by
the Trustee as outstanding for the purpose of such selection.
SECTION 3.03 Notice of Redemption. At least 30 days but not more
than 60 days before a Redemption Date, the Company shall mail a notice of
redemption by first-class mail, postage prepaid, to each Holder of Securities to
be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the Redemption Date;
(b) the Redemption Price, or if then not ascertainable, the manner of
calculation thereof, and accrued and unpaid cash interest, if any, payable
on the Redemption Date;
(c) the Conversion Rate;
(d) the name and address of the Paying Agent and Conversion Agent;
(e) that Securities called for redemption may be converted at any
time before the close of business on the second Business Day immediately
preceding the Redemption Date, even if not otherwise convertible at such
time;
(f) that Holders who want to convert Securities must satisfy the
requirements set forth in paragraph 9 of the Securities;
(g) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price and accrued and unpaid cash
interest, if any;
(h) if fewer than all the outstanding Securities are to be redeemed,
the certificate number and Principal Amounts at Maturity of the particular
Securities to be redeemed;
(i) that, unless the Company defaults in making payment of such
Redemption Price and any cash interest which is due and payable, Original
Issue Discount or cash interest, including Contingent Cash Interest, will
cease to accrue on and after the Redemption Date;
(j) the CUSIP number of the Securities; and
23
(k) any other information the Company desires, in its own
discretion, to present.
At the Company's request, the Trustee shall give the notice of
redemption to Holders in the Company's name and at the Company's expense,
provided that the Company makes such request at least five Business Days (unless
a shorter period shall be satisfactory to the Trustee) prior to the date such
notice of redemption must be mailed.
SECTION 3.04 Effect of Notice of Redemption. Once notice of
redemption is given, Securities called for redemption become due and payable on
the Redemption Date and at the Redemption Price (together with accrued and
unpaid cash interest, if any, to but not including the date of redemption)
stated in the notice except for Securities which are converted in accordance
with the terms of this Indenture. Upon surrender to the Paying Agent, such
Securities shall be paid at the Redemption Price (together with accrued and
unpaid cash interest, if any, to but not including the date of redemption)
stated in the notice.
SECTION 3.05 Deposit of Redemption Price. Prior to 10:00 a.m. New
York City time, on any Redemption Date, the Company shall deposit with the
Paying Agent (or if the Company or a Subsidiary or an Affiliate of either of
them is the Paying Agent, shall segregate and hold in trust) money sufficient to
pay the Redemption Price of, and any accrued and unpaid interest to but not
including the date of redemption with respect to, all Securities to be redeemed
on that date other than Securities or portions of Securities called for
redemption which on or prior thereto have been delivered by the Company to the
Trustee for cancellation or have been converted. The Paying Agent shall as
promptly as practicable return to the Company any money not required for that
purpose because of conversion of Securities pursuant to Article 11 hereof. If
such money is then held by the Company in trust and is not required for such
purpose it shall be discharged from such trust.
SECTION 3.06 Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate and deliver to the Holder a new Security in an authorized
denomination equal in Principal Amount at Maturity to the unredeemed portion of
the Security surrendered.
SECTION 3.07 Conversion Arrangement on Call for Redemption. In
connection with any redemption of Securities, the Company may arrange for the
purchase and conversion of any Securities called for redemption by an agreement
with one or more investment banks or other purchasers to purchase such
Securities by paying to the Trustee in trust for the Securityholders, on or
prior to 10:00 a.m. New York City time on the Redemption Date, an amount that,
together with any amounts deposited with the Trustee by the Company for the
redemption of such Securities, is not less than the Redemption Price of, and any
accrued and unpaid interest with respect to, such Securities. Notwithstanding
anything to the contrary contained in this Article 3, the obligation of the
Company to pay the Redemption Prices of such Securities shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such
purchasers. If such an agreement is entered into, any Securities not duly
surrendered for conversion by the Holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such Holders and (notwithstanding anything to the contrary
contained in Article 11) surrendered by such purchasers for conversion,
24
all as of immediately prior to the close of business on the Business Day prior
to the Redemption Date, subject to payment of the above amount as aforesaid. The
Trustee shall hold and pay to the Holders whose Securities are selected for
redemption any such amount paid to it for purchase and conversion in the same
manner as it would moneys deposited with it by the Company for the redemption of
Securities. Without the Trustee's prior written consent, no arrangement between
the Company and such purchasers for the purchase and conversion of any
Securities shall increase or otherwise affect any of the powers, duties,
responsibilities or obligations of the Trustee as set forth in this Indenture,
and the Company agrees to indemnify the Trustee from, and hold it harmless
against, any loss, liability or expense arising out of or in connection with any
such arrangement for the purchase and conversion of any Securities between the
Company and such purchasers, including the costs and expenses incurred by the
Trustee in the defense of any claim or liability arising out of or in connection
with the exercise or performance of any of its powers, duties, responsibilities
or obligations under this Indenture.
SECTION 3.08 Purchase of Securities at Option of the Holder.
(a) General. Securities shall be purchased by the Company pursuant to
paragraph 7 of the Securities as of May 14, 2007, 2012, 2017, 2022 and 2027
(each, a "Purchase Date"), at the purchase price of $425.00 per $1,000 of
Principal Amount at Maturity as of May 14, 2007, of $551.26 per $1,000 of
Principal Amount at Maturity as of May 14, 2012, of $639.76 per $1,000 of
Principal Amount at Maturity as of May 14, 2017, of $742.47 per $1,000 Principal
Amount at Maturity as of May 14, 2022, and of $861.67 per $1,000 Principal
Amount at Maturity as of May 14, 2027 in each case, plus accrued and unpaid cash
interest, if any, to the Purchase Date (each, a "Purchase Price", as
applicable), at the option of the Holder thereof, upon:
(i) delivery to the Paying Agent, by the Holder, of a written notice
of purchase (a "Purchase Notice") at any time from the opening of business
on the date that is 20 Business Days prior to a Purchase Date until the
close of business on such Purchase Date stating:
(A) the certificate number of the Security which the Holder will
deliver to be purchased,
(B) the portion of the Principal Amount at Maturity of the
Security which the Holder will deliver to be purchased, which portion
must be a Principal Amount at Maturity of $1,000 or an integral
multiple thereof,
(C) that such Security shall be purchased as of the Purchase
Date pursuant to the terms and conditions specified in paragraph 7 of
the Securities and in this Indenture, and
(D) in the event the Company elects, pursuant to Section 3.08(b)
hereof, to pay the Purchase Price to be paid as of such Purchase Date,
in whole or in part, in shares of Common Stock but such portion of the
Purchase Price shall ultimately be payable to such Holder entirely in
cash because any of the conditions to payment of the Purchase Price in
Common Stock is not satisfied
25
prior to the close of business on such Purchase Date, as set forth in
Section 3.08(d) hereof, whether such Holder elects (1) to withdraw
such Purchase Notice as to some or all of the Securities to which such
Purchase Notice relates (stating the Principal Amount at Maturity and
certificate numbers of the Securities as to which such withdrawal
shall relate), or (2) to receive cash in respect of the entire
Purchase Price for all Securities (or portions thereof) to which such
Purchase Notice relates; and
(ii) delivery of such Security to the Paying Agent prior to, on or
after the Purchase Date (together with all necessary endorsements) at the
offices of the Paying Agent, such delivery being a condition to receipt by
the Holder of the Purchase Price therefor; provided, however, that such
Purchase Price shall be so paid pursuant to this Section 3.08 only if the
Security so delivered to the Paying Agent shall conform in all respects to
the description thereof in the related Purchase Notice, as determined by
the Company.
If a Holder, in such Holder's Purchase Notice and in any written
notice of withdrawal delivered by such Holder pursuant to the terms of Section
3.10 hereof, fails to indicate such Holder's choice with respect to the election
set forth in clause (D) of Section 3.08(a)(i) hereof, such Holder shall be
deemed to have elected to receive cash in respect of the Purchase Price for all
Securities subject to such Purchase Notice in the circumstances set forth in
such clause (D).
The Company shall purchase from the Holder thereof, pursuant to this
Section 3.08, a portion of a Security if the Principal Amount at Maturity of
such portion is $1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to the purchase of all of a Security also apply to the
purchase of such portion of such Security.
Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.08 shall be consummated by the delivery of the consideration to
be received by the Holder (together with accrued and unpaid cash interest, if
any) promptly following the later of the Purchase Date and the time of delivery
of the Security.
Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Purchase Notice contemplated by this Section 3.08(a)
shall have the right to withdraw such Purchase Notice at any time prior to the
close of business on the business day prior to the Purchase Date by delivery of
a written notice of withdrawal to the Paying Agent in accordance with Section
3.10 hereof.
The Paying Agent shall promptly notify the Company of the receipt by
it of any Purchase Notice or written notice of withdrawal thereof.
(b) Company's Right to Elect Manner of Payment of Purchase Price.
The Securities to be purchased pursuant to Section 3.08(a) hereof may be paid
for, at the election of the Company, in U.S. legal tender ("cash") or Common
Stock, or in any combination of cash and Common Stock, subject to the conditions
set forth in Sections 3.08(c) and (d) hereof. The Company shall designate, in
the Company Notice delivered pursuant to Section 3.08(e) hereof,
26
whether the Company will purchase the Securities for cash or Common Stock, or,
if a combination thereof, the percentages or amounts of the Purchase Price of
Securities in respect of which it will pay in cash or Common Stock; provided
that the Company will pay cash for fractional interests in Common Stock. For
purposes of determining the existence of potential fractional interests, all
Securities subject to purchase by the Company held by a Holder shall be
considered together (no matter how many separate certificates are to be
presented). Each Holder whose Securities are purchased pursuant to this Section
3.08 shall receive the same percentage of cash or Common Stock in payment of the
Purchase Price for such Securities, except (i) as provided in Section 3.08(d)
hereof with regard to the payment of cash in lieu of fractional shares of Common
Stock and (ii) in the event that the Company is unable to purchase the
Securities of a Holder or Holders for Common Stock because any necessary
qualifications or registrations of the Common Stock under applicable state
securities laws cannot be obtained, the Company may purchase the Securities of
such Holder or Holders for cash. The Company may not change its election with
respect to the consideration (or components or percentages of components
thereof) to be paid once the Company has given its Company Notice to
Securityholders except pursuant to this Section 3.08(b) or pursuant to Section
3.08(d) hereof in the event of a failure to satisfy, prior to the close of
business on the Purchase Date, any condition to the payment of the Purchase
Price, in whole or in part, in Common Stock.
At least three Business Days before the Company Notice Date, the
Company shall deliver an Officers' Certificate to the Trustee specifying:
(i) the manner of payment selected by the Company,
(ii) the information required by Section 3.08(e) hereof,
(iii) if the Company elects to pay the Purchase Price, or a specified
percentage thereof, in Common Stock, that the conditions to such manner of
payment set forth in Section 3.08(d) have been or will be complied with,
and
(iv) whether the Company desires the Trustee to give the Company
Notice required by Section 3.08(e) hereof.
(c) Purchase with Cash. On each Purchase Date, at the option of the
Company, the Purchase Price of Securities in respect of which a Purchase Notice
pursuant to Section 3.08(a) hereof has been given, or a specified percentage
thereof, may be paid by the Company with cash equal to the aggregate Purchase
Price of such Securities. If the Company elects to purchase Securities with
cash, the Company Notice, as provided in Section 3.08(e) hereof, shall be sent
to Holders (and to beneficial owners as required by applicable law) not less
than 20 Business Days prior to such Purchase Date (the "Company Notice Date").
(d) Payment by Issuance of Common Stock. On each Purchase Date, at
the option of the Company, the Purchase Price of Securities in respect of which
a Purchase Notice pursuant to Section 3.08(a) hereof has been given, or a
specified percentage thereof, may be paid by the Company by the issuance of a
number of shares of Common Stock equal to the quotient obtained by dividing (i)
the amount of cash to which the Securityholders would have been entitled had the
Company elected to pay all or such specified percentage, as the case may be, of
27
the Purchase Price of such Securities in cash by (ii) the Market Price of a
share of Common Stock, subject to the next succeeding paragraph.
The Company will not issue a fractional share of Common Stock in
payment of the Purchase Price. Instead the Company will pay cash for the current
market value of the fractional share. The current market value of a fraction of
a share shall be determined by multiplying the Market Price by such fraction and
rounding the product to the nearest whole cent. It is understood that if a
Holder elects to have more than one Security purchased, the number of shares of
Common Stock shall be based on the aggregate amount of Securities to be
purchased.
Upon a payment by Common Stock pursuant to the terms hereof, that
portion of accrued Original Issue Discount or cash interest attributable to the
period from the Issue Date to the Purchase Date with respect to the purchased
Security shall not be cancelled, extinguished or forfeited but rather shall be
deemed paid in full to the Holder through the delivery of the Common Stock in
exchange for the Security being purchased pursuant to the terms hereof, and the
fair market value of such Common Stock (together with any cash payments in lieu
of fractional shares of Common Stock) shall be treated as issued, to the extent
thereof, first in exchange for the accrued Original Issue Discount or cash
interest through the Purchase Date, and the balance, if any, of the fair market
value of such shares of Common Stock shall be treated as issued in exchange for
the Issue Price of the Security being purchased pursuant to the provisions
hereof. If the Company elects to purchase the Securities by the issuance of
shares of Common Stock, the Company Notice, as provided in Section 3.08(e)
hereof, shall be sent to the Holders (and to beneficial owners as required by
applicable law) not later than the Company Notice Date.
The Company's right to exercise its election to purchase the
Securities pursuant to this Section 3.08 through the issuance of shares of
Common Stock shall be conditioned upon:
(i) the Company's not having given its Company Notice of an
election to pay entirely in cash and its giving of timely Company Notice of
election to purchase all or a specified percentage of the Securities with
Common Stock as provided herein;
(ii) the shares of Common Stock having been admitted for listing or
admitted for listing subject to notice of issuance on the principal United
States securities exchange on which the Common Stock is then listed or, if
the Common Stock is not then listed on a national or regional securities
exchange, as quoted on the National Association of Securities Dealers
Automated Quotation System;
(iii) the registration of the shares of Common Stock to be issued in
respect of the payment of the Purchase Price under the Securities Act of
1933, as amended (the "Securities Act"), or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in each case, if required;
(iv) any necessary qualification or registration under applicable
state securities laws or the availability of an exemption from such
qualification and registration; and
(v) the receipt by the Trustee of an Officers' Certificate and an
Opinion of Counsel each stating that (A) the terms of the issuance of the
Common Stock are in
28
conformity with this Indenture and (B) the shares of Common Stock to be
issued by the Company in payment of the Purchase Price in respect of
Securities have been duly authorized and, when issued and delivered
pursuant to the terms of this Indenture in payment of the Purchase Price in
respect of the Securities, will be validly issued, fully paid and
non-assessable and, to the best of such counsel's knowledge, free from
preemptive rights under law or material contracts, and, in the case of such
Officers' Certificate, stating that conditions (i), (ii), (iii) and (iv)
above and the condition set forth in the second succeeding sentence have
been satisfied and, in the case of such Opinion of Counsel, stating that
conditions (ii) and (iii) above have been satisfied.
Such Officers' Certificate shall also set forth the number of shares
of Common Stock to be issued for each $1,000 Principal Amount at Maturity of
Securities and the Sale Price of a share of Common Stock on each Trading Day
during the period for which the Market Price is calculated. The Company may pay
the Purchase Price (or any portion thereof) in Common Stock only if the
information necessary to calculate the Market Price is published in a daily
newspaper of national circulation. If the foregoing conditions are not satisfied
with respect to a Holder or Holders prior to the close of business on the
Purchase Date and the Company has elected to purchase the Securities pursuant to
this Section 3.08 through the issuance of shares of Common Stock, the Company
shall pay the entire Purchase Price of the Securities of such Holder or Holders
in cash.
The "Market Price" of the Common Stock means the average of the Sale
Prices of the Common Stock for the five Trading Day period ending on the third
Business Day (if the third Business Day prior to the applicable Purchase Date is
a Trading Day or, if not, then on the last Trading Day prior to such Business
Day) prior to the applicable Purchase Date, appropriately adjusted to take into
account the occurrence, during the period commencing on the first of such
Trading Days during such five Trading Day period and ending on such Purchase
Date, of any event described in Section 11.06, 11.07 or 11.08 hereof; subject,
however, to the conditions set forth in Sections 11.09 and 11.10 hereof.
(e) Notice of Election. The Company's notice of election to purchase
with cash or Common Stock or any combination thereof shall be sent to the
Holders (and to beneficial owners as required by applicable law) in the manner
provided in Section 14.02 hereof at the time specified in Section 3.08(c) or (d)
hereof, as applicable (the "Company Notice"). Such Company Notice shall state
the manner of payment elected and shall contain the following information:
In the event the Company has elected to pay the Purchase Price (or a
specified percentage thereof) with Common Stock, the Company Notice shall:
(i) state that each Holder will receive Common Stock with a Market
Price determined as of a specified date prior to the Purchase Date equal to
such specified percentage of the Purchase Price of the Securities held by
such Holder (except any cash amount to be paid in lieu of fractional
shares);
(ii) set forth the method of calculating the Market Price of the
Common Stock; and
29
(iii) state that because the Market Price of Common Stock will be
determined prior to the Purchase Date, Holders will bear the market risk
with respect to the value of the Common Stock to be received from the date
such Market Price is determined to the Purchase Date.
In any case, each Company Notice shall include a form of Purchase
Notice to be completed by a Securityholder and shall state:
(i) the Purchase Price, the Conversion Rate and accrued and unpaid
cash interest, including Contingent Cash Interest, if any, that will be
accrued and payable with respect to the Securities as of the Purchase Date;
(ii) whether the Company will pay the Purchase Price in cash or in
Common Stock or any combination thereof, specifying the percentage of each;
(iii) the name and address of the Paying Agent and the Conversion
Agent;
(iv) that Securities as to which a Purchase Notice has been given
may be converted pursuant to Article 11 hereof only if the applicable
Purchase Notice has been withdrawn in accordance with the terms of this
Indenture;
(v) that Securities must be surrendered to the Paying Agent to
collect payment of the Purchase Price and interest, if any;
(vi) that the Purchase Price for any Security as to which a Purchase
Notice has been given and not withdrawn, together with any cash interest
payable with respect thereto, will be paid promptly following the later of
the Purchase Date and the time of surrender of such Security as described
in (v);
(vii) the procedures the Holder must follow to exercise rights under
this Section 3.08 and a brief description of those rights;
(viii) briefly, the conversion rights of the Securities and that
Holders who want to convert Securities must satisfy the requirements set
forth in paragraph 9 of the Securities;
(ix) the procedures for withdrawing a Purchase Notice (including,
without limitation, for a conditional withdrawal pursuant to the terms of
Section 3.08(a)(i)(D) or Section 3.10 hereof);
(x) that, unless the Company defaults in making payment of such
Purchase Price and cash interest, if any, Original Issue Discount and cash
interest, including Contingent Cash Interest, if any, on Securities
surrendered for purchase will cease to accrue on and after the Purchase
Date; and
(xi) the CUSIP number of the Securities.
30
At the Company's request, the Trustee shall give such Company Notice
in the Company's name and at the Company's expense; provided, however, that, in
all cases, the text of such Company Notice shall be prepared by the Company.
Upon determination of the actual number of shares of Common Stock to
be issued for each $1,000 Principal Amount at Maturity of Securities, the
Company will issue a press release and publish such determination on the
Company's web site on the World Wide Web.
(f) Covenants of the Company. All shares of Common Stock delivered
upon purchase of the Securities shall be newly issued shares or treasury shares,
shall be duly authorized, validly issued, fully paid and nonassessable and shall
be free from preemptive rights and free of any lien or adverse claim created by
the Company.
The Company shall use its reasonable efforts to list or cause to have
quoted any shares of Common Stock to be issued to purchase Securities on the
principal United States securities exchange or over-the-counter or other
domestic market on which any other shares of the Common Stock are then listed or
quoted. The Company will promptly inform the Trustee in writing of any such
listing.
(g) Procedure upon Purchase. The Company shall deposit cash (in
respect of a cash purchase under Section 3.08(c) hereof or for fractional
interests as applicable) or shares of Common Stock, or a combination thereof, as
applicable, at the time and in the manner as provided in Section 3.11 hereof,
sufficient to pay the aggregate Purchase Price of, and any accrued and unpaid
interest with respect to all Securities to be purchased pursuant to this Section
3.08. As soon as practicable after the Purchase Date, the Company shall deliver
to each Holder entitled to receive Common Stock through the Paying Agent, a
certificate for the number of full shares of Common Stock issuable in payment of
the Purchase Price and cash in lieu of any fractional interests. The person in
whose name the certificate for Common Stock is registered shall be treated as a
holder of record of shares of Common Stock on the Business Day following the
Purchase Date. Subject to Section 3.08(d) hereof, no payment or adjustment will
be made for dividends on the Common Stock the record date for which occurred on
or prior to the Purchase Date.
(h) Taxes. If a Holder of a Security is paid in Common Stock, the
Company shall pay any documentary, stamp or similar issue or transfer tax due on
such issue of shares of Common Stock. However, the Holder shall pay any such tax
which is due because the Holder requests the shares of Common Stock to be issued
in a name other than the Holder's name. The Paying Agent may refuse to deliver
the certificates representing the Common Stock being issued in a name other than
the Holder's name until the Paying Agent receives a sum sufficient to pay any
tax which will be due because the shares of Common Stock are to be issued in a
name other than the Holder's name. Nothing herein shall preclude any income tax
withholding required by law or regulations.
SECTION 3.09 Purchase of Securities at Option of the Holder upon
Change in Control.
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(a) If there shall have occurred a Change in Control, Securities
shall be purchased by the Company, at the option of the Holder thereof, at a
purchase price specified in paragraph 7 of the Securities (the "Change in
Control Purchase Price"), as of the date that is no later than 30 Business Days
after the occurrence of the Change in Control but in no event prior to the date
on which such Change in Control occurs (the "Change in Control Purchase Date"),
subject to satisfaction by or on behalf of the Holder of the requirements set
forth in Section 3.09(c) hereof.
A "Change in Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its subsidiaries,
taken as a whole, to any "person" or "group" (as such terms are used in Section
13(d) of the Exchange Act), (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" or "group" (as such terms are used in
Section 13(d) of the Exchange Act) becomes the "beneficial owner" (as such term
is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly through one or more intermediaries, of more than 50% of the voting
power of the outstanding voting stock of the Company, or (iv) the first day on
which more than a majority of the members of the Board of Directors of the
Company are not Continuing Directors.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of the
Board of Directors of the Company on May 14, 2002 or (ii) was nominated for
election to the Board of Directors of the Company with the approval of, or whose
election to the Board of Directors of the Company was ratified by, at least a
majority of the Continuing Directors who were members of the Board of Directors
of the Company at the time of such nomination or election.
(b) Within 15 days after the occurrence of a Change in Control, the
Company shall mail a written notice of Change in Control by first-class mail to
the Trustee and to each Holder (and to beneficial owners as required by
applicable law). The notice shall include a form of Change in Control Purchase
Notice to be completed by the Securityholder and shall state:
(i) briefly, the events causing a Change in Control and the date of
such Change in Control;
(ii) the date by which the Change in Control Purchase Notice
pursuant to this Section 3.09 must be given;
(iii) the Change in Control Purchase Date;
(iv) the Change in Control Purchase Price and, to the extent known
at the time of such notice, the amount of interest, if any, that will be
accrued and payable with respect to the Securities as of the Change in
Control Purchase Date;
(v) the name and address of the Paying Agent and the Conversion
Agent;
32
(vi) the Conversion Rate and any adjustments thereto resulting from
the Change in Control;
(vii) that Securities as to which a Change in Control Purchase Notice
has been given may be converted pursuant to Article 11 hereof only if the
Change in Control Purchase Notice has been withdrawn in accordance with the
terms of this Indenture;
(viii) that Securities must be surrendered to the Paying Agent to
collect payment of the Change in Control Purchase Price and accrued and
unpaid cash interest, if any;
(ix) that the Change in Control Purchase Price for any Security as
to which a Change in Control Purchase Notice has been duly given and not
withdrawn, together with any accrued interest payable with respect thereto,
will be paid promptly following the later of the Change in Control Purchase
Date and the time of surrender of such Security as described in Section
3.09(b)(viii) hereof;
(x) briefly, the procedures the Holder must follow to exercise
rights under this Section 3.09;
(xi) briefly, the conversion rights of the Securities;
(xii) the procedures for withdrawing a Change in Control Purchase
Notice;
(xiii) that, unless the Company defaults in making payment of such
Change in Control Purchase Price and cash interest, if any on Securities
surrendered for purchase, Original Issue Discount and any cash interest,
including Contingent Cash Interest, on Securities surrendered for purchase
will cease to accrue on and after the Change in Control Purchase Date; and
(xiv) the CUSIP number of the Securities.
(c) A Holder may exercise its rights specified in Section 3.09(a)
hereof upon delivery of a written notice of purchase (a "Change in Control
Purchase Notice") to the Paying Agent at any time prior to the close of business
on the Business Day prior to the Change in Control Purchase Date, stating:
(i) the certificate number or numbers of the Security or Securities
which the Holder will deliver to be purchased;
(ii) the portion of the Principal Amount at Maturity of the Security
which the Holder will deliver to be purchased, which portion must be $1,000
or an integral multiple thereof; and
(iii) that such Security shall be purchased pursuant to the terms and
conditions specified in paragraph 7 of the Securities.
The delivery of such Security to the Paying Agent at any time after
the delivery of the Change in Control Purchase Notice (together with all
necessary endorsements) at the offices
33
of the Paying Agent shall be a condition to the receipt by the Holder of the
Change in Control Purchase Price therefor; provided, however, that such Change
in Control Purchase Price shall be so paid pursuant to this Section 3.09 only if
the Security so delivered to the Paying Agent shall conform in all respects to
the description thereof set forth in the related Change in Control Purchase
Notice.
The Company shall purchase from the Holder thereof, pursuant to this
Section 3.09, a portion of a Security if the Principal Amount at Maturity of
such portion is $1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to the purchase of all of a Security also apply to the
purchase of such portion of such Security.
Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.09 shall be consummated by the delivery of the consideration to
be received by the Holder (together with accrued and unpaid interest, if any)
promptly following the later of the Change in Control Purchase Date and the time
of delivery of the Security to the Paying Agent in accordance with this Section
3.09.
Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Change in Control Purchase Notice contemplated by this
Section 3.09(c) shall have the right to withdraw such Change in Control Purchase
Notice at any time prior to the close of business on the Business Day prior to
the Change in Control Purchase Date by delivery of a written notice of
withdrawal to the Paying Agent in accordance with Section 3.10 hereof.
The Paying Agent shall promptly notify the Company of the receipt by
it of any Change in Control Purchase Notice or written withdrawal thereof.
The Company shall not be required to comply with this Section 3.09 if
a third party mails a written notice of Change in Control in the manner, at the
times and otherwise in compliance with this Section 3.09 and repurchases all
Securities for which a Change in Control Purchase Notice shall be delivered and
not withdrawn.
SECTION 3.10 Effect of Purchase Notice or Change in Control Purchase
Notice. Upon receipt by the Paying Agent of the Purchase Notice or Change in
Control Purchase Notice specified in Section 3.08(a) or Section 3.09(c) hereof,
as applicable, the Holder of the Security in respect of which such Purchase
Notice or Change in Control Purchase Notice, as the case may be, was given shall
(unless such Purchase Notice or Change in Control Purchase Notice is withdrawn
as specified in the following two paragraphs) thereafter be entitled to receive
solely the Purchase Price or Change in Control Purchase Price, as the case may
be, and any accrued and unpaid interest, with respect to such Security. Such
Purchase Price or Change in Control Purchase Price which price reflects the
Issue Price plus accrued Original Issue Discount and accrued and unpaid cash
interest, including Contingent Cash Interest, if any, shall be paid to such
Holder, subject to receipt of funds and/or securities by the Paying Agent,
promptly following the later of (x) the Purchase Date or the Change in Control
Purchase Date, as the case may be, with respect to such Security (provided the
conditions in Section 3.08(a) or Section 3.09(c) hereof, as applicable, have
been satisfied) and (y) the time of delivery of such Security to the Paying
Agent by the Holder thereof in the manner required by Section 3.08(a) or Section
3.09(c) hereof, as applicable. Securities in respect of which a Purchase Notice
or Change in Control Purchase
34
Notice, as the case may be, has been given by the Holder thereof may not be
converted pursuant to Article 11 hereof on or after the date of the delivery of
such Purchase Notice or Change in Control Purchase Notice, as the case may be,
unless such Purchase Notice or Change in Control Purchase Notice, as the case
may be, has first been validly withdrawn as specified in the following two
paragraphs.
A Purchase Notice or Change in Control Purchase Notice, as the case
may be, may be withdrawn by means of a written notice of withdrawal delivered to
the office of the Paying Agent at any time prior to the close of business on the
Business Day prior to the Purchase Date or the Change in Control Purchase Date,
as the case may be, specifying:
(a) the certificate number or numbers of the Security or Securities
in respect of which such notice of withdrawal is being submitted,
(b) the Principal Amount at Maturity of the Security or Securities
with respect to which such notice of withdrawal is being submitted, and
(c) the Principal Amount at Maturity, if any, of such Security which
remains subject to the original Purchase Notice or Change in Control
Purchase Notice, as the case may be, and which has been or will be
delivered for purchase by the Company.
A written notice of withdrawal of a Purchase Notice may be in the form
set forth in the preceding paragraph or may be in the form of a conditional
withdrawal contained in a Purchase Notice pursuant to the terms of Section
3.08(a)(i)(D) hereof.
There shall be no purchase of any Securities pursuant to Section 3.08
hereof (other than through the issuance of Common Stock in payment of the
Purchase Price, including cash in lieu of fractional shares) or 3.09 hereof if
there has occurred (prior to, on or after, as the case may be, the giving, by
the Holders of such Securities, of the required Purchase Notice or Change in
Control Purchase Notice, as the case may be) and is continuing an Event of
Default (other than a default in the payment of the Purchase Price or Change in
Control Purchase Price, as the case may be, and any accrued and unpaid cash
interest with respect to such Securities). The Paying Agent will promptly return
to the respective Holders thereof any Securities (x) with respect to which a
Purchase Notice or Change in Control Purchase Notice, as the case may be, has
been withdrawn in compliance with this Indenture, or (y) held by it during the
continuance of an Event of Default (other than a default in the payment of the
Purchase Price or Change in Control Purchase Price, as the case may be, and any
accrued and unpaid cash interest with respect to such Securities) in which case,
upon such return, the Purchase Notice or Change in Control Purchase Notice with
respect thereto shall be deemed to have been withdrawn.
SECTION 3.11 Deposit of Purchase Price or Change in Control Purchase
Price. Prior to 10:00 a.m., New York City time, on the Business Day following
the Purchase Date or the Change in Control Purchase Date, as the case may be,
the Company shall deposit with the Trustee or with the Paying Agent (or, if the
Company or a Subsidiary or an Affiliate of either of them is acting as the
Paying Agent, shall segregate and hold in trust as provided in Section 2.04
hereof) an amount of money (in immediately available funds if deposited on such
Business Day) or Common Stock, if permitted hereunder, sufficient to pay the
aggregate
35
Purchase Price or Change in Control Purchase Price, as the case may be, of, and
any accrued and unpaid cash interest with respect to, all the Securities or
portions thereof which are to be purchased as of the Purchase Date or Change in
Control Purchase Date, as the case may be.
SECTION 3.12 Securities Purchased in Part. Any Security which is to
be purchased only in part shall be surrendered at the office of the Paying Agent
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing) and the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security, without service charge,
a new Security or Securities, of any authorized denomination as requested by
such Holder in aggregate Principal Amount at Maturity equal to, and in exchange
for, the portion of the Principal Amount at Maturity of the Security so
surrendered which is not purchased.
SECTION 3.13 Repayment to the Company. The Trustee and the Paying
Agent shall promptly return to the Company any cash or shares of Common Stock
that remain unclaimed as provided in paragraph 15 of the Securities, together
with interest or dividends, if any, thereon (subject to the provisions of
Section 7.01(f) hereof), held by them for the payment of the Purchase Price or
Change in Control Purchase Price, as the case may be, or contingent interest, if
any; provided, however, that to the extent that the aggregate amount of cash or
shares of Common Stock deposited by the Company pursuant to Section 3.11 hereof
exceeds the aggregate Purchase Price or Change in Control Purchase Price, as the
case may be, of, and the accrued and unpaid contingent interest with respect to,
the Securities or portions thereof which the Company is obligated to purchase as
of the Purchase Date or Change in Control Purchase Date, as the case may be,
whether as a result of withdrawal or otherwise, then promptly after the Business
Day following the Purchase Date or Change in Control Purchase Date, as the case
may be, the Trustee shall return any such excess to the Company together with
interest or dividends, if any, thereon (subject to the provisions of Section
7.01(f) hereof).
ARTICLE 4
COVENANTS
SECTION 4.01 Payment of Securities. The Company shall promptly make
all payments in respect of the Securities on the dates and in the manner
provided in the Securities or pursuant to this Indenture. Any amounts to be
given to the Trustee or Paying Agent, shall be deposited with the Trustee or
Paying Agent by 10:00 a.m., New York City time, by the Company. Principal Amount
at Maturity, Restated Principal Amount, Issue Price plus accrued Original Issue
Discount, Redemption Price, Purchase Price, Change in Control Purchase Price,
and cash interest shall be considered paid on the applicable date due if on such
date (or, in the case of a Purchase Price or Change in Control Purchase Price,
on the Business Day following the applicable Purchase Date or Change in Control
Purchase Date, as the case may be) the Trustee or the Paying Agent holds, in
accordance with this Indenture, money or securities, if permitted hereunder,
sufficient to pay all such amounts then due.
The Company shall, to the extent permitted by law, pay cash interest
on overdue amounts at the rate per annum set forth in paragraph 1 of the
Securities, compounded semiannually, which interest shall accrue from the date
such overdue amount was originally due
36
to the date payment of such amount, including interest thereon, has been made or
duly provided for. All such interest shall be payable on demand. The accrual of
such interest on overdue amounts shall be in lieu of, and not in addition to,
the continued accrual of Original Issue Discount.
SECTION 4.02 SEC and Other Reports. The Company shall deliver to the
Trustee, within 30 days after it files such annual and quarterly reports,
information, documents and other reports with the SEC, copies of its annual
report and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. The Company also shall comply with the
provisions of TIA Section 314(a), provided that no report required thereby to be
filed with the SEC need be so filed unless this Indenture is qualified under the
TIA. Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of the same shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.03 Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on December 31, 2002) an Officers'
Certificate, stating whether or not to the knowledge of the signers thereof the
Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
SECTION 4.04 Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out the
purposes of this Indenture.
SECTION 4.05 Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, The City of New York, an office or agency
of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities
may be presented or surrendered for payment, where Securities may be surrendered
for registration of transfer, exchange, purchase, redemption or conversion and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The office of the Trustee, located at JPMorgan
Chase Bank, 450 W. 33rd Street, 15th Floor, New York, New York 10001 Attention:
Institutional Trust Services, shall initially be such office or agency for all
of the aforesaid purposes. The Company shall give prompt written notice to the
Trustee of the location, and of any change in the location, of any such office
or agency (other than a change in the location of the office of the Trustee). If
at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 14.02 hereof.
37
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes.
SECTION 4.06 Delivery of Certain Information. At any time when the
Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the
request of a Holder or any beneficial holder of Securities or shares of Common
Stock which are restricted securities issued upon conversion thereof, the
Company will promptly furnish or cause to be furnished Rule 144A Information (as
defined below) to such Holder or any beneficial holder of Securities or holder
of shares of Common Stock issued upon conversion of Securities, or to a
prospective purchaser of any such security designated by any such holder, as the
case may be, to the extent required to permit compliance by such Holder or
holder with Rule 144A under the Securities Act in connection with the resale of
any such security. "Rule 144A Information" shall be such information as is
specified pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.07 Covenant to Comply With Securities Laws Upon Purchase of
Securities. In connection with any offer to purchase or purchase of Securities
under Section 3.08 or 3.09 hereof (provided that such offer or purchase
constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which term, as
used herein, includes any successor provision thereto) under the Exchange Act at
the time of such offer or purchase), the Company shall to the extent applicable
(a) comply with Rule 13e-4 and Rule 14e-1 under the Exchange Act, (b) file the
related Schedule TO (or any successor schedule, form or report) under the
Exchange Act, and (c) otherwise comply with all Federal and state securities
laws so as to permit the rights and obligations under Sections 3.08 and 3.09
hereof to be exercised in the time and in the manner specified in Sections 3.08
and 3.09 hereof.
SECTION 4.08 Waiver of Compliance. The Company may omit in any
particular instance to comply with any covenant or condition set forth in
Sections 4.01 to 4.07, inclusive, if before the time for such compliance the
Holders of a majority in aggregate Principal Amount at Maturity of the
Securities at the time outstanding shall notify the Company that they elect to
either waive such compliance in such instance or generally waive compliance with
such covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect.
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01 When Company May Merge or Transfer Assets. The Company
shall not consolidate with or merge with or into any other person or convey,
transfer or lease all or substantially all of its properties and assets to any
person, nor will the Company permit any Subsidiary to enter into any such
transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment, transfer,
38
lease or other disposition of all or substantially all of the properties and
assets of the Company and its Subsidiaries on a consolidated basis to any other
person or persons, unless:
(a) either (i) the Company or such subsidiary shall be the surviving
corporation or (ii) the person (if other than the Company) formed by such
consolidation or into which the Company or such Subsidiary is merged or the
person which acquires by conveyance, transfer or lease the properties and assets
of the Company or such Subsidiary substantially as an entirety (A) shall be
organized and validly existing under the laws of the United States or any state
thereof or the District of Columbia and (B) shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in form
reasonably satisfactory to the Trustee, all of the obligations of the Company or
such Subsidiary under the Securities and this Indenture;
(b) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing; and
(c) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with this Article 5 and that all conditions precedent herein provided for
relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise) of the properties and assets of one or more Subsidiaries
(other than to the Company or another Subsidiary), which, if such assets were
owned by the Company, would constitute all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
The successor person formed by such consolidation or into which the
Company or the applicable Subsidiary is merged or the successor person to which
such conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company or the applicable
Subsidiary under this Indenture with the same effect as if such successor had
been named as the Company or the applicable Subsidiary herein; and thereafter,
except in the case of a lease and any obligations the Company or the applicable
Subsidiary may have under a supplemental indenture pursuant to Section 11.14
hereof, the Company or the applicable Subsidiary shall be discharged from all
obligations and covenants under this Indenture and the Securities. Subject to
Section 9.06 hereof, the Company, the applicable Subsidiary, the Trustee and the
successor person shall enter into a supplemental indenture to evidence the
succession and substitution of such successor person and such discharge and
release of the Company and the applicable Subsidiary.
39
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in payment of any interest, including any
Contingent Cash Interest, when due under the Securities and such default
continues for 30 days;
(b) the Company defaults in the payment of the Principal Amount at
Maturity (or, if the Securities have been converted to semiannual coupon
notes following a Tax Event pursuant to Section 10.01 of the Indenture, the
Restated Principal Amount), Issue Price plus accrued Original Issue
Discount and any cash interest, including any Contingent Cash Interest,
Redemption Price, Purchase Price or Change in Control Purchase Price on any
Security when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration, when due for purchase by the Company or
otherwise;
(c) the Company fails to comply with any of its agreements in the
Security or this Indenture (other than those referred to in clauses (a) and
(b) above) and such failure continues for 60 days after receipt by the
Company of a Notice of Default;
(d) default under any Debt, whether such Debt now exists or is
created later, which default results in such Debt becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable, and the principal amount of all Debt so
accelerated, together with all Debt due and payable but not paid prior to
the end of any grace period, is $10,000,000 or more, and such acceleration
has not been rescinded or annulled within a period of 10 days after receipt
by the Company of a Notice of Default from the Trustee; provided, however,
that if any such default shall be cured, waived, rescinded or annulled,
then the Event of Default by reason thereof shall be deemed not to have
occurred;
(e) the Company pursuant to or under or within the meaning of any
Bankruptcy Law:
(ii) commences a voluntary case or proceeding;
(iii) consents to the entry of an order for relief against it in an
involuntary case or proceeding or the commencement of any case
against it;
(iv) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(v) makes a general assignment for the benefit of its creditors;
(vi) files a petition in bankruptcy or answer or consent seeking
reorganization or relief; or
40
(vii) consents to the filing of such petition or the appointment of or
taking possession by a Custodian; or
(f) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company in an involuntary case or
proceeding, or adjudicates the Company insolvent or bankrupt;
(ii) appoints a Custodian of the Company or for any substantial part
of its property; or
(iii) orders the winding up or liquidation of the Company;
and such order or decree remains unstayed and in effect for 60 days.
A Default under clause (c) or clause (d) above is not an Event of
Default until the Trustee notifies the Company, or the Holders of at least 25%
in aggregate Principal Amount at Maturity of the Securities at the time
outstanding notify the Company and the Trustee, of the Default and the Company
does not cure such Default (and such Default is not waived) within the time
specified in clause (c) or clause (d) above after actual receipt of such notice.
Any such notice must specify the Default, demand that it be remedied and state
that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after it
becomes aware of the occurrence thereof, written notice of any event which with
the giving of notice or the lapse of time, or both, would become an Event of
Default under clause (3) or clause (4) above, its status and what action the
Company is taking or proposes to take with respect thereto.
SECTION 6.02 Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(e) or (f) in respect of the Company)
occurs and is continuing, the Trustee by written Notice to the Company, or the
Holders of at least 25% in aggregate Principal Amount at Maturity of the
Securities at the time outstanding by notice to the Company and the Trustee, may
declare the Issue Price plus accrued Original Issue Discount and any accrued and
unpaid cash interest (or if the Securities have been converted to semiannual
coupon notes following a Tax Event, the Restated Principal Amount, plus accrued
interest), including accrued and unpaid Contingent Cash Interest, through the
date of declaration on all the Securities to be immediately due and payable.
Upon such a declaration, such Issue Price plus accrued Original Issue Discount,
and such accrued and unpaid interest, if any, shall be due and payable
immediately. If an Event of Default specified in Section 6.01(e) or (f) occurs
in respect of the Company and is continuing, the Issue Price plus accrued
Original Issue Discount and any accrued and unpaid cash interest (or, if the
Securities have been converted to semiannual coupon notes following a Tax Event,
the Restated Principal Amount, plus accrued interest), including accrued and
unpaid Contingent Cash Interest, on all the Securities shall become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Securityholders. The Holders of a majority in aggregate
Principal Amount at Maturity of the Securities at the time outstanding, by
notice to the Trustee (and without notice to any other
41
Securityholder) may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except nonpayment of the Issue Price
plus accrued Original Issue Discount and any accrued and unpaid cash interest
(or, if the Securities have been converted to semiannual coupon notes following
a Tax Event, the Restated Principal Amount, plus accrued interest), including
accrued and unpaid Contingent Cash Interest, that have become due solely as a
result of acceleration and if all amounts due to the Trustee under Section 7.07
hereof have been paid. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.
SECTION 6.03 Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of the Issue Price plus accrued Original Issue Discount and any accrued and
unpaid cash interest (or, if the Securities have been converted to semiannual
coupon notes following a Tax Event, the Restated Principal Amount, plus accrued
interest), including accrued and unpaid Contingent Cash Interest, on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.
The Trustee may maintain a proceeding even if the Trustee does not
possess any of the Securities or does not produce any of the Securities in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of, or acquiescence in, the
Event of Default. Except as set forth in Section 2.07 hereof, no remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04 Waiver of Past Defaults. Subject to Section 6.02, the
Holders of a majority in aggregate Principal Amount at Maturity of the
Securities at the time outstanding, by notice to the Trustee (and without notice
to any other Securityholder), may waive an existing Default and its consequences
except (a) an Event of Default described in Section 6.01(a) or (b), (b) a
Default in respect of a provision that under Section 9.02 cannot be amended
without the consent of each Securityholder affected or (c) a Default which
constitutes a failure to convert any Security in accordance with the terms of
Article 11. When a Default is waived, it is deemed cured, but no such waiver
shall extend to any subsequent or other Default or impair any consequent right.
This Section 6.04 shall be in lieu of Section 316(a)1(B) of the TIA and such
Section 316(a)1(B) is hereby expressly excluded from this Indenture, as
permitted by the TIA.
SECTION 6.05 Control by Majority. The Holders of a majority in
aggregate Principal Amount at Maturity of the Securities at the time outstanding
may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or power conferred on
the Trustee. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture or that the Trustee determines in good
faith is unduly prejudicial to the rights of other Securityholders or would
involve the Trustee in personal liability unless the Trustee is offered
indemnity satisfactory to it. This Section 6.05 shall be in lieu of Section
316(a)1(A) of the TIA and such Section 316(a)1(A) is hereby expressly excluded
from this Indenture, as permitted by the TIA.
SECTION 6.06 Limitation on Suits. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:
42
(a) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(b) the Holders of at least 25% in aggregate Principal Amount at
Maturity of the Securities at the time outstanding make a written
request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer to the Trustee security or indemnity
satisfactory to the Trustee against any loss, liability or
expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of such notice, request and offer of security or
indemnity; and
(e) the Holders of a majority in aggregate Principal Amount at
Maturity of the Securities at the time outstanding do not give
the Trustee a direction inconsistent with the request during such
60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
any other Securityholder or to obtain a preference or priority over any other
Securityholder.
SECTION 6.07 Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of the Principal Amount at Maturity (or if the Securities have been
converted to semiannual coupon notes following a Tax Event pursuant to Article
10 hereof, the Restated Principal Amount, plus accrued cash interest), Issue
Price plus accrued Original Issue Discount, Redemption Price, Purchase Price,
Change in Control Purchase Price, or cash interest, including Contingent Cash
Interest, in respect of the Securities held by such Holder, on or after the
respective due dates expressed in the Securities or any Redemption Date, and to
convert the Securities in accordance with Article 11 hereof, or to bring suit
for the enforcement of any such payment on or after such respective dates or the
right to convert, shall not be impaired or affected adversely without the
consent of such Holder.
SECTION 6.08 Collection Suit by Trustee. If an Event of Default
described in Section 6.01(a) or (b) hereof occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Company for the whole amount owing with respect to the Securities and the
amounts provided for in Section 7.07 hereof.
SECTION 6.09 Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the Principal Amount at Maturity, Restated
Principal Amount, Issue Price plus accrued Original Issue Discount, cash
interest, including Contingent Cash Interest, Redemption Price, Purchase Price,
Change in Control Purchase Price shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company for the payment of any such amount)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
43
(a) to file and prove a claim for the whole amount of the Principal
Amount at Maturity, Restated Principal Amount, Issue Price plus accrued Original
Issue Discount, cash interest, including Contingent Cash Interest, Redemption
Price, Purchase Price or Change in Control Purchase Price (or, if the Securities
have been converted to semiannual coupon notes following a Tax Event, the
Restated Principal Amount, plus accrued interest), as the case may be, and to
file such other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel or any other amounts due the Trustee under Section 7.07 hereof) and
of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10 Priorities. If the Trustee collects any money pursuant
to this Article 6, it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for the Principal Amount at Maturity, Restated Principal
Amount, Issue Price plus accrued Original Issue Discount, cash
interest, including Contingent Cash Interest, Redemption Price,
Purchase Price or Change in Control Purchase Price (or, if the
Securities have been converted to semiannual coupon notes following a
Tax Event, the Restated Principal Amount, plus accrued cash interest),
as the case may be, ratably, without preference or priority of any
kind, according to such amounts due and payable on the Securities; and
THIRD: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder and the Company a
notice that states the record date, the payment date and the amount to be paid.
SECTION 6.11 Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or
44
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant (other than the Trustee) in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in aggregate Principal Amount at Maturity of the
Securities at the time outstanding. This Section 6.11 shall be in lieu of
Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded
from this Indenture, as permitted by the TIA.
SECTION 6.12 Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, which would prohibit or
forgive the Company from paying all or any portion of the Principal Amount at
Maturity, Restated Principal Amount, Issue Price plus accrued Original Issue
Discount, cash interest, including Contingent Cash Interest, Redemption Price,
Purchase Price or Change in Control Purchase Price (or, if the Securities have
been converted to semiannual coupon notes following a Tax Event, the Restated
Principal Amount, plus accrued interest), as contemplated herein, or which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
ARTICLE 7
TRUSTEE
SECTION 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture, but in
case of any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the
45
requirements of this Indenture, but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated therein.
This Section 7.01(b) shall be in lieu of Section 315(a) of the TIA and such
Section 315(a) is hereby expressly excluded from this Indenture, as permitted by
the TIA.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph (c) does not limit the effect of paragraph (b) of
this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts;
and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
Subparagraphs (c)(i), (ii) and (iii) of this Section 7.01 shall be in lieu of
Sections 315(d)(1), 315(d)(2) and 315(d)(3) of the TIA and such Sections
315(d)(1), 315(d)(2) and 315(d)(3) are hereby expressly excluded from this
Indenture, as permitted by the TIA.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any right
or power or extend or risk its own funds or otherwise incur any financial
liability unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
(acting in any capacity hereunder) shall be under no liability for interest on
any money received by it hereunder unless otherwise agreed in writing with the
Company.
SECTION 7.02 Rights of Trustee. Subject to its duties and
responsibilities under the provisions of Section 7.01 hereof, and, except as
expressly excluded from this Indenture pursuant to said Section 7.01 hereof,
subject also to its duties and responsibilities under the TIA:
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
46
(b) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers' Certificate;
(c) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(d) the Trustee shall not be liable for any action taken, suffered or
omitted to be taken by it in good faith which it believes to be authorized or
within its rights or powers conferred under this Indenture;
(e) the Trustee may consult with counsel selected by it and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel;
(f) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities which may be
incurred therein or thereby;
(g) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a resolution of the
Board of Directors;
(h) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney
at the sole cost of the Company and shall incur no liability or additional
liability of any kind by reason of such inquiry or investigation;
(i) the Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a
default is received by a Responsible Officer of the Trustee at the Corporate
Trust Office of the Trustee, and such notice references the Securities and this
Indenture;
(j) the rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be
47
enforceable by, the Trustee in each of its capacities hereunder, and to each
agent, custodian and other Person employed to act hereunder;
(k) the Trustee may request that the Company deliver an Officers'
Certificate setting forth the names of individuals and/or titles of officers
authorized at such time to take specified actions pursuant to this Indenture,
which Officers' Certificate may be signed by any person authorized to sign an
Officers' Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superseded; and
(l) the permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as duties.
SECTION 7.03 Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, Conversion
Agent or co-registrar may do the same with like rights. However, the Trustee
must comply with Sections 7.10 and 7.11 hereof.
SECTION 7.04 Trustee's Disclaimer. The Trustee makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use or application of
the proceeds from the Securities, it shall not be responsible for any statement
in the registration statement for the Securities under the Securities Act or in
the Indenture or the Securities (other than its certificate of authentication),
or the determination as to which beneficial owners are entitled to receive any
notices hereunder.
SECTION 7.05 Notice of Defaults. If a Default occurs and if it is
known to a Responsible Officer of the Trustee, the Trustee shall give to each
Securityholder notice of the Default within 90 days after such Responsible
Officer obtains knowledge of such Default unless such Default shall have been
cured or waived before the giving of such notice. Except in the case of a
Default described in Section 6.01(a) or (b) hereof, the Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Securityholders.
The second sentence of this Section 7.05 shall be in lieu of the proviso to
Section 315(b) of the TIA and such proviso is hereby expressly excluded from
this Indenture, as permitted by the TIA. The Trustee shall not be deemed to have
knowledge of a Default unless a Responsible Officer of the Trustee has received
written notice of such Default.
SECTION 7.06 Reports by Trustee to Holders. Within 60 days after each
May 15 beginning with the May 15 following the date of this Indenture, the
Trustee shall mail to each Securityholder a brief report dated as of such May 15
that complies with TIA Section 313(a), if required by such Section 313(a). The
Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC (but only if this Indenture is then qualified under
the TIA) and with each securities exchange, if any, on which the Securities are
listed. The Company agrees to promptly notify the
48
Trustee whenever the Securities become listed on any securities exchange and of
any delisting thereof.
SECTION 7.07 Compensation and Indemnity. The Company agrees:
(a) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time agree in
writing for all services rendered by it hereunder (which compensation shall not
be limited (to the extent permitted by law) by any provision of law in regard to
the compensation of a trustee of an express trust);
(b) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses, advances and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(c) to indemnify the Trustee and its agents for, and to hold them
harmless against, any loss, liability or expense (including reasonable
attorney's fees and expenses and taxes (other than taxes based upon, measured by
or determined by the income of the Trustee)) incurred without negligence or bad
faith on their part, arising out of or in connection with the acceptance or
administration of this trust, including the reasonable costs and expenses of
defending itself against any claim (whether asserted by the Company or any
Holder or any other Person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
To secure the Company's payment obligations in this Section 7.07, the
Holders shall have been deemed to have granted to the Trustee a lien prior to
the Securities on all money or property held or collected by the Trustee, except
that held in trust to pay the Principal Amount at Maturity, Issue Price plus
accrued Original Issue Discount, Redemption Price, Purchase Price, Change in
Control Purchase Price or cash interest, if any, as the case may be, on
particular Securities.
The Company's payment obligations pursuant to this Section 7.07 shall
survive the discharge of this Indenture and the resignation or removal of the
Trustee. When the Trustee incurs expenses after the occurrence of a Default
specified in Section 6.01(e) or (f) hereof, the expenses including the
reasonable charges and expenses of its counsel, are intended to constitute
expenses of administration under any Bankruptcy Law.
SECTION 7.08 Replacement of Trustee. The Trustee may resign by so
notifying the Company; provided, however, no such resignation shall be effective
until a successor Trustee has accepted its appointment pursuant to this Section
7.08. The Holders of a majority in aggregate Principal Amount at Maturity of the
Securities at the time outstanding may remove the Trustee by so notifying the
Trustee and the Company. The Company shall remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged bankrupt or insolvent;
49
(c) a receiver or public officer takes charge of the Trustee or its
property; or
(d) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint, by
resolution of its Board of Directors, a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company satisfactory in form and
substance to the retiring Trustee and the Company. Thereupon the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Securityholders. The retiring Trustee shall promptly transfer all property held
by it as Trustee to the successor Trustee, subject to the lien provided for in
Section 7.07 hereof.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in aggregate Principal Amount at Maturity of the
Securities at the time outstanding may petition any court of competent
jurisdiction at the expense of the Company for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
SECTION 7.09 Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation, the resulting,
surviving or transferee corporation without any further act shall be the
successor Trustee.
SECTION 7.10 Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The Trustee
(or its parent holding company) shall have a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition. Nothing herein contained shall prevent the Trustee from filing with
the Commission the application referred to in the penultimate paragraph of TIA
Section 310(b).
SECTION 7.11 Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01 Discharge of Liability on Securities. When (a) the
Company delivers to the Trustee all outstanding Securities (other than
Securities replaced
50
pursuant to Section 2.07 hereof) for cancellation or (b) all outstanding
Securities have become due and payable and the Company irrevocably deposits with
the Trustee, the Paying Agent (if the Paying Agent is not the Company or any of
its Affiliates) or the Conversion Agent cash or, if expressly permitted by the
terms of the Securities or the Indenture, Common Stock sufficient to pay all
amounts due and owing on all outstanding Securities (other than Securities
replaced pursuant to Section 2.07 hereof), and if in either case the Company
pays all other sums payable hereunder by the Company, then this Indenture shall,
subject to Section 7.07 hereof, cease to be of further effect. The Trustee shall
join in the execution of a document prepared by the Company acknowledging
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and Opinion of Counsel and at the cost
and expense of the Company.
SECTION 8.02 Repayment to the Company. The Trustee and the Paying
Agent shall return to the Company upon written request any money or securities
held by them for the payment of any amount with respect to the Securities that
remains unclaimed for two years, subject to applicable unclaimed property law.
After return to the Company, Holders entitled to the money or securities must
look to the Company for payment as general creditors unless an applicable
abandoned property law designates another person and the Trustee and the Paying
Agent shall have no further liability to the Securityholders with respect to
such money or securities for that period commencing after the return thereof.
ARTICLE 9
AMENDMENTS
SECTION 9.01 Without Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without the consent of any
Securityholder:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to comply with Article 5 or Section 11.14 hereof;
(c) to secure the Company's obligations under the Securities and this
Indenture;
(d) to add to the Company's covenants for the benefit of the
Securityholders or to surrender any right or power conferred upon the
Company;
(e) to make any change to comply with the TIA, or any amendment
thereto, or to comply with any requirement of the SEC in connection with
the qualification of the Indenture under the TIA, or as necessary in
connection with the registration of the Securities under the Securities
Act; or
(f) to make any change that does not adversely affect the rights of
any Holders (it being understood that any amendment described in clause (a)
of this Section 9.01 made solely to conform this Indenture to the final
offering memorandum provided to investors in connection with the initial
offering of the Securities will be deemed not to adversely affect the
rights or interests of Holders).
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SECTION 9.02 With Consent of Holders. With the written consent of the
Holders of at least a majority in aggregate Principal Amount at Maturity of the
Securities at the time outstanding, the Company and the Trustee may amend this
Indenture or the Securities. However, without the consent of each Securityholder
affected, an amendment to this Indenture or the Securities may not:
(a) reduce the percentage in Principal Amount at Maturity of
Securities whose Holders must consent to an amendment;
(b) make any change in the manner or rate of accrual of Original
Issue Discount or cash interest, including Contingent Cash Interest, reduce
the rate of cash interest, including Contingent Cash Interest, referred to
in paragraph 1 of the Securities, or extend the time for payment of
Original Issue Discount or cash interest, including Contingent Cash
Interest, on any Security;
(c) reduce the Principal Amount at Maturity, Restated Principal
Amount, Issue Price, accrued Original Issue Discount or cash interest, with
respect to any Security, or extend the Stated Maturity of any Security;
(d) reduce the Redemption Price, Purchase Price or Change in Control
Purchase Price of any Security;
(e) make any Security payable in money or securities other than that
stated in the Security;
(f) make any change in Article 10 hereof, or this Section 9.02,
except to increase any percentage set forth therein;
(g) make any change that adversely affects the right to convert any
Security;
(h) make any change that adversely affects the right to require the
Company to purchase the Securities in accordance with the terms thereof and
this Indenture; or
(i) impair the right to institute suit for the enforcement of any
payment with respect to, or conversion of, the Securities.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section 9.02 becomes effective, the
Company shall mail to each Holder a notice briefly describing the amendment.
SECTION 9.03 Compliance with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article 9 shall comply with the TIA.
SECTION 9.04 Revocation and Effect of Consents, Waivers and Actions.
Until an amendment, consent, waiver or other action by Holders becomes
effective, a consent
52
thereto by a Holder of a Security hereunder is a continuing consent by the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same obligation as the consenting Holder's Security, even if
notation of the amendment, consent, waiver or other action is not made on the
Security. However, any such Holder or subsequent Holder may revoke the consent
as to such Holder's Security or portion of the Security if the Trustee receives
the notice of revocation before the date as of which the amendment, consent,
waiver or action is made effective. After an amendment, consent, waiver or
action becomes effective, it shall bind every Securityholder.
SECTION 9.05 Notation on or Exchange of Securities. Securities
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article 9 may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new Securities so
modified as to conform, in the opinion of the Board of Directors, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for outstanding
Securities.
SECTION 9.06 Trustee to Sign Supplemental Indentures. The Trustee
shall sign any supplemental indenture authorized pursuant to this Article 9 if
the amendment contained therein does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may, but need
not, sign such supplemental indenture. In signing such supplemental indenture
the Trustee shall receive, and (subject to the provisions of Section 7.01
hereof) shall be fully protected in relying upon, in addition to the documents
required by Section 14.04 hereof, an Officers' Certificate and an Opinion of
Counsel stating that such amendment is authorized or permitted by this
Indenture.
SECTION 9.07 Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
ARTICLE 10
SPECIAL TAX EVENT CONVERSION
SECTION 10.01 Optional Conversion to Semiannual Coupon Note upon Tax
Event. From and after (a) the date of the occurrence of a Tax Event (the "Tax
Event Date") subsequent to May 14, 2007 and (b) the date the Company exercises
the option provided for in this Section 10.01, whichever is later (the "Option
Exercise Date"), at the option of the Company, interest in lieu of future
Original Issue Discount or cash interest shall accrue at the rate of 3% per
annum, calculated on a semiannual bond equivalent basis, on a Restated Principal
Amount, per $1,000 original Principal Amount at Maturity (the "Restated
Principal Amount") equal to the Issue Price plus Original Issue Discount accrued
through the Option Exercise Date and shall be payable semiannually on May 14 and
November 14 of each year (each an "Interest Payment Date") to Holders of record
at the close of business on the April 29 or October 30, respectively, (each a
"Regular Record Date") immediately preceding such Interest Payment Date.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months and
53
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the Option Exercise Date. Within 15 days of the
occurrence of a Tax Event, the Company shall deliver a written notice of such
Tax Event by facsimile and first-class mail to the Trustee and within 15 days of
its exercise of such option the Company shall deliver a written notice of the
Option Exercise Date by facsimile and first-class mail to the Trustee and by
first class mail to the Holders of the Securities. From and after the Option
Exercise Date, (a) the Company shall be obligated to pay at Stated Maturity, in
lieu of the Principal Amount at Maturity of a Security, the Restated Principal
Amount thereof plus accrued and unpaid interest on such Security and (b) "Issue
Price and accrued Original Issue Discount," "Issue Price plus Original Issue
Discount" or similar words, as used herein, shall mean Restated Principal Amount
plus accrued and unpaid interest with respect to any Security. Securities
authenticated and delivered after the Option Exercise Date may, and shall if
required by the Trustee, bear a notation in a form approved by the Trustee as to
the conversion of the Securities to semiannual coupon notes. No other changes to
this Indenture shall result as a result of the events described in this Section
10.01.
ARTICLE 11
CONVERSION
SECTION 11.01 Conversion Privilege. A Holder of a Security may convert
such Security into shares of Common Stock at any time prior to the close of
business on May 14, 2032, subject to the provisions of this Article 11 and
paragraph 9 of the Securities. The number of shares of Common Stock issuable
upon conversion of a Security per $1,000 of Principal Amount at Maturity thereof
(the "Conversion Rate") shall be determined in accordance with the provisions of
paragraph 9 of the Securities.
A Holder may convert a portion of the Principal Amount at Maturity of
a Security if the portion is $1,000 or an integral multiple of $1,000.
Provisions of this Indenture that apply to conversion of all of a Security also
apply to conversion of a portion of a Security.
SECTION 11.02 Conversion Procedure. To convert a Security, a Holder
must satisfy the requirements in paragraph 9 in the Securities. The date on
which the Holder satisfies all those requirements is the conversion date (the
"Conversion Date"). As soon as practicable after the Conversion Date but in any
event no later than the seventh Business Day following the Conversion Date, the
Company shall deliver to the Holder, through the Conversion Agent, a certificate
for the number of full shares of Common Stock issuable upon the conversion and
cash in lieu of any fractional share determined pursuant to Section 11.03
hereof. The Company shall determine such full number of shares and the amounts
of the required cash with respect to any fractional share, and shall set forth
such information in an Officer's certificate delivered to the Conversion Agent.
The Conversion Agent shall have no duties under this paragraph unless and until
it has received such certificate.
The Person in whose name the certificate is registered shall be
treated as a stockholder of record on and after the Conversion Date; provided,
however, that no surrender of a Security on any date when the stock transfer
books of the Company shall be closed shall be effective to constitute the Person
or Persons entitled to receive the shares of Common Stock upon such conversion
as the record holder or holders of such shares of Common Stock on such
54
date, but such surrender shall be effective to constitute the Person or Persons
entitled to receive such shares of Common Stock as the record holder or holders
thereof for all purposes at the close of business on the next succeeding day on
which such stock transfer books are open; such conversion shall be at the
Conversion Rate in effect on the date that such Security shall have been
surrendered for conversion, as if the stock transfer books of the Company had
not been closed. Upon conversion of a Security, such Person shall no longer be a
Holder of such Security.
No payment or adjustment will be made for dividends on, or other
distributions with respect to, any Common Stock except as provided in this
Article 11. On conversion of a Security, that portion of accrued Original Issue
Discount and cash interest, including Contingent Cash Interest, if any,
attributable to the period from the Issue Date of the Security through the
Conversion Date, with respect to the converted Security shall not be cancelled,
extinguished or forfeited, but rather shall be deemed to be paid in full to the
Holder thereof through delivery of the Common Stock (together with the cash
payment, if any, in lieu of fractional shares) in exchange for the Security
being converted pursuant to the provisions hereof; and the fair market value of
such shares of Common Stock (together with any such cash payment in lieu of
fractional shares) shall be treated as issued, to the extent thereof, first in
exchange for accrued Original Issue Discount and cash interest, including
Contingent Cash Interest, if any, through the Conversion Date, and the balance,
if any, of such fair market value of such Common Stock (and any such cash
payment) shall be treated as issued in exchange for the Issue Price of the
Security being converted pursuant to the provisions hereof. Notwithstanding the
foregoing, accrued cash interest will be payable upon conversion of Securities
made concurrently with or after acceleration of Securities following an Event of
Default.
If the Holder converts more than one Security at the same time, the
number of shares of Common Stock issuable upon the conversion shall be based on
the total Principal Amount at Maturity of the Securities converted.
A Security surrendered for conversion based on (a) the Common Stock
price may be surrendered for conversion until the close of business on May 14,
2032, (b) the Security being called for redemption may be surrendered for
conversion at any time prior to the close of business on the second Business Day
immediately preceding the Redemption Date, even if it is not otherwise
convertible at such time, (c) a credit downgrade may be surrendered for
conversion until the close of business on any Business Day during the period of
the continuance of the credit downgrade as more fully described in paragraph 9
of the Security, and (d) upon the occurrence of certain corporate transactions
more fully described in paragraph 9 of the Security may be surrendered for
conversion at any time from and after the date which is 15 days prior to the
anticipated effective date of such transaction until 15 days after the actual
date of such transaction, and if such day is not a Business Day, the next
occurring Business Day following such day.
Upon surrender of a Security that is converted in part, the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder, a
new Security in an authorized denomination equal in Principal Amount at Maturity
to the unconverted portion of the Security surrendered.
55
SECTION 11.03 Fractional Shares. The Company will not issue a
fractional share of Common Stock upon conversion of a Security. Instead, the
Company will deliver cash for the current market value of the fractional share.
The current market value of a fractional share shall be determined, to the
nearest 1/1,000th of a share, by multiplying the per share Sale Price of the
Common Stock, on the last Trading Day prior to the Conversion Date, by the
fractional amount and rounding the product to the nearest whole cent.
SECTION 11.04 Taxes on Conversion. If a Holder converts a Security,
the Company shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of shares of Common Stock upon the conversion. However, the
Holder shall pay any such tax which is due because the Holder requests the
shares to be issued in a name other than the Holder's name and any income tax
which is imposed on the Holder as a result of the conversion. The Conversion
Agent may refuse to deliver the certificates representing the Common Stock being
issued in a name other than the Holder's name until the Conversion Agent
receives a sum sufficient to pay any tax which will be due because the shares
are to be issued in a name other than the Holder's name. Nothing herein shall
preclude the Company from any tax withholding or directing the withholding of
any tax required by law or regulations.
SECTION 11.05 Company to Provide Stock. The Company shall, prior to
issuance of any Securities under this Article 11, and from time to time as may
be necessary, reserve out of its authorized but unissued Common Stock a
sufficient number of shares of Common Stock to permit the conversion of the
Securities.
All shares of Common Stock delivered upon conversion of the Securities
shall be newly issued shares or treasury shares, shall be duly and validly
issued and fully paid and nonassessable and shall be free from preemptive rights
and free of any lien or adverse claim created by the Company.
The Company will endeavor promptly to comply with all federal and
state securities laws regulating the offer and delivery of shares of Common
Stock upon conversion of Securities, if any, and will list or cause to have
quoted such shares of Common Stock on each national securities exchange or in
the over-the-counter market or such other market on which the Common Stock is
then listed or quoted.
SECTION 11.06 Adjustment for Change in Capital Stock. Except as set
forth in Section 11.14 hereof, if, after the Issue Date of the Securities, the
Company:
(a) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock or other Capital Stock;
(b) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(c) pays a dividend or makes a distribution of its Common Stock in
shares of its Capital Stock (other than Common Stock or rights, warrants or
options for its Capital Stock);
(d) combines its outstanding shares of Common Stock into a smaller
number of shares; or
56
(e) issues by reclassification of its Common Stock any shares of its
Capital Stock (other than rights, warrants or options for its Capital Stock);
then the conversion privilege and the Conversion Rate in effect immediately
prior to such action shall be adjusted so that the Holder of a Security
thereafter converted may receive the number of shares or other units of Capital
Stock of the Company which such Holder would have owned immediately following
such action if such Holder had converted the Security immediately prior to such
action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
SECTION 11.07 Adjustment for Rights Issue. Except as set forth in
Sections 11.14 and 11.19 hereof, if after the Issue Date, the Company
distributes any rights, warrants or options to all holders of its Common Stock
entitling them, for a period expiring within 60 days of the Issue Date, to
purchase shares of Common Stock at a price per share less than the Sale Price of
the Common Stock as of the Time of Determination, the Conversion Rate shall be
adjusted in accordance with the formula:
R' = R (O + N)
(O + [(N x P)/M])
where:
R' = the adjusted Conversion Rate.
R = the current Conversion Rate.
O = the number of shares of Common Stock outstanding on the record date for
the distribution to which this Section 11.07 is being applied.
N = the number of additional shares of Common Stock offered pursuant to the
distribution.
P = the offering price per share of the additional shares.
M = the Average Sale Price.
The adjustment shall become effective immediately after the record
date for the determination of shareholders entitled to receive the rights,
warrants or options to which this Section 11.07 applies. If all of the shares of
Common Stock subject to such rights, warrants or options have not been issued
when such rights, warrants or options expire, then the Conversion Rate shall
promptly be readjusted to the Conversion Rate which would then be in effect had
the adjustment upon the issuance of such rights, warrants or options been made
on the basis of the actual number of shares of Common Stock issued upon the
exercise of such rights, warrants or options.
57
No adjustment shall be made under this Section 11.07 if the
application of the formula stated above in this Section 11.07 would result in a
value of R' that is equal to or less than the value of R.
SECTION 11.08 Adjustment for Other Distributions. If, after the Issue
Date of the Securities, the Company distributes to all holders of its Common
Stock any of its assets or evidence of indebtedness or any rights, warrants or
options to purchase securities of the Company (including securities or cash, but
excluding (x) distributions of Capital Stock referred to in Section 11.06 hereof
and distributions of rights, warrants or options referred to in Section 11.07
hereof and (y) cash dividends or other cash distributions that are paid out of
consolidated current net earnings or earnings retained in the business as shown
on the books of the Company unless such cash dividends or other cash
distributions are Extraordinary Cash Dividends), the Conversion Rate shall be
adjusted, in accordance with the formula:
R' = R x M
M - F
where:
R' = the adjusted Conversion Rate.
R = the current Conversion Rate.
M = the Average Sale Price.
F = the fair market value (on the record date for the distribution to which
this Section 11.08 applies) of the assets, securities, rights, warrants or
options to be distributed in respect of each share of Common Stock in the
distribution to which this Section 11.08 is being applied (including, in the
case of cash dividends or other cash distributions giving rise to an adjustment,
all such cash distributed concurrently).
The Board of Directors shall determine fair market values for the
purposes of this Section 11.08.
The adjustment shall become effective immediately after the record
date for the determination of shareholders entitled to receive the distribution
to which this Section 11.08 applies.
For purposes of this Section 11.08, the term "Extraordinary Cash
Dividend" shall mean any cash dividend or distribution with respect to the
Common Stock the amount of which, together with the aggregate amount of cash
dividends on the Common Stock to be aggregated with such cash dividend in
accordance with the provisions of this paragraph, equals or exceeds the
threshold percentage set forth in item (a) below. For purposes of item (a)
below, the "Ex-Dividend Measurement Period" with respect to a cash dividend on
the Common Stock shall mean the 365 consecutive day period ending on the date
prior to the Ex-Dividend Time with respect to such cash dividend, and the
"Relevant Cash Dividends" with respect to a cash dividend on the Common Stock
shall mean the cash dividends on the Common Stock with Ex-Dividend Times
occurring in the Ex-Dividend Measurement Period.
58
(a) If, upon the date prior to the Ex-Dividend Time with respect to a
cash dividend on the Common Stock, the aggregate amount of such
cash dividend together with the amounts of all Relevant Cash
Dividends equals or exceeds on a per share basis 5% of the Sale
Price of the Common Stock on the last Trading Day preceding the
date of declaration by the Board of Directors of the cash
dividend or distribution with respect to which this provision is
being applied, then such cash dividend together with all Relevant
Cash Dividends, shall be deemed to be an Extraordinary Cash
Dividend and for purposes of applying the formula set forth above
in this Section 11.08, the value of "F" shall be equal to (y) the
aggregate amount of such cash dividend together with the amount
of all Relevant Cash Dividends, minus (z) the aggregate amount of
all Relevant Cash Dividends for which a prior adjustment in the
Conversion Rate was previously made under this Section 11.08.
In making the determinations required by item (a) above, the amount of
cash dividends paid on a per share basis and the amount of any
Relevant Cash Dividends specified in item (a) above, shall be
appropriately adjusted to reflect the occurrence during such period of
any event described in Section 11.06 hereof.
SECTION 11.09 When Adjustment May Be Deferred. No adjustment in the
Conversion Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Rate. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment and all adjustments that are made and carried forward shall be taken
in the aggregate in order to determine if the 1% threshold is met.
All calculations under this Article 11 shall be made to the nearest
cent or to the nearest 1/1,000th of a share, as the case may be.
SECTION 11.10 When No Adjustment Required. No adjustment need be made
for a transaction referred to in Section 11.06, 11.07, 11.08 or 11.14 hereof if
Securityholders may participate in the transaction. Such participation by
Securityholders may include participation without conversion or upon conversion,
provided that if such participation is upon conversion, an adjustment shall be
made at such time as the Securityholders are no longer entitled to participate.
No adjustment need be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.
Unless otherwise required by a provision of this Article 11, no
adjustment need be made for a change in the par value or no par value of the
Common Stock.
To the extent the Securities become convertible pursuant to this
Article 11 into cash, no adjustment need be made thereafter as to the cash.
Interest will not accrue on the cash.
No adjustment will be made pursuant to this Article 11 that would
result, through the application of two or more provisions hereof, in the
duplication of any adjustment.
59
SECTION 11.11 Notice of Adjustment. Whenever the Conversion Rate is
adjusted, the Company shall promptly mail to Securityholders a notice of the
adjustment. The Company shall file with the Trustee and the Conversion Agent
such notice and a certificate from the Company's independent public accountants
briefly stating the facts requiring the adjustment and the manner of computing
it. Upon receipt by it of such notice, and at the written request of the
Company, the Conversion Agent will promptly mail such notice to Securityholders
at the Company's expense. The certificate shall be conclusive evidence that the
adjustment is correct. Neither the Trustee nor any Conversion Agent shall be
under any duty or responsibility with respect to any such certificate except to
exhibit the same to any Holder desiring inspection thereof.
SECTION 11.12 Voluntary Increase. The Company from time to time may
increase the Conversion Rate by any amount for any period of time. Whenever the
Conversion Rate is increased, the Company shall mail to Securityholders and file
with the Trustee and the Conversion Agent a notice of the increase. The Company
shall mail the notice at least 15 days before the date the increased Conversion
Rate takes effect. The notice shall state the increased Conversion Rate and the
period it will be in effect.
A voluntary increase of the Conversion Rate does not change or adjust
the Conversion Rate otherwise in effect for purposes of Section 11.06, 11.07 or
11.08 or 11.14 hereof.
SECTION 11.13 Notice of Certain Transactions. If:
(a) the Company takes any action that would require an adjustment in
the Conversion Rate pursuant to Section 11.06, 11.07 or 11.08 hereof (unless no
adjustment is to occur pursuant to Section 11.10 hereof); or
(b) the Company takes any action that would require a supplemental
indenture pursuant to Section 11.14; or
(c) there is a liquidation or dissolution of the Company;
then the Company shall mail to Securityholders and file with the Trustee and the
Conversion Agent a notice stating the proposed record date for a dividend or
distribution or the proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, binding share exchange, transfer,
liquidation or dissolution. The Company shall file and mail the notice at least
15 days before such date. Failure to file or mail the notice or any defect in it
shall not affect the validity of the transaction.
SECTION 11.14 Reorganization of Company; Special Distributions. If
the Company is a party to a transaction subject to Article 5 hereof (other than
a sale of all or substantially all of the assets of the Company in a transaction
in which the holders of Common Stock immediately prior to such transaction do
not receive securities, cash, property or other assets of the Company or any
other Person) or a merger or binding share exchange which reclassifies or
changes its outstanding Common Stock, the Person obligated to deliver
securities, cash or other assets upon conversion of Securities shall, no later
than the closing date of such transaction, enter into a supplemental indenture.
If the issuer of securities deliverable upon
60
conversion of Securities is an Affiliate of the successor Company, that issuer
shall, no later than the closing date of such transaction, join in the
supplemental indenture.
The supplemental indenture shall provide that the Holder of a Security
may convert it into the kind and amount of securities, cash or other assets
which such Holder would have received immediately after the consolidation,
merger, binding share exchange or transfer if such Holder had converted the
Security immediately before the effective date of the transaction, assuming (to
the extent applicable) that such Holder was not a constituent Person or an
Affiliate of a constituent Person to such transaction. The supplemental
indenture shall provide for adjustments which shall be as nearly equivalent as
may be practical to the adjustments provided for in this Article 11. The
successor Company shall mail to Securityholders a notice briefly describing the
supplemental indenture.
If this Section applies, neither Section 11.06 nor 11.07 hereof
applies.
If the Company makes a distribution to all holders of its Common Stock
of any of its assets, or debt securities or any rights, warrants or options to
purchase securities of the Company that would otherwise result in an adjustment
in the Conversion Rate pursuant to the provisions of Section 11.08 hereof, then,
from and after the record date for determining the holders of Common Stock
entitled to receive the distribution, a Holder of a Security that converts such
Security in accordance with the provisions of this Indenture shall upon such
conversion be entitled to receive, in addition to the shares of Common Stock
into which the Security is convertible, the kind and amount of securities, cash
or other assets comprising the distribution that such Holder would have received
if such Holder had converted the Security immediately prior to the record date
for determining the holders of Common Stock entitled to receive the
distribution.
SECTION 11.15 Company Determination Final. Any determination that the
Company or the Board of Directors must make pursuant to Section 11.03, 11.06,
11.07, 11.08, 11.09, 11.10, 11.14 or 11.17 hereof is conclusive.
SECTION 11.16 Trustee's Adjustment Disclaimer. The Trustee has no
duty to determine when an adjustment under this Article 11 should be made, how
it should be made or what it should be. The Trustee has no duty to determine
whether a supplemental indenture under Section 11.14 hereof need be entered into
or whether any provisions of any supplemental indenture are correct. The Trustee
shall not be accountable for and makes no representation as to the validity or
value of any securities or assets issued upon conversion of Securities. The
Trustee shall not be responsible for the Company's failure to comply with this
Article 11. Each Conversion Agent (other than the Company or an Affiliate of the
Company) shall have the same protection under this Section 11.16 as the Trustee.
SECTION 11.17 Simultaneous Adjustments. In the event that this
Article 11 requires adjustments to the Conversion Rate under more than one of
Sections 11.06, 11.07 or 11.08 hereof, and the record dates for the
distributions giving rise to such adjustments shall occur on the same date, then
such adjustments shall be made by applying, first, the provisions of Section
11.06 hereof, second, the provisions of Section 11.08 hereof and, third, the
provisions of Section 11.07 hereof.
61
SECTION 11.18 Successive Adjustments. After an adjustment to the
Conversion Rate under this Article 11, any subsequent event requiring an
adjustment under this Article 11 shall cause an adjustment to the Conversion
Rate as so adjusted.
SECTION 11.19 Rights Issued in Respect of Common Stock Issued Upon
Conversion. Each share of Common Stock issued upon conversion of Securities
pursuant to this Article 11 shall be entitled to receive the appropriate number
of common stock or preferred stock purchase rights, as the case may be (the
"Rights"), if any, that all shares of Common Stock are entitled to receive and
the certificates representing the Common Stock issued upon such conversion shall
bear such legends, if any, in each case as may be provided by the terms of any
shareholder rights agreement adopted by the Company, as the same may be amended
from time to time (in each case, a "Rights Agreement"). Provided that such
Rights Agreement requires that each share of Common Stock issued by the Company
(including those that might be issued upon conversion of Securities) at any time
prior to the distribution of separate certificates representing the Rights be
entitled to receive such Rights, then, notwithstanding anything else to the
contrary in this Article 11, there shall not be any adjustment to the conversion
privilege or Conversion Rate or any other term or provision of the Securities as
a result of the issuance of Rights, the distribution of separate certificates
representing the Rights, the exercise or redemption of such Rights in accordance
with any such Rights Agreement, or the termination or invalidation of such
Rights.
SECTION 11.20 Company's Right to Elect to Pay Cash or Common Stock.
In lieu of delivery of Common Stock upon notice of conversion of any Securities
(for all or any portion of the Securities), the Company may elect to pay holders
surrendering Securities an amount in cash per Security (or a portion of a
Security) equal to the Average Sale Price of Common Stock for the five
consecutive Trading Days immediately following either (a) the date of notice of
election to deliver cash as described below if the Company has not given notice
of redemption, or (b) the conversion date, in the case of conversion following
the notice of redemption specifying that the Company intends to deliver cash
upon conversion, in either case multiplied by the Conversion Rate in effect on
that date. The Company will inform the Holders through the Trustee no later than
two business days following the Conversion Date of its election to deliver
shares of Common Stock or to pay cash in lieu of delivery of Common Stock,
unless the Company has already informed holders of its election in connection
with its optional redemption of the Securities pursuant to Section 3.1 herein.
If the Company elects to deliver all of such payment in Common Stock, the Common
Stock will be delivered through the Conversion Agent no later than the fifth
business day following the Conversion Date. If the Company elects to pay all or
a portion of such payment in cash, the payment, including any delivery of Common
Stock, will be made to Holders surrendering Securities no later than the tenth
business day following the applicable conversion date. If an Event of Default
(other than a default in a cash payment upon conversion of the Securities) has
occurred and is continuing, the Company may not pay cash upon conversion of any
Security or portion of a Security (other than cash for fractional shares).
62
ARTICLE 12
PAYMENT OF INTEREST
SECTION 12.01 Interest Payments. Interest on any Security that is
payable in cash, and is punctually paid or duly provided for, on any applicable
payment date shall be paid to the person in whose name that Security is
registered at the close of business on the Record Date or accrual date, as the
case may be, for such interest at the office or agency of the Company maintained
for such purpose. Each installment of semiannual or contingent interest on any
Security shall be paid in same-day funds by transfer to an account maintained by
the payee located inside the United States, if the Trustee shall have received
proper wire transfer instructions from such payee not later than the related
Record Date or accrual date, as the case may be, or, if no such instructions
have been received, by check drawn on a bank in New York City mailed to the
payee at its address set forth on the Registrar's books. In the case of a
permanent Global Security, semiannual or contingent interest payable on any
applicable payment date will be paid to the Depositary, with respect to that
portion of such permanent Global Security held for its account by Cede & Co. for
the purpose of permitting such party to credit the interest received by it in
respect of such permanent Global Security to the accounts of the beneficial
owners thereof.
SECTION 12.02 Defaulted Interest. Except as otherwise specified with
respect to the Securities, any interest on any Security that is payable, but is
not punctually paid or duly provided for, within 30 days following any
applicable payment date (herein called "Defaulted Interest", which term shall
include any accrued and unpaid interest that has accrued on such defaulted
amount in accordance with paragraph 1 of the Securities), shall be paid by the
Company, at its election in each case (x) to the Holder as of Special Record
Date, as determined in accordance with clause (a) below, or (y) in the manner
set forth in clause (b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the persons in whose names the Securities are registered at the close of
business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall
notify the Trustee in writing of the amount of Defaulted Interest proposed
to be paid on each Security and the date of the proposed payment (which
shall not be less than 20 days after such notice is received by the
Trustee), and at the same time the Company shall deposit with the Trustee
an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit on or prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of
the persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date (the "Special Record
Date") for the payment of such Defaulted Interest which shall be not more
than 15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of the
notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at the expense of
the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first-class
postage prepaid, to each Holder of Securities at his address as it appears
on the list of Securityholders maintained pursuant to Section 2.05 hereof
not less than 10 days prior to such Special Record Date.
63
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been mailed as aforesaid, such Defaulted
Interest shall be paid to the persons in whose names the Securities are
registered at the close of business on such Special Record Date and shall
no longer be payable pursuant to the following clause (b) of this Section
12.02.
(b) The Company may make payment of any Defaulted Interest on the
Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this clause, such manner of payment shall be deemed practicable by the
Trustee.
SECTION 12.03 Interest Rights Preserved. Subject to the foregoing
provisions of this Article 12 and Section 2.06 hereof, each Security delivered
under this Indenture upon registration of transfer of or in exchange for or in
lieu of any other Security shall carry the rights to semiannual interest accrued
and unpaid, and to accrue, which were carried by such other Security.
ARTICLE 13
CONTINGENT CASH INTEREST
SECTION 13.01 Contingent Cash Interest. The Company shall make
Contingent Cash Interest payments to the Holders of Securities, as set forth in
Section 13.02 below, during any six month period commencing May 14 or November
14 beginning with the six-month period commencing on May 14, 2007 (each a
"Semiannual Period") if, but only if, the average of the Security Market Prices
of a Security for the five Trading Days in the relevant Five-Trading-Day
Measurement Period equals 120% or more of the Relevant Value of such Security.
During any Semiannual Period when Contingent Cash Interest is payable pursuant
to this section, each Contingent Cash Interest payment due and payable on each
$1,000 Principal Amount at Maturity shall be calculated for any quarterly period
within the applicable Semiannual Period, and in each instance shall equal the
greater of the applicable Conversion Rate at such time with respect to the
Securities as determined in accordance with Article 11 hereof and paragraph 9 of
the Securities, multiplied by the greater of (a) $0.105 and (b) the sum of all
Regular Cash Dividends paid by the Company per share on the Common Stock during
the applicable quarter of such Semiannual Period.
As used in this Article 13, "Five-Trading-Day Measurement Period"
means the five Trading Days ending on the third Trading Day immediately
preceding the first day of the applicable Semiannual Period; provided, however,
that if the Company declares a dividend on the Common Stock for which the record
date (the "Common Stock Record Date") falls prior to the first day of the next
Semiannual Period, but the payment date for the Common Stock falls within such
Semiannual Period, then, the "Five-Trading-Day Measurement Period" shall mean
the five Trading Days ending on the third Trading Day immediately preceding such
Common Stock Record Date. "Relevant Value" means the sum of the Issue Price, the
accrued Original Issue Discount and accrued cash interest, if any, on such
Security to the day immediately preceding the first day of the applicable
Semiannual Period. "Security Market Price" means, as
64
of any date of determination, the average of the secondary market bid quotations
per $1,000 Principal Amount at Maturity of Securities obtained by the Bid
Calculation Agent for $5 million Principal Amount at Maturity of Securities at
approximately 4:00 p.m., New York City time, on such determination date from
three independent nationally recognized securities dealers (none of which shall
be an Affiliate of the Company) selected by the Company; provided, however, if
(a) at least three such bids are not obtained by the Bid Calculation Agent or
(b) in the Company's reasonable judgment, the bid quotations are not indicative
of the secondary market value of the Securities as of such determination date,
then the Securities Market Price for such determination date shall equal the
product of (i) the Conversion Rate in effect as of such determination date
multiplied by (ii) the average Sale Price of the Common Stock for the five
Trading Days ending on such determination date, appropriately adjusted to take
into account the occurrence, during the period commencing on the first of such
Trading Days during such five Trading Day period and ending on such
determination date, of any event described in Section 11.06, 11.07 or 11.08
hereof (subject to the conditions set forth in Sections 11.08 and 11.10 hereof).
The Original Issue Discount of the Securities will continue to accrue
whether or not Contingent Cash Interest payments are made.
SECTION 13.02 Payment of Contingent Cash Interest; Contingent Cash
Interest Rights Preserved. If payable, Contingent Cash Interest shall be paid on
the last day of the applicable Semiannual Period (in each case, a "Contingent
Cash Interest Payment Date") or, if the Company pays a Regular Cash Dividend on
the Common Stock during a Semiannual Period, on the payment date for the related
Common Stock dividend. Contingent Cash Interest payments on any Security that
are payable, and are punctually paid or duly provided for, on any Contingent
Cash Interest Payment Date shall be paid to the Person who is the holder of that
Security on the 15th day preceding the last day of such Semiannual Period (the
"Contingent Cash Interest Record Date") or, if the company pays regular cash
dividends on the Common Stock during one quarter within such Semiannual Period,
the Common Stock Record Date. Each payment of Contingent Cash Interest on any
Security shall be paid (A) if such Security is held in the form of a Global
Note, in the same-day funds by transfer to an account maintained by the payee
located inside the United States, or (B) if such Security is held in the form of
a Certificated Note, by check, mailed to the address of such Holder as set forth
in the Security Register. In the case of a Global Note, interest payable on any
Contingent Cash Interest Payment date will be paid to the Depositary for the
purpose of permitting DTC to credit the interest received by it in respect of
such Global Note to the accounts of the beneficial owners thereof. If the
Company only pays a Regular Cash Dividend on the Common Stock during one quarter
within such Semiannual Period, the remaining Contingent Cash Interest payments
will accrue and be payable as of the 15th day preceding the last day of the
applicable Semiannual Period.
Upon determination that Holders of Securities will be entitled to
receive Contingent Cash Interest during a Semiannual Period, prior to the start
of such Semiannual Period, the Company will issue a press release and publish
such information on its website as soon as practicable.
SECTION 13.03 Bid Calculation Agent. The Bid Calculation Agent shall
solicit bids from securities dealers which the Company indicates that it
believes are willing to bid for the Securities. The Company initially appoints
the Trustee to act as the Bid Calculation
65
Agent. The Company may change the Bid Calculation Agent at its discretion;
provided, however, the Bid Calculation Agent may not be an Affiliate of the
Company.
ARTICLE 13A
TAX MATTERS
SECTION 13A.01 Tax Treatment. The parties hereto hereby agree, and
each Holder and any beneficial holder of a Security by its purchase of a
Security hereby agrees (in the absence of administrative pronouncement or
judicial ruling to the contrary):
(a) to treat the Securities as indebtedness of the Company for all
United States federal income tax purposes;
(b) to treat the Securities as debt instruments that are subject to
U.S. Treasury Regulation section 1.1275-4(b); and
(c) to treat any payment to and receipt by a Holder of Common Stock
upon conversion of a Security, or upon a purchase by the Company at the
option of the Holder of a Security where the Company elects to pay in
Common Stock, as a contingent payment under U.S. Treasury Regulation
section 1.1275-4(b).
SECTION 13A.02 Comparable Yield and Projected Payment Schedule. Solely
for purposes of applying U.S. Treasury Regulation section 1.1275-4 to the Notes:
(a) for United States Federal income tax purposes, the Company shall
accrue interest with respect to outstanding Securities as
original issue discount according to the "noncontingent bond
method," as set forth in U.S. Treasury Regulation section
1.1275-4(b) using a comparable yield of 6.90%, compounded
semiannually, and the projected payment schedule attached as
Annex 1 to this Indenture;
(b) the Company shall file with the Trustee promptly at the end of
each calendar year (i) a written notice specifying the amount of
original issue discount for United States federal income tax
purposes (including daily rates and accrual periods) accrued on
outstanding Securities as of the end of such year and (ii) such
other specific information relating to such original issue
discount that the Company determines to be relevant under the
Internal Revenue Code of 1986, as amended from time to time,
including the amount of any adjustment made under the
noncontingent bond method to account for the amount of any
difference between the amount of an actual payment and the amount
of a projected payment; and
(c) the Company acknowledges and agrees, and each Holder and any
beneficial holder of a Security, by its purchase of a Security
shall be deemed to acknowledge and agree, that (i) the comparable
yield and the projected payment schedule are determined on the
basis of an assumption of linear growth of stock price and a
constant growth in dividend yield, (ii) the comparable yield and
the projected payment schedule are not
66
determined for any purpose other than for the purpose of applying
U.S. Treasury Regulation section 1.1275-4(b)(4) to the Security
and (iii) the comparable yield and the projected payment schedule
do not constitute a projection or representation regarding the
actual amounts payable on the Securities.
ARTICLE 14
MISCELLANEOUS
SECTION 14.01 Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies, or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 14.02 Notices. Any request, demand, authorization, notice,
waiver, consent or communication shall be in writing and delivered in person or
delivery by courier guaranteeing overnight delivery or mailed by first-class
mail, postage prepaid, addressed as follows or transmitted by facsimile
transmission (confirmed by guaranteed overnight courier) to the following
facsimile numbers:
if to the Company:
Horace Mann Educators Corporation
1 Horace Mann Plaza
Springfield, IL 62715
Attention: General Counsel
Facsimile: (217) 788-5757
with a copy of any notice given pursuant to Article 6 hereof to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
The Company or the Trustee by notice given to the other in the manner
provided above may designate additional or different addresses for subsequent
notices or communications.
Any notice or communication given to a Securityholder shall be mailed
to the Securityholder, by first-class mail, postage prepaid, at the
Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not received by the addressee.
If the Company mails a notice or communication to the Securityholders,
it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion
Agent or co-registrar.
SECTION 14.03 Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar, the Paying Agent, the
Conversion Agent and anyone else shall have the protection of TIA Section
312(c).
SECTION 14.04 Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, such actions are authorized or permitted by this Indenture and
that all such conditions precedent have been complied with.
SECTION 14.05 Statements Required in Certificate or Opinion. Each
Officers' Certificate or Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Indenture shall include to the extent
required by the Trustee:
(a) a statement that each person making such Officers' Certificate or
Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
Officers' Certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of each such person, he has made
such examination or investigation as is necessary to enable such person to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
68
(d) a statement that, in the opinion of such person, such covenant or
condition has been complied with.
SECTION 14.06 Separability Clause. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 14.07 Rules by Trustee, Paying Agent, Conversion Agent and
Registrar. The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar, Conversion Agent and the Paying Agent may make
reasonable rules for their functions.
SECTION 14.08 Calculations. The calculation of the Purchase Price,
Change in Control Purchase Price, Conversion Rate, Market Price, Sale Price of
the Common Stock and each other calculation to be made hereunder shall be the
obligation of the Company. All calculations made by the Company as contemplated
pursuant to this Section 14.08 shall be final and binding on the Company and the
Holders absent manifest error. The Trustee, Paying Agent and Conversion Agent
shall not be obligated to recalculate, recompute or confirm any such
calculations.
SECTION 14.09 Legal Holidays. A "Legal Holiday" is any day other than
a Business Day. If any specified date (including a date for giving notice) is a
Legal Holiday, the action shall be taken on the next succeeding day that is not
a Legal Holiday, and, if the action to be taken on such date is a payment in
respect of the Securities, no Original Issue Discount or interest, if any, shall
accrue for the intervening period.
SECTION 14.10 GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THIS INDENTURE AND THE SECURITIES.
SECTION 14.11 No Recourse Against Others. A director, officer,
employee, agent, representative, stockholder or equity holder, as such, of the
Company shall not have any liability for any obligations of the Company under
the Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Securities.
SECTION 14.12 Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 14.13 Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One originally signed copy is enough to
prove this Indenture.
69
IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Indenture on behalf of the respective parties hereto as of the
date first above written.
HORACE MANN EDUCATORS CORPORATION
By: /s/ Peter H. Heckman
Name: Peter H. Heckman
Title: Executive V.P. & Chief Financial Officer
/s/ Ann Caparros
Name: Ann Caparros
Title: Corporate Secretary & General Counsel
Projected Interest Payment per
$1,000 Principal Amount at Maturity of
Period Ending Notes*
November 14, 2002 7.13
May 14, 2003 7.13
November 14, 2003 7.13
May 14, 2004 7.13
November 14, 2004 7.13
May 14, 2005 7.13
November 14, 2005 7.13
May 14, 2006 7.13
November 14, 2006 7.13
May 14, 2007 7.13
November 14, 2007 0
May 14, 2008 0
November 14, 2008 0
May 14, 2009 0
November 14, 2009 0
May 14, 2010 0
November 14, 2010 0
May 14, 2011 0
November 14, 2011 0
December 15, 2011 3.04
* The comparable yield and the schedule of projected payments are determined
on the basis of an assumption of linear growth of the stock price and a constant
growth in dividend yield and are not determined for any purpose other than for
the determination of interest accruals and adjustments thereof in respect of the
Securities for United States federal income tax purposes. The comparable yield
and the schedule of projected payments do not constitute a projection or
representation regarding the amounts payable on Securities.
Projected Interest Payment per
$1,000 Principal Amount at Maturity of
Period Ending Notes*
March 15, 2012 3.04
June 15, 2012 3.19
September 15, 2012 3.19
December 15, 2012 3.19
March 15, 2013 3.19
Annex 1-1
Projected Interest Payment per
$1,000 Principal Amount at Maturity of
Period Ending Notes*
June 15, 2013 3.35
September 15, 2013 3.35
December 15, 2013 3.35
March 15, 2014 3.35
June 15, 2014 3.52
September 15, 2014 3.52
December 15, 2014 3.52
March 15, 2015 3.52
June 15, 2015 3.69
September 15, 2015 3.69
December 15, 2015 3.69
March 15, 2016 3.69
June 15, 2016 3.88
September 15, 2016 3.88
December 15, 2016 3.88
March 15, 2017 3.88
June 15, 2017 4.07
September 15, 2017 4.07
December 15, 2017 4.07
March 15, 2018 4.07
June 15, 2018 4.27
September 15, 2018 4.27
December 15, 2018 4.27
March 15, 2019 4.27
June 15, 2019 4.49
September 15, 2019 4.49
December 15, 2019 4.49
March 15, 2020 4.49
June 15, 2020 4.71
September 15, 2020 4.71
December 15, 2020 4.71
March 15, 2021 4.71
June 15, 2021 4.95
September 15, 2021 4.95
December 15, 2021 4.95
March 15, 2022 4.95
June 15, 2022 5.20
September 15, 2022 5.20
December 15, 2022 5.20
March 15, 2023 5.20
June 15, 2023 5.46
September 15, 2023 5.46
December 15, 2023 5.46
Annex 1-2
Projected Interest Payment per
$1,000 Principal Amount at Maturity of
Period Ending Notes*
March 15, 2024 5.46
June 15, 2024 5.73
September 15, 2024 5.73
December 15, 2024 5.73
March 15, 2025 5.73
June 15, 2025 6.02
September 15, 2025 6.02
December 15, 2025 6.02
March 15, 2026 6.02
June 15, 2026 6.32
September 15, 2026 6.32
December 15, 2026 6.32
March 15, 2027 6.32
June 15, 2027 6.63
September 15, 2027 6.63
December 15, 2027 6.63
March 15, 2028 6.63
June 15, 2028 6.96
September 15, 2028 6.96
December 15, 2028 6.96
March 15, 2029 6.96
June 15, 2029 7.31
September 15, 2029 7.31
December 15, 2029 7.31
March 15, 2030 7.31
June 15, 2030 7.68
September 15, 2030 7.68
December 15, 2030 7.68
March 15, 2031 7.68
June 15, 2031 8.06
September 15, 2031 8.06
December 15, 2031 8.06
March 15, 2032 8.06
Terminal Value at Maturity $2,354.43
Annex 1-3
EXHIBIT A-1
[FORM OF FACE OF GLOBAL SECURITY]
THIS NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT, FOR PURPOSES OF
SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986,
AS AMENDED. THE ISSUE PRICE OF THIS NOTE WAS $475.00 PER $1,000 OF PRINCIPAL
AMOUNT AT MATURITY; THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, INCLUDING CASH
INTEREST PAYABLE THROUGH MAY 14, 2007 TAXABLE AS ORIGINAL ISSUE DISCOUNT UNDER
TREASURY REGULATION SECTION 1.1273-1, IS $2,378.67 PER $1,000 OF PRINCIPAL
AMOUNT AT MATURITY; THE ISSUE DATE IS MAY 14, 2002; AND THE YIELD TO MATURITY
FOR THE PURPOSES OF ACCRUING TAX ORIGINAL ISSUE DISCOUNT IS 6.90% PER ANNUM,
CALCULATED ON A SEMIANNUAL BOND EQUIVALENT BASIS.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER,
SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE"), WHICH IS TWO YEARS AFTER
A-1-1
(X) THE LATER OF THE LAST DAY SECURITIES OF THIS ISSUE WERE ISSUED AND (Y) THE
LAST DATE ON WHICH HORACE MANN EDUCATORS CORPORATION (THE "COMPANY" OR THE
"ISSUER") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (C) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH
OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF ANY HOLDER THAT IS NOT
AN AFFILIATE OF THE COMPANY AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF
THE CONDITIONS SPECIFIED IN THE INDENTURE.
A-1-2
HORACE MANN EDUCATORS CORPORATION
Senior Convertible Note due 2032
No. A-1 CUSIP: 440327 AF 1
Issue Date: May 14, 2002 Original Issue Discount: $525.00
Issue Price: $475.00 (for each $1,000 Principal
(for each $1,000 Principal Amount at Maturity)
Amount at Maturity)
HORACE MANN EDUCATORS CORPORATION, a Delaware corporation (herein called
the "Company"), promises to pay to Cede & Co. or registered assigns, the
Principal Amount at Maturity of THREE HUNDRED FIFTEEN MILLION EIGHT HUNDRED
THOUSAND DOLLARS $315,800,000 on May 14, 2032.
This Security shall not bear interest except as specified on the other
side of this Security. Original Issue Discount will accrue as specified on the
other side of this Security. This Security is convertible as specified on the
other side of this Security.
Additional provisions of this Security are set forth on the other side of
this Security.
Dated: May 14, 2002 HORACE MANN EDUCATORS CORPORATION
By: ________________________________
Title:
By: ________________________________
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
JPMORGAN CHASE BANK, as
Trustee, certifies that this
is one of the Securities referred
to in the within-mentioned Indenture.
By:________________________
Authorized Officer
A-1-3
[FORM OF REVERSE SIDE OF ALL SECURITIES]
Senior Convertible Notes due 2032
1. Interest.
The Company promises to pay interest in cash on the Principal Amount at
Maturity of this Note at the rate per annum of 1.425% from the Issue Date, or
from the most recent date to which interest has been paid or provided for, until
May 14, 2007. During such period, the Company will pay cash interest
semiannually in arrears on May 14 and November 14 of each year (each an
"Interest Payment Date") to Holders of record at the close of business on each
April 29 and October 30 (whether or not a business day) (each a "Regular Record
Date") immediately preceding such Interest Payment Date. Cash interest on the
Securities will accrue from the most recent date to which interest has been paid
or duly provided or, if no interest has been paid, from the Issue Date. Cash
interest will be computed on the basis of a 360-day year of twelve 30-day
months.
After May 14, 2007, this Security shall not bear interest, except as
specified in this paragraph or in paragraph 11 hereof. If the Principal Amount
at Maturity hereof or any portion of such Principal Amount at Maturity is not
paid when due (whether upon acceleration pursuant to Section 6.02 of the
Indenture, upon the date set for payment of the Redemption Price pursuant to
paragraph 6 hereof, upon the date set for payment of the Purchase Price or
Change in Control Purchase Price pursuant to paragraph 7 hereof or upon the
Stated Maturity of this Security) or if installments of cash interest are not
paid when due in accordance with paragraph 11 hereof, then in each such case the
overdue amount shall, to the extent permitted by law, bear interest at the rate
of 3% per annum, compounded semiannually, which interest shall accrue from the
date such overdue amount was originally due to the date payment of such amount,
including interest thereon, has been made or duly provided for. All such
interest shall be payable on demand. The accrual of such interest on overdue
amounts shall be in lieu of, and not in addition to, the continued accrual of
Original Issue Discount or cash interest.
Original Issue Discount (the difference between the Issue Price and the
Principal Amount at Maturity of the Security), in the period during which a
Security remains outstanding, shall accrue at 3.00% per annum, on a semiannual
bond equivalent basis using a 360-day year composed of twelve 30-day months,
from the Issue Date of this Security.
2. Method of Payment.
Subject to the terms and conditions of the Indenture, the Company will
make payments in respect of Redemption Prices, Purchase Prices, Change in
Control Purchase Prices and at Stated Maturity to Holders who surrender
Securities to a Paying Agent to collect such payments in respect of the
Securities. In addition, the Company will pay cash interest from the Issue Date
until May 14, 2007, as more fully described in paragraph 1 hereof. The Company
will pay any cash amounts in money of the United States that at the time of
payment is legal tender for
A-1-4
payment of public and private debts. However, the Company may make such cash
payments by check payable in such money.
3. Paying Agent, Conversion Agent, Registrar and Bid Calculation Agent.
Initially, JPMorgan Chase Bank, a New York banking corporation chartered
trust company (the "Trustee"), will act as Paying Agent, Conversion Agent,
Registrar and Bid Calculation Agent. The Company may appoint and change any
Paying Agent, Conversion Agent, Registrar or co-registrar and Bid Calculation
Agent without notice, other than notice to the Trustee except that the Company
will maintain at least one Paying Agent in the State of New York, City of New
York, Borough of Manhattan, which shall initially be an office or agency of the
Trustee. The Company or any of its Subsidiaries or any of their Affiliates may
act as Paying Agent, Conversion Agent, Registrar or co-registrar. None of the
Company, any of its Subsidiaries or any of their Affiliates shall act as Bid
Calculation Agent.
4. Indenture.
The Company issued the Securities pursuant to an Indenture dated as of
May 14, 2002 (the "Indenture"), between the Company and the Trustee. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as in effect from
time to time (the "TIA"). Capitalized terms used herein and not defined herein
have the meanings ascribed thereto in the Indenture. The Securities are subject
to all such terms, and Securityholders are referred to the Indenture and the TIA
for a statement of those terms.
The Securities are general unsecured and unsubordinated obligations, of
the Company, limited to $368,500,000 aggregate Principal Amount at Maturity
(subject to Section 2.07 of the Indenture). The Indenture does not limit other
indebtedness of the Company, secured or unsecured.
5. Contingent Cash Interest.
Subject to the conditions of the Indenture and the accrual and record
date provisions specified in this paragraph 5, the Company shall pay Contingent
Cash Interest to the Securityholders during any six-month period (a "Contingent
Cash Interest Period") from May 14 to November 14 and from November 14 to May
14, with the initial six-month period commencing after May 14, 2007, if the
average Securities Market Price for the Five-Trading-Day Measurement Period with
respect to such Contingent Cash Interest period equals 120% or more of the sum
of the Issue Price of a Security, Original Issue Discount and cash interest, if
any, accrued thereon to the day immediately preceding the first day of the
relevant Contingent Interest Period.
Contingent Cash Interest, if any, will accrue and be payable to holders
of this Security as of the Contingent Cash Interest Record Date or a Common
Stock Record Date, as applicable. Original Issue Discount will continue to
accrue at 3% whether or not Contingent Cash Interest is paid.
A-1-5
The amount of Contingent Cash Interest payable per $1,000 Principal Amount
at Maturity hereof in respect of any quarterly period of the applicable
Contingent Cash Interest Period shall equal the greater of (x) $0.105 and (y)
the sum of all Regular Cash Dividends paid by the Company per share of Common
Stock during that three-month period of the applicable Contingent Cash Interest
Period, in each case, multiplied by the number of shares of Common Stock into
which $1,000 Principal Amount at Maturity hereof is convertible pursuant to
paragraph 9 hereof as of the accrual date for such Contingent Cash Interest.
Upon determination that Securityholders will be entitled to receive
Contingent Cash Interest during a Contingent Cash Interest Period, the Company
shall issue a press release and publish such information on its web site on the
World Wide Web as soon as practicable.
6. Redemption at the Option of the Company.
No sinking fund is provided for the Securities. The Securities are
redeemable as a whole, or from time to time in part, at any time at the option
of the Company in accordance with the Indenture at the Redemption Prices set
forth below, provided that the Securities are not redeemable prior to May 14,
2007.
The table below shows Redemption Prices of a Security per $1,000
Principal Amount at Maturity on the dates shown below and at Stated Maturity,
which prices reflect accrued Original Issue Discount calculated to each such
date. The Redemption Price of a Security redeemed between such dates shall
include an additional amount reflecting the additional Original Issue Discount
accrued since the immediately preceding date in the table to, but not including,
the Redemption Date and any accrued and unpaid cash interest.
If this Security has been converted to a semiannual coupon note following
the occurrence of a Tax Event, the Redemption Price will be equal to the
Restated Principal Amount plus accrued and unpaid interest from the date of such
conversion to but not including the Redemption Date; but in no event will this
Security be redeemable before May 14, 2007.
7. Purchase by the Company at the Option of the Holder.
Subject to the terms and conditions of the Indenture, the Company shall
become obligated to purchase, at the option of the Holder, the Securities held
by such Holder on the following Purchase Dates and at the following Purchase
Prices, plus accrued and unpaid cash interest, if any, per $1,000 Principal
Amount at Maturity, upon delivery of a Purchase Notice containing the
information set forth in the Indenture, at any time from the opening of business
on the date that is 20 Business Days prior to such Purchase Date until the close
of business on the day immediately preceding such Purchase Date and upon
delivery of the Securities to the Paying Agent by the Holder as set forth in the
Indenture.
A-1-7
Purchase Date Price Purchase
------------- --------------
May 14, 2007 $475.00
May 14, 2012 $551.26
May 14, 2017 $639.76
May 14, 2022 $742.47
May 14, 2027 $861.67
The Purchase Price (equal to the Issue Price plus accrued Original Issue
Discount to the Purchase Date) may be paid, at the option of the Company, in
cash or by the issuance and delivery of shares of Common Stock of the Company,
or in any combination thereof in accordance with the Indenture.
If prior to a Purchase Date this Security has been converted to a
semiannual coupon note following the occurrence of a Tax Event, the Purchase
Price will be equal to the Restated Principal Amount plus accrued and unpaid
cash interest from the date of conversion to the Purchase Date as provided in
the Indenture.
At the option of the Holder and subject to the terms and conditions of
the Indenture, the Company shall become obligated to purchase the Securities
held by such Holder no later than 30 Business Days after the occurrence of a
Change in Control of the Company for a Change in Control Purchase Price equal to
the Issue Price plus accrued Original Issue Discount and accrued and unpaid cash
interest, including Contingent Cash Interest, if any, to but not including the
Change in Control Purchase Date, which Change in Control Purchase Price shall be
paid in cash. If prior to a Change in Control Purchase Date this Security has
been converted to a semiannual coupon note following the occurrence of a Tax
Event, the Change in Control Purchase Price shall be equal to the Restated
Principal Amount plus accrued cash interest from the date of conversion to the
Change in Control Purchase Date.
A third party may make the offer and purchase of the Securities in lieu
of the Company in accordance with the Indenture.
Holders have the right to withdraw any Purchase Notice or Change in
Control Purchase Notice, as the case may be, by delivering to the Paying Agent a
written notice of withdrawal in accordance with the provisions of the Indenture.
If cash (and/or securities if permitted under the Indenture) sufficient
to pay the Purchase Price or Change in Control Purchase Price, as the case may
be, of all Securities or portions thereof to be purchased as of the Purchase
Date or the Change in Control Purchase Date, as the case may be, is deposited
with the Paying Agent on the Business Day following the Purchase Date or the
Change in Control Purchase Date, as the case may be, Original Issue Discount or
cash interest, if any, shall cease to accrue on such Securities (or portions
thereof) on such Purchase Date or Change in Control Purchase Date, as the case
may be, and the Holder thereof shall have no other rights as such (other than
the right to receive the Purchase Price or Change in Control Purchase Price, as
the case may be, if any, upon surrender of such Security).
A-1-8
8. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
the Holder's registered address. If money sufficient to pay the Redemption Price
of, and accrued and unpaid cash interest, if any, with respect to, all
Securities (or portions thereof) to be redeemed on the Redemption Date is
deposited with the Paying Agent prior to or on the Redemption Date, on such
Redemption Date, Original Issue Discount or accrued cash interest, if any, shall
cease to accrue on such Securities or portions thereof. Securities in
denominations larger than $1,000 of Principal Amount at Maturity may be redeemed
in part but only in integral multiples of $1,000 of Principal Amount at
Maturity.
9. Conversion.
Conversion Based on Sale Price of Common Stock. Subject to the provisions
of this paragraph 9 and notwithstanding the fact that any other condition to
conversion described below has not been satisfied, Holders may convert the
Securities into Common Stock on a Conversion Date if the Sale Price of the
Common Stock for at least 20 Trading Days in a period of 30 consecutive Trading
Days ending on the last Trading Day of the most recently ended fiscal quarter,
commencing with the quarter ending September 30, 2002, is greater than the
conversion trigger price per share. The "conversion trigger price" for any
fiscal quarter shall be the following percentage of the accreted conversion
price per share of Common Stock on the last day of such calendar quarter: (a)
120% until and including March 31, 2007 and (b) declining 0.1% per calendar
quarter thereafter to 110% on the last day of the calendar quarter ending March
31, 2032. If the foregoing condition is satisfied, then the Securities will be
convertible at any time at the option of the Holder, through their maturity.
The "accreted conversion price per share" of Common Stock as of any day
equals the quotient of:
. the Issue Price and accrued Original Issue Discount or accrued
cash interest to that day, divided by
. the number of shares of Common Stock issuable upon conversion of
$1,000 Principal Amount at Maturity of Securities on that day
pursuant to this paragraph 9 and Article 11 of the Indenture.
Conversion Based on Credit Ratings Downgrade. Subject to the provisions
of this paragraph 9 and the Indenture and notwithstanding the fact that any
other condition to conversion has not been satisfied, the Securities shall be
convertible into Common Stock at the election of a Holder on a Conversion Date
at any time that (a) the credit rating assigned to the Securities by Moody's
Investors Service Inc. and its successors ("Moody's") is Ba2 or lower or the
credit rating assigned to the Securities by Standard & Poor's Credit Market
Services, a division of the McGraw-Hill Companies Inc. and its successors
("Standard & Poor's) is BB+ or lower, or (b) the Securities are no longer rated
by either or both of Moody's or Standard & Poor's, or (c) either or both of
Moody's or Standard & Poor's have suspended or withdrawn their ratings of the
Securities.
A-1-9
Conversion upon Redemption. Subject to the provisions of this paragraph 9
and notwithstanding the fact that any other condition described herein to
conversion has not been satisfied, a Holder may convert into Common Stock a
Security or portion of a Security which has been called for redemption pursuant
to paragraph 6 hereof, but such Securities may be surrendered for conversion
only until the close of business on the second Business Day immediately
preceding the Redemption Date.
Conversion Upon Certain Distributions. Subject to the provisions of this
paragraph 9 and notwithstanding the fact that any other condition to conversion
has not been satisfied, in the event that the Company declares a dividend or
distribution described in Section 11.07 of the Indenture, or a dividend or a
distribution described in Section 11.08 of the Indenture and, in the case of a
dividend or distribution described in Section 11.08 of the Indenture, the fair
market value, per share, of such dividend or distribution per share of Common
Stock, as determined in the Indenture, exceeds 15% of the Sale Price of the
Common Stock on the Business Day immediately preceding the date of declaration
for such dividend or distribution, the Securities may be surrendered for
conversion beginning on the date the Company gives notice to the Holders of such
right, which shall not be less than 20 days prior to the Ex-Dividend Time for
such dividend or distribution, and Securities may be surrendered for conversion
at any time thereafter until the close of business on the Business Day prior to
the Ex-Dividend Time or until the Company announces that such dividend or
distribution will not take place.
Conversion Upon Occurrence of Certain Corporate Transactions. Subject to
the provisions of this paragraph 9 and notwithstanding the fact that any other
condition described herein to conversion has not been satisfied, in the event
the Company is a party to a consolidation, merger or binding share exchange
pursuant to which the Common Stock would be converted into cash, securities or
other property as set forth in Section 11.14 of the Indenture, the Securities
may be surrendered for conversion at any time from and after the date which is
15 days prior to the date announced by the Company as the anticipated effective
time until 15 days after the actual effective date of such transaction, and at
the effective time of such transaction the right to convert a Security into
Common Stock will be deemed to have changed into a right to convert it into the
kind and amount of cash, securities or other property which the holder would
have received if the holder had converted its Security immediately prior to the
transaction.
A Security in respect of which a Holder has delivered a Purchase Notice
or Change in Control Purchase Notice exercising the option of such Holder to
require the Company to purchase such Security may be converted only if such
notice of exercise is withdrawn in accordance with the terms of the Indenture.
The initial Conversion Rate is 17.763 shares of Common Stock per $1,000
Principal Amount at Maturity, subject to adjustment in the case of certain
events described in the Indenture. The Company will deliver cash or a check in
lieu of any fractional share of Common Stock. The ability to surrender
Securities for conversion will expire at the close of business on May 14, 2032.
In the event the Company exercises its option pursuant to Section 10.01
of the Indenture to have interest in lieu of Original Issue Discount or cash
interest accrue on the Security following a Tax Event, the Holder will be
entitled on conversion to receive the same number of
A-1-10
shares of Common Stock such Holder would have received if the Company had not
exercised such option.
Accrued and unpaid interest in lieu of Original Issue Discount and cash
interest, including Contingent Cash Interest, will not be paid on Securities
that are converted following a Tax Event provided, however that Securities
surrendered for conversion during the period, in the case of interest in lieu of
Original Issue Discount, from the close of business on any Regular Record Date
next preceding any Interest Payment Date to the opening of business on such
Interest Payment Date, shall be entitled to receive such interest, in lieu of
Original Issue Discount, payable on such Securities on the corresponding
Interest Payment Date and (except Securities with respect to which the Company
has mailed a notice of redemption) Securities surrendered for conversion during
such periods must be accompanied by payment of an amount equal to the interest
in lieu of Original Issue Discount with respect thereto that the registered
Holder is to receive.
To convert a Security, a Holder must (a) complete and manually sign the
conversion notice (or complete and manually sign a facsimile of such notice) and
deliver such notice to the Conversion Agent, (b) surrender the Security to the
Conversion Agent, (c) furnish appropriate endorsements and transfer documents if
required by the Conversion Agent, the Company or the Trustee and (d) pay any
transfer or similar taxes, if required.
A Holder may convert a portion of a Security if the Principal Amount at
Maturity of such portion is $1,000 or an integral multiple of $1,000. No payment
or adjustment will be made for dividends on the Common Stock except as provided
in the Indenture. On conversion of a Security, accrued Original Issue Discount
and any accrued and unpaid cash interest (or interest if the Company has
exercised its option provided for in paragraph 11 hereof), including Contingent
Cash Interest, attributable to the period from the Issue Date (or, if the
Company has exercised the option referred to in paragraph 11 hereof, the later
of (x) the date of such exercise and (y) the date on which interest was last
paid) through the Conversion Date shall not be cancelled, extinguished or
forfeited, but rather shall be deemed to be paid in full to the Holder thereof
through the delivery of the Common Stock (together with the cash payment, if
any, in lieu of fractional shares) in exchange for the Security being converted
pursuant to the terms hereof; and the fair market value of such shares of Common
Stock (together with any such cash payment in lieu of fractional shares) shall
be treated as issued, to the extent thereof, first in exchange for the Original
Issue Discount and any accrued and unpaid cash interest (or interest, if the
Company has exercised its option provided for in paragraph 11 hereof), including
Contingent Cash Interest, accrued through the Conversion Date, and the balance,
if any, of such fair market value of such Common Stock (and any such cash
payment) shall be treated as issued in exchange for the Issue Price of the
Security being converted pursuant to the provisions hereof.
The Conversion Rate will be adjusted in accordance with Article 11 of the
Indenture for dividends or distributions on Common Stock payable in Common Stock
or other Capital Stock; subdivisions, combinations or certain reclassifications
of Common Stock; distributions to all holders of Common Stock of certain rights
to purchase Common Stock for a period expiring within 60 days of the Issue Date
at less than the Sale Price of the Common Stock at the Time of Determination;
and distributions to such holders of assets or debt securities of the Company or
certain rights to purchase securities of the Company (excluding certain cash
dividends or
A-1-11
distributions) and certain rights pursuant to shareholder rights plans. The
Company from time to time may voluntarily increase the Conversion Rate.
If the Company is a party to a consolidation, merger or binding share
exchange or a transfer of all or substantially all of its assets, or upon
certain distributions described in the Indenture, the right to convert a
Security into Common Stock may be changed into a right to convert it into
securities, cash or other assets of the Company or another person.
10. [INTENTIONALLY OMITTED.]
11. Tax Event.
(a) From and after (i) the date (the "Tax Event Date") of the occurrence
of a Tax Event and (ii) the date the Company exercises the option provided for
in this paragraph 11, whichever is later (the "Option Exercise Date"), at the
option of the Company, interest in lieu of future Original Issue Discount shall
accrue at the rate of 3% per annum on a principal amount per Note (the "Restated
Principal Amount") equal to the Issue Price plus Original Issue Discount accrued
through the Option Exercise Date and shall be payable semiannually on May 14 and
November 14 of each year (each an "Interest Payment Date") to Holders of record
at the close of business on the April 29 and October 30, respectively, (each a
"Regular Record Date") immediately preceding such Interest Payment Date.
Interest will be computed on a semiannual bond equivalent basis using a 360-day
year comprised of twelve 30-day months and will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from the
Option Exercise Date.
(b) Interest on any Security that is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the person in
whose name that Security is registered at the close of business on the Regular
Record Date for such interest at the office or agency of the Company maintained
for such purpose. Each installment of interest on any Security shall be paid in
same-day funds by transfer to an account maintained by the payee located inside
the United States.
12. Defaulted Interest.
Except as otherwise specified with respect to the Securities, any
Defaulted Interest on any Security shall forthwith cease to be payable to the
registered Holder thereof on the relevant Regular Record Date or accrual date,
as the case may be, and such Defaulted Interest shall be paid by the Company as
provided for in Section 12.02 of the Indenture.
13. Denominations; Transfer; Exchange.
The Securities are in fully registered form, without coupons, in
denominations of $1,000 of Principal Amount at Maturity and integral multiples
of $1,000. A Holder may transfer or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not transfer
or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities in respect of which a
A-1-12
Purchase Notice or Change in Control Purchase Notice has been given and not
withdrawn (except, in the case of a Security to be purchased in part, the
portion of the Security not to be purchased) or any Securities for a period of
15 days before the mailing of a notice of redemption of Securities to be
redeemed.
14. Persons Deemed Owners.
The registered Holder of this Security may be treated as the owner of
this Security for all purposes.
15. Unclaimed Money or Securities.
The Trustee and the Paying Agent shall return to the Company upon written
request any money or securities held by them for the payment of any amount with
respect to the Securities that remains unclaimed for two years, subject to
applicable unclaimed property laws. After return to the Company, Holders
entitled to the money or securities must look to the Company for payment as
general creditors unless an applicable abandoned property law designates another
person.
16. Amendment; Waiver.
Subject to certain exceptions set forth in the Indenture, (a) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in aggregate Principal Amount at Maturity of the
Securities at the time outstanding and (b) certain Defaults may be waived with
the written consent of the Holders of a majority in aggregate Principal Amount
at Maturity of the Securities at the time outstanding. Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, or to
comply with Article 5 or Section 11.14 of the Indenture, to secure the Company's
obligations under this Security or to add to the Company's covenants for the
benefit of the Securityholders or to surrender any right or power conferred, to
comply with any requirement of the SEC in connection with the qualification of
the Indenture under the TIA, or as necessary in connection with the registration
of the Securities under the Securities Act or to make any change that does not
adversely affect the rights of any Holders.
17. Defaults and Remedies.
Under the Indenture, Events of Default include (a) default in payment of
interest when due under the Securities and such default continues for 30 days;
(b) default in payment of the Principal Amount at Maturity (or, if the
Securities have been converted to semiannual coupon notes following a Tax Event,
the Restated Principal Amount), Issue Price plus accrued Original Issue Discount
or cash interest, Redemption Price, Purchase Price or Change in Control Purchase
Price, as the case may be, in respect of the Securities when the same becomes
due and payable; (c) failure by the Company to comply with other agreements in
the Indenture or the Securities, subject to notice and lapse of time; (d)
default in the payment of any principal when due or resulting in acceleration of
other indebtedness of the Company for borrowed money where the aggregate
principal amount with respect to which the default or acceleration has occurred
exceeds $10,000,000, and such acceleration has not been rescinded or annulled
within a period
A-1-13
of 10 days after receipt by the Company of a Notice of Default, subject to
notice and lapse of time; and (e) certain events of bankruptcy or insolvency. If
an Event of Default occurs and is continuing, the Trustee, or the Holders of at
least 25% in aggregate Principal Amount at Maturity of the Securities at the
time outstanding, may declare all the Securities to be due and payable
immediately. Certain events of bankruptcy or insolvency are Events of Default
which will result in the Securities becoming due and payable immediately upon
the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives indemnity or security reasonably satisfactory
to it. Subject to certain limitations, Holders of a majority in aggregate
Principal Amount at Maturity of the Securities at the time outstanding may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Securityholders notice of any continuing Default (except a Default
in payment of amounts specified in clause (a) or (b) above) if it determines
that withholding notice is in their interests.
18. Trustee Dealings with the Company.
Subject to certain limitations imposed by the TIA, if applicable, the
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.
19. No Recourse Against Others.
A director, officer, employee, agent, representative, stockholder or
equity holder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
20. Authentication.
This Security shall not be valid until an authorized signatory of the
Trustee manually signs the Trustee's Certificate of Authentication on the other
side of this Security.
21. Abbreviations.
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
A-1-14
22. GOVERNING LAW.
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS
SECURITY.
A-1-15
The Company will furnish to any Securityholder upon written
request and without charge a copy of the Indenture which has in it the text of
this Security in larger type. Requests may be made to:
Horace Mann Educators Corporation
1 Horace Mann Plaza
Springfield, IL 62715
Attention: General Counsel
A-1-16
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Insert assignee's soc. sec. or tax ID no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
_____________________ agent to transfer this Security on the books of the
Company. The agent may substitute another to act for him.
CONVERSION NOTICE
To convert this Security into Common Stock of the Company, check the box:
[_]
To convert only part of this Security, state the Principal Amount at Maturity to
be converted (which must be $1,000 or an integral multiple of $1,000):
If you want the stock certificate made out in another person's name, fill in the
form below:
(Insert other person's soc. sec. or tax ID no.)
(Print or type other person's name, address and zip code)
A-1-17
Date: _____________________ Your Signature:___________________________________
(Sign exactly as your name appears on the other side of this Security)
A-1-18
EXHIBIT A-2
[Form of Face of Certificated Security]
THIS NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT, FOR PURPOSES OF
SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986,
AS AMENDED. THE ISSUE PRICE OF THIS NOTE WAS $475.00 PER $1,000 OF PRINCIPAL
AMOUNT AT MATURITY; THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, INCLUDING CASH
INTEREST PAYABLE THROUGH MAY 14, 2007 TAXABLE AS ORIGINAL ISSUE DISCOUNT UNDER
TREASURY REGULATION SECTION 1.1273-1, IS $2,378.67 PER $1,000 OF PRINCIPAL
AMOUNT AT MATURITY; THE ISSUE DATE IS MAY 14, 2002; AND THE YIELD TO MATURITY
FOR THE PURPOSES OF ACCRUING TAX ORIGINAL ISSUE DISCOUNT IS 6.90% PER ANNUM,
CALCULATED ON A SEMIANNUAL BOND EQUIVALENT BASIS.
[INCLUDE IF SECURITY IS A CERTIFICATED SECURITY TO BE HELD BY AN
INSTITUTIONAL ACCREDITED INVESTOR--IN CONNECTION WITH ANY TRANSFER, THE HOLDER
WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOLLOWING RESTRICTIONS.]
THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER,
SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE"), WHICH IS TWO YEARS AFTER THE LATER OF (X) THE
LAST DAY SECURITIES OF THIS ISSUE WERE ISSUED AND (Y) AND THE LAST DATE ON WHICH
HORACE MANN EDUCATORS CORPORATION (THE "COMPANY" OR THE "ISSUER") OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2),(3) OR (7)
OF RULE 501 UNDER THE
A-2-1
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR (E)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF ANY HOLDER THAT IS NOT AN AFFILIATE OF THE COMPANY
AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF
THE CONDITIONS SPECIFIED IN THE INDENTURE.
A-2-2
HORACE MANN EDUCATORS CORPORATION
Senior Convertible Note due 2032
No. A-1 CUSIP: 440327 AF 1
Issue Date: May 14, 2002 Original Issue Discount: $525.00
Issue Price: $475.00 (for each $1,000 Principal
(for each $1,000 Principal Amount at Maturity)
Amount at Maturity)
HORACE MANN EDUCATORS CORPORATION, a Delaware corporation (herein called
the "Company"), promises to pay to Cede & Co. or registered assigns, the
Principal Amount at Maturity of THREE HUNDRED FIFTEEN MILLION EIGHT HUNDRED
THOUSAND DOLLARS $315,800,000 on May 14, 2032.
This Security shall not bear interest except as specified on the other
side of this Security. Original Issue Discount will accrue as specified on the
other side of this Security. This Security is convertible as specified on the
other side of this Security.
Additional provisions of this Security are set forth on the other side of
this Security.
Dated: May 14, 2002 HORACE MANN EDUCATORS CORPORATION
By:
Title:
By:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
JPMORGAN CHASE BANK,
as Trustee, certifies that this
is one of the Securities referred
to in the within-mentioned Indenture.
By:________________________
Authorized Officer
A-2-3
[Form of Reverse Side of Certificated Security is the same as the
Form of Reverse Side of Global Security]
A-2-4
EXHIBIT B-1
Transfer Certificate
In connection with any transfer of any of the Securities within the
period prior to the expiration of the holding period applicable to the sales
thereof under Rule 144(k) (or any successor provision) under the Securities Act
of 1933, as amended (the "Securities Act"), the undersigned registered owner of
this Security hereby certifies with respect to $__________ Principal Amount at
Maturity of the above-captioned securities presented or surrendered on the date
hereof (the "Surrendered Securities") for registration of transfer, or for
exchange or conversion where the securities issuable upon such exchange or
conversion are to be registered in a name other than that of the undersigned
registered owner (each such transaction being a "transfer"), that such transfer
complies with the restrictive legend set forth on the face of the Surrendered
Securities for the reason checked below:
[_] The transfer of the Surrendered Securities is made to the Company
or any subsidiaries; or
[_] The transfer of the Surrendered Securities complies with Rule 144A
under the Securities Act; or
[_] The transfer of the Surrendered Securities is to an institutional
accredited investor, as described in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act; or
The transfer of the Surrendered Securities is pursuant to an
effective registration statement under the Securities Act; or
The transfer of the Surrendered Securities is pursuant to an
offshore transaction in accordance with Rule 904 under the
Securities Act; or
The transfer of the Surrendered Securities is pursuant to another
available exemption from the registration requirement of the
Securities Act.
and unless the box below is checked, the undersigned confirms that, to
the undersigned's knowledge, such Securities are not being transferred to an
"affiliate" of the Company as defined in Rule 144 under the Securities Act (an
"Affiliate").
(If the registered owner is a corporation, partnership or
fiduciary, the title of the Person signing on behalf of
such registered owner must be stated.)
B-1-1
EXHIBIT B-2
Form of Letter to be Delivered by Accredited Investors
Horace Mann Educators Corporation
1 Horace Mann Plaza
Springfield, IL 62715
Attention: Chief Financial Officer
JPMorgan Chase Bank
450 W. 33rd Street,
15th floor
New York, NY 10001
Attention: Institutional Trust Services
Dear Sirs:
We are delivering this letter in connection with the proposed transfer of
$_________ Principal Amount at Maturity of the Senior Convertible Notes due 2032
(the "Securities") issued by Horace Mann Educators Corporation (the "Company"),
which are convertible into shares of the Company's Common Stock, $0.001 par
value per share (the "Common Stock").
We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the
"Securities Act"), or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a)(1), (2) or (3)
under the Securities Act (an "Institutional Accredited Investor");
(ii) the purchase of Securities by us is for our own account or
for the account of one or more other Institutional Accredited Investors
or as fiduciary for the account of one or more trusts, each of which is
an "accredited investor" within the meaning of Rule 501(a)(7) under the
Securities Act and for each of which we exercise sole investment
discretion or (B) we are a "bank," within the meaning of Section 3(a)(2)
of the Securities Act, or a "savings and loan association" or other
institution described in Section 3(a)(5)(A) of the Securities Act that is
acquiring Securities as fiduciary for the account of one or more
institutions for which we exercise sole investment discretion;
(iii) we will acquire Securities having a minimum principal amount
at maturity of not less than $250,000 for our own account or for any
separate account for which we are acting;
B-2-1
(iv) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and risks
of purchasing Securities; and
(v) we are not acquiring Securities with a view to distribution
thereof or with any present intention of offering or selling Securities
or the Common Stock issuable upon conversion thereof, except as permitted
below; provided that the disposition of our property and property of any
accounts for which we are acting as fiduciary shall remain at all times
within our control.
We understand that the Securities were originally offered and sold in a
transaction not involving any public offering within the United States within
the meaning of the Securities Act and that the Securities and the Common Stock
issuable upon conversion thereof (the Securities and such Common Stock
hereinafter referred to as the "Securities") have not been registered under the
Securities Act, and we agree, on our own behalf and on behalf of each account
for which we acquire any Securities, that if in the future we decide to resell
or otherwise transfer such Securities prior to the date (the "Resale Restriction
Termination Date") which is two years after the later of the last day the
Securities of this issue were issued and the last date on which the Company or
an affiliate of the Company was the owner of the Security, such Securities may
be resold or otherwise transferred only (i) to Horace Mann Educators Corporation
or any subsidiary thereof, or (ii) for as long as the Securities are eligible
for resale pursuant to Rule 144A, to a person it reasonably believes is a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act) that purchases for its own account or for the account of a qualified
institutional buyer to which notice is given that the transfer is being made in
reliance on Rule 144A, or (iii) to an Institutional Accredited Investor that is
acquiring the Security for its own account, or for the account of such
Institutional Accredited Investor for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution in violation of
the Securities Act, or (iv) pursuant to another available exemption from
registration under the Securities Act (if applicable), or (v) pursuant to a
registration statement which has been declared effective under the Securities
Act and, in each case, in accordance with any applicable securities laws of any
state of the United States or any other applicable jurisdiction and in
accordance with the legends set forth on the Securities. We further agree to
provide any person purchasing any of the Securities from us other than pursuant
to clause (v) above a notice advising such purchaser that resales of such
securities are restricted as stated herein. We understand that the trustee or
the transfer agent, as the case may be, for the Securities will not be required
to accept for registration of transfer any Securities pursuant to (iii) or (iv)
above except upon presentation of evidence satisfactory to the Company that the
foregoing restrictions on transfer have been complied with. We further
understand that any Securities will be in the form of definitive physical
certificates and that such certificates will bear a legend reflecting the
substance of this paragraph other than certificates representing Securities
transferred pursuant to clause (v) above.
We acknowledge that the Company, others and you will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
B-2-2
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
ARTICLE I DEFINITIONS ............................................................. 1
SECTION 1.1 Definitions ........................................................ 1
SECTION 1.2 Use of Defined Terms ............................................... 14
SECTION 1.3 Cross References; Headings ......................................... 14
SECTION 1.4 Other Definitional Provisions ...................................... 14
ARTICLE II AMOUNT AND TERMS OF COMMITMENT .......................................... 14
SECTION 2.1 Revolving Loan Commitment .......................................... 14
SECTION 2.2 Types of Loans ..................................................... 16
SECTION 2.3 Borrowing Request .................................................. 16
SECTION 2.4 Funding of Borrowing ............................................... 16
ARTICLE III RECORDKEEPING; NOTE; PAYMENTS; SETOFF ................................... 16
SECTION 3.1 Evidence of Debt ................................................... 16
SECTION 3.2 Payment of the Loans ............................................... 17
SECTION 3.3 Making of Payments ................................................. 17
SECTION 3.4 Due Date Extension ................................................. 18
SECTION 3.5 Set-off ............................................................ 18
ARTICLE IV INTEREST; CONVERSION; EURODOLLAR LOANS .................................. 18
SECTION 4.1 Interest Rates ..................................................... 18
SECTION 4.2 Interest Payment Dates ............................................. 19
SECTION 4.3 Setting of Rates ................................................... 19
SECTION 4.4 Computation of Interest and Fees ................................... 19
SECTION 4.5 Continuation and Conversion Elections .............................. 19
SECTION 4.6 Funding ............................................................ 20
SECTION 4.7 Eurodollar Rate Lending Unlawful ................................... 20
SECTION 4.8 Eurodollar Deposits Unavailable .................................... 20
ARTICLE V FEES .................................................................... 21
SECTION 5.1 Payment of Fees .................................................... 21
SECTION 5.2 Non-Use Fee ........................................................ 21
SECTION 5.3 Compensation of Administrative Agent ............................... 21
ARTICLE VI INCREASED COSTS AND OTHER SPECIAL PROVISIONS ............................ 21
SECTION 6.1 Increased Costs .................................................... 21
SECTION 6.2 Payment for Credits ................................................ 22
SECTION 6.3 Certificate Requirements ........................................... 22
i
SECTION 6.4 General Funding Losses........................................................ 22
SECTION 6.5 Discretion of Lender as to Manner of Funding.................................. 22
SECTION 6.6 Conclusiveness of Statements: Survival of Provisions.......................... 23
ARTICLE VII REPRESENTATIONS AND WARRANTIES..................................................... 23
SECTION 7.1 Due Organization, Authorization, etc.......................................... 23
SECTION 7.2 Statutory Financial Statements................................................ 24
SECTION 7.3 GAAP Financial Statements..................................................... 25
SECTION 7.4 Litigation and Contingent Liabilities......................................... 25
SECTION 7.5 Investment Company Act........................................................ 25
SECTION 7.6 Regulations T, U and X........................................................ 25
SECTION 7.7 Proceeds...................................................................... 26
SECTION 7.8 Insurance..................................................................... 26
SECTION 7.9 Accuracy of Information....................................................... 26
SECTION 7.10 Subsidiaries.................................................................. 26
SECTION 7.11 Insurance Licenses............................................................ 26
SECTION 7.12 Taxes......................................................................... 26
SECTION 7.13 Compliance with Laws.......................................................... 27
ARTICLE VIII COVENANTS.......................................................................... 27
SECTION 8.1 Affirmative Covenants......................................................... 27
SECTION 8.2 Negative Covenants............................................................ 32
ARTICLE IX CONDITIONS......................................................................... 34
SECTION 9.1 Conditions to Occurrence of the Effective Date................................ 34
SECTION 9.2 Conditions to All Borrowings.................................................. 35
ARTICLE X EVENTS OF DEFAULT AND THEIR EFFECT................................................. 36
SECTION 10.1 Events of Default............................................................. 36
SECTION 10.2 Effect of Event of Default.................................................... 38
ARTICLE XI THE ADMINISTRATIVE AGENT........................................................... 39
SECTION 11.1 Appointment and Authorization of Administrative Agent......................... 39
SECTION 11.2 Delegation of Duties.......................................................... 39
SECTION 11.3 Liability of Administrative Agent............................................. 39
SECTION 11.4 Reliance by Administrative Agent.............................................. 40
SECTION 11.5 Notice of Default............................................................. 40
ii
SECTION 11.6 Credit Decision; Disclosure of Information by Administrative Agent............ 40
SECTION 11.7 Indemnification of Administrative Agent....................................... 41
SECTION 11.8 Administrative Agent in its Individual Capacity............................... 41
SECTION 11.9 Successor Administrative Agent................................................ 42
SECTION 11.10 Administrative Agent May File Proofs of Claim................................. 42
ARTICLE XII ASSIGNMENTS AND PARTICIPATIONS..................................................... 43
SECTION 12.1 Successors and Assigns........................................................ 43
SECTION 12.2 Assignments................................................................... 43
SECTION 12.3 Register...................................................................... 44
SECTION 12.4 Participations................................................................ 44
SECTION 12.5 Greater Payment............................................................... 45
SECTION 12.6 Pledge........................................................................ 45
SECTION 12.7 Definitions................................................................... 45
ARTICLE XIII GENERAL............................................................................ 46
SECTION 13.1 Waiver; Amendments............................................................ 46
SECTION 13.2 Confirmations................................................................. 46
SECTION 13.3 Notices and Other Communications; Facsimile Copies............................ 46
SECTION 13.4 Attorney Costs, Expenses and Taxes............................................ 47
SECTION 13.5 Indemnification by the Borrower............................................... 48
SECTION 13.6 Survival of Representations and Warranties.................................... 49
SECTION 13.7 GOVERNING LAW................................................................. 49
SECTION 13.8 JURY TRIAL.................................................................... 49
SECTION 13.9 Successors and Assigns........................................................ 49
iii
SCHEDULES AND EXHIBITS
SCHEDULE 2.1 Commitments
SCHEDULE 7.1 Jurisdictions
SCHEDULE 7.2(a) SAP Exceptions
SCHEDULE 7.2(e) Adverse Changes and Dividends
SCHEDULE 7.4 Litigation
SCHEDULE 7.10 Subsidiaries
SCHEDULE 7.11 Insurance Licenses
SCHEDULE 7.12 Taxes
SCHEDULE 13.3 Addresses
EXHIBIT A Borrowing Request ((S)2.3)
EXHIBIT B Note ((S)3.1)
EXHIBIT C Continuation/Conversion Notice ((S)4.5)
EXHIBIT D Compliance Certificate ((S)8.1.1(f))
EXHIBIT E Opinion of Counsel ((S)9.1.4)
EXHIBIT F Assignment Agreement ((S)12.1.1)
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 29, 2002, is entered into by
and among HORACE MANN EDUCATORS CORPORATION, a Delaware corporation (the
"Borrower"), various financial institutions which are parties hereto (the
"Lenders"), and BANK OF AMERICA, N.A., as administrative agent for the Lenders
(in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Lenders have agreed to make available to the Borrower a
revolving credit facility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. When used herein the following terms shall
have the following meanings:
Administrative Agent shall mean (a) Bank of America, N.A., in its
capacity as administrative agent for the Lenders, and (b) each other Person as
shall have subsequently been appointed as the successor Administrative Agent
pursuant to Section 11.9.
Administrative Questionnaire means an administrative questionnaire in
a form supplied by the Administrative Agent.
Affiliate of any Person shall mean any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be:
(a) "controlled by" any other Person if such other Person possesses,
directly or indirectly, power:
(i) to vote 10% or more of the securities having at the time of
any determination hereunder voting power for the election of directors
of such Person; or
(ii) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise; or
(b) "controlled by" or "under common control with" such other Person
if such other Person is the executor, administrator, or other personal
representative of such Person.
Agent-Related Persons shall mean the Administrative Agent, together
with its Affiliates, and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
Agreement shall mean this Credit Agreement as from time to time
amended, modified, supplemented, restated, refunded or renewed and in effect.
Annual Statement shall mean the annual financial statement of any
Insurance Subsidiary as required to be filed with the insurance commissioner (or
similar authority) of such Insurance Subsidiary's state of domicile, together
with all exhibits or schedules filed therewith, prepared in conformity with SAP.
References to amounts on particular exhibits, schedules, lines, pages and
columns of the Annual Statement are based on the format promulgated by the NAIC
for 2001 Annual Statements. If such format is changed in future years so that
different information is contained in such items or they no longer exist, it is
understood that the reference is to information consistent with that reported in
the referenced item in the 2001 Annual Statement of such Insurance Subsidiary.
Applicable Eurodollar Interest Rate Margin shall mean at any time,
subject to Section 4.1(c), the applicable percentage per annum determined
pursuant to the following table by reference to the higher public rating, if
any, assigned to the Borrower's senior, unsecured long-term debt by Standard &
Poor's Rating Group ("S&P") or Moody's Investor Service Inc. ("Moody's"), as the
case may be:
S&P/Moody's Rating Interest Rate Margin
--------------------------------------------------------------------------------
A/A2 or above 0.500
A-/A3 0.625
BBB+/Baa1 0.750
BBB/Baa2 1.000
BBB-/Baa3 or lower
(or no rating) 1.250
--------------------------------------------------------------------------------
Applicable Non-Use Fee Rate shall mean at any time, the
applicable percentage per annum determined pursuant to the following table by
reference to the higher public rating, if any, assigned to the Borrower's
senior, unsecured long-term debt by S&P or Moody's, as the case may be:
BBB+/Baa1 0.2000
BBB/Baa2 0.2500
BBB-/Baa3 or lower
(or no rating) 0.300
--------------------------------------------------------------------------------
Assignment and Assumption shall mean an Assignment and Assumption
substantially in the form of Exhibit F.
Attributable Indebtedness shall mean, on any date, (a) in respect of
any capital lease of any Person, the capitalized amount thereof that would
appear on a balance sheet of such Person prepared as of such date in accordance
with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized
amount of the remaining lease payments under the relevant lease that would
appear on a balance sheet of such Person prepared as of such date in accordance
with GAAP if such lease were accounted for as a capital lease.
Authorized Officers shall mean those officers of the Borrower whose
signatures and incumbency shall have been certified to the Administrative Agent
pursuant to Section 9.1.3.
Bank of America shall mean Bank of America, N.A.
Base Rate shall mean, for any day, a fluctuating rate per annum equal
to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of
interest in effect for such day as publicly announced from time to time by Bank
of America as its "prime rate." The "prime rate" is a rate set by Bank of
America based upon various factors including Bank of America's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in such rate announced by Bank of America shall
take effect at the opening of business on the day specified in the public
announcement of such change.
Base Rate Loan shall mean any Loan which bears interest at or by
reference to the Base Rate.
Borrower is defined in the Preamble.
Borrowing shall mean the Loans of a single Type and Interest Period
made by the Lenders on any single specified day in accordance with Section 2.1.
Borrowing Date shall mean any Business Day on which a Borrowing is
made.
Borrowing Request shall mean a loan request and certificate duly
executed by two Authorized Officers of the Borrower substantially in the form of
Exhibit A.
Business Day shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in New York City or Chicago are authorized or
required by law to close and, if the applicable Business Day relates to any
Eurodollar Loan, shall mean such a day on which dealings are carried on in the
applicable offshore dollar interbank market.
3
Capitalized Lease shall mean, as to any Person, any lease which is or
should be capitalized on the balance sheet in accordance with GAAP, together
with any other lease which is in substance a financing lease, including, without
limitation, any lease under which (a) such Person has or will have an option to
purchase the property subject thereto at a nominal amount or an amount less than
a reasonable estimate of the fair market value of such property as of the date
the lease is entered into or (b) the term of the lease approximates or exceeds
the expected useful life of the property leased thereunder.
Change in Control shall be deemed to have occurred if (a) there shall
be consummated (i) any consolidation or merger of the Borrower in which the
Borrower is not the continuing or surviving corporation, or pursuant to which
shares of the Borrower's common stock would be converted into cash, securities
or other property, other than a merger of the Borrower in which no Borrower
shareholder's ownership percentage in the surviving corporation immediately
after the merger is less than such shareholder's ownership percentage in the
Borrower immediately prior to such merger by ten percent (10%) or more, or (ii)
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Borrower; (b) the shareholders of the Borrower approve any plan or proposal for
the liquidation or dissolution of the Borrower which is a part of a similar
transaction; (c) any "person" as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is or
becomes, directly or indirectly, the "beneficial owner," as defined in Rule
13d-3 under the Exchange Act, of securities of the Borrower that represent 51%
or more of the combined voting power of the Borrower's then outstanding
securities; or (d) a majority of the members of the Borrower's Board of
Directors are persons who are then serving on the Board of Directors without
having been elected by the Board of Directors or having been nominated by the
Borrower for election by its shareholders.
Closing shall mean the execution and delivery of this Agreement by the
parties hereto.
Code shall mean the Internal Revenue Code of 1986, as amended and any
successor statute of similar import, together with the regulations thereunder,
as amended, reformed or otherwise modified and in effect from time to time.
References to sections of the Code shall be construed to also refer to successor
sections.
Combined shall mean with reference to any group of two or more Persons
and to any financial item (e.g., Statutory EBT, etc.), the amount obtained by
aggregating the respective amounts of such financial item for all such Persons,
without duplication.
Commitment is defined in Section 2.1.
Commitment Amount shall mean, on any date, the aggregate amount shown
on Schedule 2.1 for all Lenders, as such amount may be reduced pursuant to
Section 2.1.1 or 10.2 or increased pursuant to Section 2.1.2.
Commitment Termination Date shall mean the earlier to occur of May
31, 2005 or the date on which any Commitment Termination Event occurs.
4
Commitment Termination Event shall mean (a) the occurrence of a
Default described in Section 10.1.5 or (b) the occurrence and continuance of any
other Event of Default and either (i) the Loans are declared to be due and
payable pursuant to Section 10.2, or (ii) in the absence of such declaration,
the Administrative Agent, acting at the direction of the Required Lenders, gives
notice to the Borrower that the Commitments have been terminated.
Compliance Certificate shall mean a certificate substantially in the
form of Exhibit D but with such changes as the Administrative Agent may from
time to time request for purposes of monitoring the Borrower's compliance
herewith.
Consolidated Debt shall mean the consolidated Debt of the Borrower and
its consolidated Subsidiaries, including without limitation the principal amount
of the Loans.
Contingent Liability shall mean any agreement, undertaking or
arrangement by which any Person (outside the ordinary course of business)
guarantees, endorses, acts as surety for or otherwise becomes or is contingently
liable for (by direct or indirect agreement, contingent or otherwise, to provide
funds for payment by, to supply funds to, or otherwise to invest in, a debtor,
or otherwise to assure a creditor against loss) the debt, obligation or other
liability of any other Person (other than by endorsements of instruments in the
course of collection), or for the payment of dividends or other distributions
upon the shares of any other Person or undertakes or agrees (contingently or
otherwise) to purchase, repurchase, or otherwise acquire or become responsible
for any Debt, obligation or liability or any security therefor, or to provide
funds for the payment or discharge thereof (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), or to maintain
solvency, assets, level of income, or other financial condition of any other
Person, or to make payment or transfer property to any other Person other than
for fair value received; provided, however, that obligations of each of the
Insurance Subsidiaries under insurance policies, annuities, or surety contracts
issued by it or to which it is a party, reinsurance treaties, certificates or
other agreements of each of the Insurance Subsidiaries which are entered into in
the ordinary course of business (including security posted by each of the
Insurance Subsidiaries in the ordinary course of its business to secure
obligations thereunder) shall not be deemed to be Contingent Liabilities of such
Insurance Subsidiary or the Borrower for the purposes of this Agreement. The
amount of any Person's obligation under any Contingent Liability shall (subject
to any limitation set forth therein) be deemed to be the outstanding principal
amount (or maximum permitted principal amount, if larger) of the debt,
obligation or other liability guaranteed or supported thereby.
Continuation/Conversion Notice shall mean a notice of continuation or
conversion duly executed by two Authorized Officers substantially in the form of
Exhibit C.
Contractual Obligation shall mean, relative to any Person, any
obligation, commitment or undertaking under any agreement or other instrument to
which such Person is a party or by which it or any of its property is bound or
subject.
Controlled Group shall mean the Borrower and any corporation, trade or
business that is, along with the Borrower, a member of a controlled group of
corporations or a controlled group of trades or businesses as described in
sections 414(b) and 414(c), respectively, of the Code or in section 4001 of
ERISA.
5
Debt shall mean, with respect to any Person, at any date, without
duplication, (a) all obligations of such Person for borrowed money or in respect
of loans or advances; (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (c) all obligations in respect
of letters of credit which have been drawn but not reimbursed by the Person for
whose account such letter of credit was issued, and bankers' acceptances issued
for the account of such Person; (d) all obligations in respect of Capitalized
Leases and Synthetic Lease Obligations of such Person; (e) all Hedging
Obligations of such Person; (f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay the deferred
purchase price of property or services; (g) Debt of such Person secured by a
Lien on property owned or being purchased by such Person (including Debt arising
under conditional sales or other title retention agreements) whether or not such
Debt is limited in recourse; (h) any Debt of another Person secured by a Lien on
any assets of such first Person, whether or not such Debt is assumed by such
first Person; (i) any Debt of a partnership in which such Person is a general
partner; and (j) all Contingent Liabilities of such Person whether or not in
connection with the foregoing. The amount of any net obligation under any
Hedging Obligation on any date shall be deemed to be the Swap Termination Value
thereof as of such date. The amount of any capital lease or Synthetic Lease
Obligation as of any date shall be deemed to be the amount of Attributable
Indebtedness in respect thereof as of such date.
Default shall mean any Event of Default or any Unmatured Event of
Default.
Default Rate is defined in Section 4.1(c).
Department is defined in Section 7.2(a).
Dollar(s) and the sign "$" shall mean lawful money of the United
States of America.
Effective Date shall mean the first date when all of the conditions
set forth in Article IX shall have been satisfied.
Eligible Assignee is defined in Section 2.17.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations promulgated thereunder and under the Code, in each case as in effect
from time to time. References to sections of ERISA also refer to successor
sections.
Eurodollar Loan(s) shall mean any Loan bearing interest at a rate
determined with reference to the Offshore Rate.
Event of Default shall mean any of the events described in Section
10.1.
Executive Officer shall mean, as to any Person, the president, the
chief financial officer, the chief executive officer, the general counsel, the
treasurer or the secretary.
Federal Funds Rate shall mean, for any day, the rate per annum equal
to the weighted average of the rates on overnight Federal funds transactions
with members of the
6
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate (rounded upward, if necessary,
to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on
such transactions as determined by the Administrative Agent.
Fiscal Quarter shall mean any quarter of a Fiscal Year.
Fiscal Year shall mean any period of twelve consecutive calendar
months ending on the last day of December.
F.R.S. Board shall mean the Board of Governors of the Federal Reserve
System (or any successor thereto).
Funding Percentage shall mean for any Lender, the percentage set forth
opposite the name of such Lender in Schedule 2.1.
Future Interest Expense shall mean at any time the sum of (a) the
consolidated projected interest expense on Consolidated Debt. For purposes of
this definition, the projected interest expense with respect to any Debt shall
be calculated by multiplying the outstanding principal amount of such Debt at
the date of calculation by the annualized interest rate then applicable to such
principal amount and subtracting therefrom, for each mandatory reduction of such
principal that is scheduled to occur within such four Fiscal Quarters, the
corresponding portion of such interest.
GAAP shall mean generally accepted accounting principles in the United
States of America as in effect from time to time.
Governmental Authority shall mean any nation or government, any state
or other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
Hedging Obligations shall mean, with respect to any Person, the net
liability of such Person under Swap Contracts.
Included Taxes shall mean all taxes, duties or other similar charges
imposed on a Lender including any interest or penalties thereon, except for any
taxes, duties or similar charges imposed on the net income of such Lender by the
jurisdiction under the laws of which such Lender is constituted, by the
jurisdiction in which such Lender booked the Loans made pursuant to this
Agreement, or by the jurisdiction in which such Lender's principal office is
located, but including taxes, duties or similar charges including any interest
or penalties thereon imposed by the United States by means of withholding at the
source on payments of principal and interest on the Loans.
Indemnified Liabilities is defined in Section 13.5.
7
Indemnified Parties is defined in Section 13.5.
Insurance Code shall mean, with respect to any Insurance Subsidiary,
the Insurance Code of such Insurance Subsidiary's state of domicile and any
successor statute of similar import, together with the regulations thereunder,
as amended or otherwise modified and in effect from time to time. References to
sections of the Insurance Code shall be construed to also refer to successor
sections.
Insurance Policies shall mean policies purchased from insurance
companies by any of the Borrower or its Subsidiaries, for its own account to
insure against its own liability and property loss (including, without
limitation, casualty, liability and workers' compensation insurance), other than
Reinsurance Agreements and Surplus Relief Reinsurance Agreements.
Insurance Subsidiary shall mean any Life Subsidiary or any P/C
Subsidiary.
Interest Coverage Ratio shall mean the ratio of (a) the combined
dividends then permitted to be paid by the Insurance Subsidiaries to the
Borrower under applicable law without approval of the Department to (b) Future
Interest Expense for the following four Fiscal Quarters.
Interest Period shall mean, relative to any Eurodollar Loan, the
period which begins on (and includes) the date on which such Eurodollar Loan is
made or continued as, or converted into, a Eurodollar Loan pursuant to Section
4.5 and, unless the maturity of such a Eurodollar Loan is accelerated, ends on
(but excludes) the day which numerically corresponds to such date one, two,
three or six months thereafter, as the Borrower may select in its relevant
Borrowing Request or Continuation/Conversion Notice; provided, that:
(a) if there exists no numerically corresponding day in such month,
such Interest Period shall end on the last Business Day of such month;
(b) if such Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall end on the next following
Business Day (unless such next following Business Day is the first Business
Day of a calendar month, in which case such Interest Period shall end on
the Business Day next preceding such numerically corresponding day); and
(c) the Borrower shall not be permitted to select, and there shall
not be applicable, any Interest Period that would end later than the
maturity of the Loans.
Lease Obligations shall mean, at any date, the rental commitments of
any person under leases for real and/or personal property (including taxes,
insurance, maintenance and similar expenses which any Person is obligated to pay
under the terms of said leases) on such date, whether or not such obligations
are reflected as liabilities or commitments on a balance sheet of such Person or
in the notes thereto, excluding, however, obligations under Capitalized Leases.
Lenders is defined in the Preamble.
License(s) is defined in Section 7.13.
8
Lien shall mean, when used with respect to any Person, any interest in
any real or personal property, asset or other right held, owned or being
purchased or acquired by such Person for its own use, consumption or enjoyment
which secures payment or performance of any obligation and shall include any
mortgage, lien, pledge, encumbrance, charge, retained title of a conditional
vendor or lessor, or other security agreement, mortgage, deed of trust, chattel
mortgage, assignment, pledge, retention of title, financing or similar statement
or notice, or other encumbrance arising as a matter of law, judicial process or
otherwise.
Life Subsidiary shall mean any Subsidiary of the Borrower that is
engaged in the business of providing life insurance and/or annuities, and
related services.
Loan(s) is defined in Section 2.1.
Loan Documents shall mean this Agreement, the Note, and all other
agreements, instruments, certificates, documents, schedules or other written
indicia relating to or delivered by the Borrower or any of its Subsidiaries in
connection with any of the foregoing.
Material Adverse Effect shall mean, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration, or governmental investigation or proceeding), a materially adverse
effect on:
(a) the assets, business, financial condition, operations or prospects
of the Borrower or any Subsidiary; or
(b) the ability of the Borrower or any Subsidiary to perform any of
its payment or other material obligations under any of the Loan Documents.
Moody's is defined in the definition of "Applicable Eurodollar
Interest Rate Margin".
Multiemployer Plan shall mean a "multiemployer plan" as defined in
section 4001(a)(3) of ERISA, and to which the Borrower or any of the
Subsidiaries is making, or is obligated to make, contributions, or has made, or
has been obligated to make, contributions.
NAIC shall mean the National Association of Insurance Commissioners,
or any successor thereto.
Net Worth means the consolidated net worth, calculated in accordance
with GAAP, of the Borrower and its consolidated Subsidiaries, excluding
unrealized gains and losses as calculated in accordance with FASB 115.
Note is defined in Section 3.1.
Obligations shall mean all obligations and liabilities of the Borrower
and its Subsidiaries to the Administrative Agent or any of the Lenders,
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, primary or secondary, joint or several, recourse or nonrecourse or
now or hereafter existing or due or to become due, whether for principal,
interest, fees, expenses, lease obligations, claims, indemnities or otherwise,
under
9
or in connection with this Agreement or any other Loan Document and including
any Hedging Obligations to the Administrative Agent or any of the Lenders.
Offshore Rate shall mean for any Interest Period with respect to any
Eurodollar Rate Loan, a rate per annum determined by the Administrative Agent
pursuant to the following formula:
Offshore Rate = Eurodollar Base Rate
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Base Rate" means, for such Interest Period:
(a) the rate per annum equal to the rate determined by the
Administrative Agent to be the offered rate that appears on the page of the
Telerate screen (or any successor thereto) that displays an average British
Bankers Association Interest Settlement Rate for deposits in Dollars (for
delivery on the first day of such Interest Period) with a term equivalent
to such Interest Period, determined as of approximately 11:00 a.m. (London
time) two Business Days prior to the first day of such Interest Period, or
(b) if the rate referenced in the preceding clause (a) does not appear
on such page or service or such page or service shall not be available, the
rate per annum equal to the rate determined by the Administrative Agent to
be the offered rate on such other page or other service that displays an
average British Bankers Association Interest Settlement Rate for deposits
in Dollars (for delivery on the first day of such Interest Period) with a
term equivalent to such Interest Period, determined as of approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, or
(c) if the rates referenced in the preceding clauses (a) and (b) are
not available, the rate per annum determined by the Administrative Agent as
the rate of interest at which deposits in Dollars for delivery on the first
day of such Interest Period in same day funds in the approximate amount of
the Eurodollar Rate Loan being made, continued or converted by Bank of
America and with a term equivalent to such Interest Period would be offered
by Bank of America's London Branch to major banks in the London interbank
eurodollar market at their request at approximately 4:00 p.m. (London time)
two Business Days prior to the first day of such Interest Period.
"Eurodollar Reserve Percentage" means, for any day during any Interest
Period, the reserve percentage (expressed as a decimal, carried out to five
decimal places) in effect on such day, whether or not applicable to any
Lender, under regulations issued from time to time by the F.R.S. Board for
determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to
Eurocurrency funding (currently referred to as "Eurocurrency liabilities").
The Offshore Rate for each outstanding Eurodollar Rate Loan shall be
adjusted automatically as of the effective date of any change in the
Eurodollar Reserve Percentage.
10
Ordinary Course Litigation is defined in Section 7.4.
Participants is defined in Section 12.2.1.
Participations is defined in Section 12.2.1.
Payment Date shall mean (a) with respect to any Eurodollar Loan,
the last day of each Interest Period with respect thereto and, if such Interest
Period is in excess of three months, the day three months after the commencement
of such Interest Period, and (b) with respect to any Base Rate Loan, the last
Business Day of each month.
Payor is defined in Section 11.6.
PBGC shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
P/C Subsidiary shall mean any Subsidiary of the Borrower that is
engaged in the business of providing property and casualty insurance and related
services.
Person shall mean any natural person, corporation, limited
liability company, partnership, firm, trust, association, government,
governmental agency or other entity, whether acting in an individual, fiduciary
or other capacity.
Plan shall mean any "employee pension benefit plan," as such term
is defined in ERISA, which is subject to Title IV of ERISA (other than a
"Multiemployer Plan"), and as to which any entity in the Controlled Group has or
may have any liability, including any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA for any time
within the preceding five years or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.
Regulatory Change shall mean, relative to any Lender:
(a) any change in (or the adoption, implementation, phase-in or
commencement of effectiveness of) any
(i) United States federal or state law or foreign law
applicable to such Lender;
(ii) regulation, interpretation, directive, requirement or
request applicable to such Lender of any court or governmental
authority charged with the interpretation or administration of any
law referred to in clause (a)(i) or of any fiscal, monetary or
other authority having jurisdiction over such Lender; or
(b) any change in the application to such Lender of any existing
law, regulation, interpretation, directive, requirement or request
referred to in clause (a)(i) or (a)(ii) above;
in either case, occurring after the date hereof.
11
Reinsurance Agreements shall mean any agreement, contract, treaty,
certificate or other arrangement (other than a Surplus Relief Reinsurance
Agreement) whereby any Insurance Subsidiary agrees to transfer or cede to
another insurer all or part of the liability assumed by such Insurance
Subsidiary under a policy or policies of insurance reinsured by such Insurance
Subsidiary.
Required Lenders shall mean, at any time, Lenders having, in the
aggregate, a Voting Percentage of 66% or more at such time.
Required Payment is defined in Section 11.6.
Requirement of Law for any Person shall mean the corporate charter
and by-laws or other organizational or governing documents of such Person, and
any law, treaty, rule, ordinance or regulation or determination of an arbitrator
or a court or other governmental authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
SAP shall mean, as to each Insurance Subsidiary, the statutory
accounting practices prescribed or permitted by the insurance commissioner (or
other similar authority) in such Insurance Subsidiary's state of domicile for
the preparation of Annual Statements and other financial reports by insurance
corporations of the same type as such Insurance Subsidiary.
S & P is defined in the definition of "Applicable Eurodollar
Interest Rate Margin."
Statutory Carrying Value shall mean, as to any investment of any
Insurance Subsidiary, the value of such investment as determined in accordance
with SAP consistently applied.
Statutory Financial Statements is defined in Section 7.2.
Statutory Liabilities shall mean, as to any Person, as of any
date, with respect to (a) any Life Subsidiary, the amount reported on page 3,
line 28, column 1 of its Annual Statement, and (b) any P/C Subsidiary, the
amount reported on page 3, line 21, column 1 of its Annual Statement; or an
amount determined in a consistent manner for any date other than one as of which
an Annual Statement is prepared.
Subsidiary shall mean a corporation of which the indicated Person
and/or its other Subsidiaries, individually or in the aggregate, own, directly
or indirectly, such number of outstanding shares as have at the time of any
determination hereunder more than 50% of the ordinary voting power. Unless
otherwise specified, "Subsidiary" shall mean a Subsidiary of the Borrower.
Surplus Relief Reinsurance Agreements shall mean any agreement
whereby any Insurance Subsidiary assumes or cedes business under a reinsurance
agreement that would be considered a "financing-type" reinsurance agreement and
(a) with respect to any P/C Subsidiary, which is entered into solely for the
purpose of affecting the income statement of such P/C Subsidiary as the same may
be amended from time to time, and (b) with respect to any Life
12
Subsidiary, as determined in the Fourth Edition of the AICPA Audit Guide for
Stock Life Insurance Companies on pp. 91-92 thereof as the same may be amended
from time to time.
Swap Contract shall mean (a) any and all rate swap transactions,
basis swaps, credit derivative transactions, forward rate transactions,
commodity swaps, commodity options, forward commodity contracts, equity or
equity index swaps or options, bond or bond price or bond index swaps or options
or forward bond or forward bond price or forward bond index transactions,
interest rate options, forward foreign exchange transactions, cap transactions,
floor transactions, collar transactions, currency swap transactions,
cross-currency rate swap transactions, currency options, spot contracts, or any
other similar transactions or any combination of any of the foregoing (including
any options to enter into any of the foregoing), whether or not any such
transaction is governed by or subject to any master agreement, and (b) any and
all transactions of any kind, and the related confirmations, which are subject
to the terms and conditions of, or governed by, any form of master agreement
published by the International Swaps and Derivatives Association, Inc., any
International Foreign Exchange Master Agreement, or any other master agreement
(any such master agreement, together with any related schedules, a "Master
Agreement"), including any such obligations or liabilities under any Master
Agreement.
Swap Termination Value shall mean, in respect of any one or more
Swap Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Lender or any Affiliate of a
Lender).
Synthetic Lease Obligation shall mean the monetary obligation of a
Person under (a) a so-called synthetic, off-balance sheet or tax retention
lease, or (b) an agreement for the use or possession of property creating
obligations that do not appear on the balance sheet of such Person but which,
upon the insolvency or bankruptcy of such Person, would be characterized as the
indebtedness of such Person (without regard to accounting treatment).
2001 Annual Statement is defined in Section 7.2(b).
2002 Quarterly Statement is defined in Section 7.2(b).
Types of Loan -- see Section 2.2. The Types of Loans under this
Agreement are as follows: Base Rate Loans and Eurodollar Loans.
Unmatured Event of Default shall mean any condition or event,
which, after notice or lapse of time or both, would constitute an Event of
Default.
Voting Percentage shall mean at any time, with respect to any
Lender, the percentage calculated by dividing the aggregate principal amount of
such Lender's Loans by the aggregate principal amount of all Lenders' Loans then
outstanding or, if no Loans are outstanding, the Funding Percentage.
13
Welfare Plan shall mean any "employee welfare benefit plan" as
such term is defined in ERISA, as to which the Borrower has any liability.
SECTION 1.2 Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Schedules hereto, the Loan
Documents, the Exhibits and any other communications delivered from time to time
in connection with this Agreement.
SECTION 1.3 Cross References; Headings. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
or in any of the Loan Documents shall refer to this Agreement or such Loan
Document as a whole and not to any particular provision of this Agreement or
such Loan Document. Section, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or to this
Agreement unless otherwise specified. Any reference in any Section or definition
to any clause is, unless otherwise specified, to such clause of such Section or
definition. The various headings in this Agreement and the Loan Documents are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or such Loan Document or any provision hereof or thereof.
SECTION 1.4 Other Definitional Provisions. Unless otherwise
defined or the context otherwise requires, all financial and accounting terms
used herein or in any of the Loan Documents or any certificate or other document
made or delivered pursuant hereto shall be defined in accordance with GAAP or
SAP, as the context may require. When used in this Agreement, the term
"financial statements" shall include the notes and schedules thereto. In
addition, when used herein, the terms "best knowledge of" or "to the best
knowledge of" any Person shall mean matters within the actual knowledge of such
Person (or an Executive Officer or general partner of such Person) or which
should have been known by such Person after reasonable inquiry.
ARTICLE II
AMOUNT AND TERMS OF COMMITMENT
SECTION 2.1 Revolving Loan Commitment. Upon and subject to the
terms and conditions hereof, each of the Lenders severally and for itself agrees
to make revolving loans (collectively called the "Loans" and individually called
a "Loan") from time to time on any Business Day occurring prior to the
Commitment Termination Date, in such Lender's Funding Percentage of the
aggregate amount of the Borrowing requested by the Borrower to be made on such
date; provided, that (i) the aggregate unpaid principal amount of all Loans from
any single Lender shall not exceed the amount set forth opposite the name of
such Lender on Schedule 2.1 and (ii) the aggregate unpaid principal amount of
all Loans from all Lenders outstanding at any time shall not exceed the
Commitment Amount. The Commitment of each Lender to make the Loans pursuant to
this Section 2.1 is herein referred to as its "Commitment."
2.1.1 Voluntary Reduction of Commitment Amount. The Borrower may,
from time to time on any Business Day, voluntarily reduce the unused
amount of the Commitment Amount in whole or in part; provided, however,
that (i) each such voluntary
14
reduction shall require at least two (2) Business Days' prior written
notice to the Administrative Agent and shall be permanent, and (ii) each
such voluntary reduction shall be in an aggregate minimum amount of
$1,000,000 and an integral multiple of $100,000 (or, if less, the entire
unused amount of the Commitment Amount).
2.1.2 Increase of Commitments. The Borrower may from time to time,
by notice to the Administrative Agent, request that the aggregate
Commitments be increased by an amount that will not result in the
aggregate Commitments under this Agreement to exceed $35,000,000. Each
such notice shall set forth the requested amount of the increase in the
Commitments and the date on which such increase is to become effective.
The Borrower shall have the right, but not the obligation, to arrange for
one or more commercial banks or other financial institutions (any such
bank or other financial institution being called an "Augmenting Lender"),
which may include any Lender, to extend Commitments or increase their
existing Commitments in an aggregate amount up to, but not greater than,
the requested increase, provided that each Augmenting Lender, if not
already a Lender hereunder (i) shall extend a new Commitment of not less
than $5,000,000, (ii) shall execute all such documentation as the
Administrative Agent shall specify to evidence its status as a Lender
hereunder and (iii) shall be consented to by the Administrative Agent. If
(and only if) Lenders (including Augmenting Lenders) shall have agreed to
increase their aggregate Commitments or to extend new Commitments in an
aggregate amount not less than $5,000,000 in the aggregate, such
increases and such new Commitments shall become effective on the date
agreed to by the Borrower, the Augmenting Lenders and the Administrative
Agent. Notwithstanding the foregoing, no increase in the aggregate
Commitments (or in the Commitment of any Lender) shall become effective
under this paragraph unless, on the date of such increase, the conditions
set forth in Section 9.2 shall be satisfied (with all references in such
paragraphs to a Loan being deemed to be references to such increase) and
the Administrative Agent shall have received a certificate to that effect
dated such date and executed by an Authorized Officer of the Borrower.
Upon the effectiveness of any increase pursuant to this Section
2.1.2 of the aggregate Commitments and any resulting adjustment in the
Funding Percentage, the Lenders and the Augmenting Lenders will purchase
from each other and sell to each other outstanding Loans sufficient to
cause the outstanding Loans of each Lender and Augmenting Lender to equal
its Funding Percentage (as so adjusted) of the aggregate outstanding
Loans. Such purchase and sale shall be made pursuant to Section 12.2
except that no minimum amount shall be required, no processing fee shall
be charged and, if any Lender shall suffer a loss or incur an expense as
a result of the effectiveness of such purchase or sale being during an
Interest Period, the Borrower shall reimburse such Lender the amount of
such loss or expense. Each such Lender shall furnish the Borrower with a
certificate setting forth the basis for determining the amount to be paid
to it hereunder.
SECTION 2.2 Types of Loans. The Loans shall be denominated as Base
Rate Loans or Eurodollar Loans (each being herein called a "Type" of Loan), as
the Borrower shall specify in the related Borrowing Request pursuant to Section
2.3 or Continuation/Conversion Notice pursuant to Section 4.5. Base Rate Loans
and Eurodollar Loans may be outstanding at
15
the same time, provided that (a) in the case of Eurodollar Loans, not more than
three (3) different Interest Periods shall be outstanding at any one time for
all such Loans, and (b) the Borrower shall specify Types of Loans and Interest
Periods such that no payment or prepayment of any principal on any Eurodollar
Loan shall result in an interruption of any Interest Period. In the absence of
instructions to the contrary in any Borrowing Request and in the absence of the
delivery of any Continuation/Conversion Notice, the Borrower shall be deemed to
have requested that any affected Loan be made or converted to a Base Rate Loan.
SECTION 2.3 Borrowing Request. By delivering to the Agent a
Borrowing Request at or before 9:00 a.m., Chicago time, on a Business Day, the
Borrower may from time to time irrevocably request, on not less than two (2)
Business Days' notice, that a Borrowing be made in an amount equal to all or any
portion of the unused Commitment Amount (i.e., the Commitment Amount minus the
aggregate amount of all outstanding Loans).
SECTION 2.4 Funding of Borrowing. On each Borrowing Date, each
Lender shall deposit with the Administrative Agent same day funds, at or before
10:00 a.m., Chicago time, in an amount equal to its Funding Percentage of the
requested Borrowing. Such deposit shall be made to such account as the
Administrative Agent shall specify. After timely receipt of such funds, the
Administrative Agent shall, at or before 1:00 p.m., Chicago time, on the
Borrowing Date, make such funds available to the Borrower by wire transfer in
same day funds to such accounts of the Borrower as the Borrower shall have
specified in writing. No Lender's obligation to make any portion of the Loans
shall be affected by any other Lender's failure to make any portion of the
Loans.
ARTICLE III
RECORDKEEPING; NOTE; PAYMENTS; SETOFF
SECTION 3.1 Evidence of Debt. The Loans made by each Lender shall
be evidenced by one or more accounts or records maintained by such Lender and by
the Administrative Agent in the ordinary course of business. The accounts or
records maintained by the Administrative Agent and each Lender shall be
conclusive absent manifest error of the amount of the Loans made by the Lenders
to the Borrower and the interest and payments thereon. Any failure to so record
or any error in doing so shall not, however, limit or otherwise affect the
obligation of the Borrower hereunder to pay any amount owing with respect to the
Obligations. In the event of any conflict between the accounts and records
maintained by any Lender and the accounts and records of the Administrative
Agent in respect of such matters, the accounts and records of the Administrative
Agent shall control in the absence of manifest error. Upon the request of any
Lender made through the Administrative Agent, the Borrower shall execute and
deliver to such Lender (through the Administrative Agent) a Note, which shall
evidence such Lender's Loans in addition to such accounts or records. Each
Lender may attach schedules to its Note and endorse thereon the date, Type (if
applicable), amount and maturity of its Loans and payments with respect thereto.
SECTION 3.2 Payment of the Loans.
3.2.1 Required Payments.
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(a) If at any time the aggregate outstanding principal amount of
the Loans shall exceed the Commitment Amount in effect at such time, the
Borrower shall make a principal repayment of the Loans in an amount equal
to such excess.
(b) The Borrower shall, immediately upon any acceleration of the
maturity date of the Loans pursuant to Section 11.2, repay the Loans.
3.2.2 Voluntary Payments. The Borrower may, from time to time on
any Business Day, make a voluntary payment, in whole or in part, of the
outstanding principal amount of any Loans, subject to Section 3.3.3.
3.2.3 Conditions Applicable to all Payments.
(a) Each payment of a portion of the Loans shall be made pro rata
among Loans of the same Type and, if applicable, having the same Interest
Period of all Lenders.
(b) No payment of any Eurodollar Loan may be made on any day other
than the last day of the Interest Period for such Loan.
(c) All voluntary payments shall require at least three but no
more than five Business Days' prior written notice to the Administrative
Agent.
(d) All voluntary partial payments shall be in an aggregate
minimum amount of $1,000,000 and an integral multiple of $100,000.
(e) All payments of principal of the Loans (in whole or in part)
shall be accompanied by the payment of interest accrued on the principal
amount being prepaid.
SECTION 3.3 Making of Payments. All payments of principal of, or
interest on, the Note and of all fees and other Obligations to be made by the
Borrower pursuant to this Agreement shall be made by the Borrower without
condition or deduction for any counterclaim, defense, recoupment or setoff to
the Administrative Agent for the Administrative Agent's account or for the
benefit of the Lenders, as applicable, in immediately available Dollars. All
such payments shall be deposited to the Borrower's Account No. 74-50915 at Bank
of America (or such other account as the Administrative Agent may from time to
time specify), not later than 10:00 am., Chicago time, on the date due. The
Administrative Agent shall have the authority to debit such account for the
amount of any payments due in order to effect each such payment. Funds received
after 11:30 a.m., Chicago time, shall be deemed to have been received by the
Administrative Agent on the next following Business Day (unless such failure to
receive funds in a timely fashion is due to the Administrative Agent's failure
to debit the Borrower's account).
SECTION 3.4 Due Date Extension. If any payment of principal or
interest with respect to the Loans falls due on a day which is not a Business
Day, then such due date shall be extended to the next following Business Day,
and additional interest shall accrue and be payable for the period of such
extension.
SECTION 3.5 Set-off. The Borrower agrees that each of the Lenders,
the Administrative Agent and any Participant shall have all rights of set-off
provided by applicable
17
law, and in addition thereto, the Borrower agrees that at any time (a) any
payment or amount owing by the Borrower under or in connection with this
Agreement or the Loan Documents is then due or (b) any Unmatured Event of
Default pursuant to Section 10.1.5 or Event of Default exists, each Lender, the
Administrative Agent or any Participant may apply to the payment of such payment
or other amount any and all balances, credits, deposits, accounts or moneys of
the Borrower then or thereafter with such Lender, the Administrative Agent or
any Participant; provided, that, any proceeds or recoveries obtained by any such
Lender, the Administrative Agent or any Participant from any such appropriation
and application in excess of such entity's pro rata share of such payments or
amounts shall be shared with the other Lenders, the Administrative Agent and the
participants on a pro rata basis; provided, further however, no such set-off
shall be undertaken by any Lender or Participant domiciled in or with respect to
property located in California without the written consent of the Administrative
Agent.
ARTICLE IV
INTEREST; CONVERSION; EURODOLLAR LOANS
SECTION 4.1 Interest Rates. The Borrower shall pay interest on the
unpaid principal amount of the Loans for the period commencing on the date of
each such Loan until such Loan is paid in full, at the rates per annum specified
below:
(a) On the outstanding principal amount of the Loans maintained
from time to time as Base Rate Loans, interest shall accrue at the Base
Rate from time to time in effect; and
(b) On the outstanding principal amount of each Loan maintained
from time to time as a Eurodollar Loan, interest shall accrue at a rate
per annum equal to the Offshore Rate from time to time in effect for the
related Interest Period plus the Applicable Eurodollar Interest Rate
Margin in effect from time to time; and
(c) Notwithstanding the foregoing, (i) any amount past due shall
bear interest at a rate per annum (the "Default Rate") equal to the Base
Rate Loan from time to time in effect (but not less than the Base Rate as
in effect at such occurrence date) plus 3.5% per annum, and (ii) upon the
occurrence and during the continuation of any Event of Default, and after
notice by the Administrative Agent to the Borrower of the Required
Lenders' intent to apply the Default Rate of interest the outstanding
principal amount of the Loans and any other monetary Obligations shall
bear interest at the Default Rate.
SECTION 4.2 Interest Payment Dates. Accrued interest on the Loans
shall be paid on each Payment Date, commencing with the first such date
following the Effective Date. After maturity, accrued interest on the Loans
shall be payable on demand.
SECTION 4.3 Setting of Rates. Interest rates hereunder shall be
calculated from time to time by the Administrative Agent and each such
calculation of an interest rate shall be conclusive and binding on the Borrower
in the absence of manifest error. Any change in the Applicable Eurodollar Rate
Margin resulting from a change in the Borrower's public ratings shall be
effective on the date such public rating change is announced.
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SECTION 4.4 Computation of Interest and Fees. Interest on Base
Rate Loans, when based on the "prime rate," shall be computed on the basis of
actual days elapsed and a year consisting of 365 or 366 days, as applicable. All
other interest and fees shall be computed on the basis of actual days elapsed
and a year consisting of 360 days.
SECTION 4.5 Continuation and Conversion Elections. At the election
of the Borrower pursuant to a Continuation/ Conversion Notice delivered to the
Administrative Agent at or before 10:00 a.m., Chicago time, the Borrower may
elect, from time to time on not less than three (3) Business Days' notice:
(a) that all, or any portion, in an aggregate minimum amount of
$1,000,000 and an integral multiple of $100,000, of the Loans be
converted from Base Rate Loans into Eurodollar Loans; and
(b) on the expiration of the Interest Period applicable to any
Eurodollar Loans, that all, or any portion, in an aggregate minimum
amount of $1,000,000 and an integral multiple of $100,000, of such Loans
be continued as Eurodollar Loans or converted into Base Rate Loans;
provided, however, that:
(i) no portion of the outstanding principal amount of any
Loan may be continued as, or be converted into, a Eurodollar Loan
when any Default has occurred and is continuing; and
(ii) no portion of the outstanding principal amount of any
Loan may be made or continued as, or be converted into, a
Eurodollar Loan if, after giving effect to such action, the
Interest Period applicable thereto shall extend beyond the date of
any mandatory payment of such Loan unless a sufficient principal
amount of the Loans is being maintained as Base Rate Loans or as
Eurodollar Loans having Interest Periods ending on or prior to the
date of any such mandatory prepayment to permit such repayment to
be applied in full to Base Rate Loans.
SECTION 4.6 Funding. In the event the Borrower elects to obtain
any portion of the Loans as Eurodollar Loans, or elects to convert any portion
of the principal amount of any Base Rate Loan into a Eurodollar Loan, each
Lender may, if it so elects, fulfill its obligation to make or continue any
portion of the principal amount of the Loans as, or to convert any portion of
the principal amount of any Loan into, a Eurodollar Loan in accordance with any
election made by the Borrower by causing a foreign branch or Affiliate of such
Lender or an international banking facility created by such Lender to make such
Eurodollar Loan; provided, however, that in such event such Eurodollar Loan
shall be deemed to have been made by such Lender for the purpose of all
provisions of this Agreement, and the obligation of the Borrower to repay such
Eurodollar Loan shall nevertheless be to such Lender and shall be deemed to be
held by it, to the extent of such Eurodollar Loan, for the account of such
foreign branch, Affiliate or international banking facility.
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SECTION 4.7 Eurodollar Rate Lending Unlawful. If as the result of
any Regulatory Change, any Lender shall determine (which determination shall be
conclusive and binding on the Borrower) that it is unlawful for such Lender to
make, continue, or maintain any Loan as, or to convert any Loan into, a
Eurodollar Loan, the obligations of all Lenders to make, continue or maintain
any portion of the principal amount of any Loan as, or to convert any Loan into,
a Eurodollar Loan shall be, upon such determination (and telephonic notice
thereof, confirmed in writing, to the Administrative Agent and the Borrower),
forthwith suspended until such Lender shall notify the Administrative Agent that
the circumstances causing such suspension no longer exist, and all Eurodollar
Loans shall automatically convert into Base Rate Loans; provided, however, that
each Lender shall take any reasonable actions available to it (including the
designation of its lending office) consistent with legal and regulatory
restrictions that will avoid the need for such suspension and will not, in the
reasonable judgment of such Lender, be otherwise materially disadvantageous to
the Lender.
SECTION 4.8 Eurodollar Deposits Unavailable. If prior to the date
on which all or any portion of the principal amount of any Loan is to be made or
continued as, or be converted into, a Eurodollar Loan, the Administrative Agent
shall have determined (and telephonic notice thereof, confirmed in writing,
shall have been given to the Borrower and the Lenders) that:
(a) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to the Administrative Agent or any
Lender in the interbank eurodollar market; or
(b) by reason of circumstances affecting the interbank eurodollar
market in Dollars, adequate means do not exist for ascertaining the
interest rate applicable hereunder to such Eurodollar Loan;
then, the obligations of all Lenders to make or continue any portion of the
principal amount of any Loan as, or to convert any portion of any Loan into,
Eurodollar Loans shall forthwith be suspended until the Administrative Agent
shall notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist; provided, however, that each Lender shall take any
reasonable actions available to it (including the designation of its lending
office) consistent with legal and regulatory restrictions that will avoid the
need for such suspension and will not, in the reasonable judgment of such
Lender, be otherwise materially disadvantageous to the Lender.
ARTICLE V
FEES
SECTION 5.1 Payment of Fees. The Borrower agrees to pay the fees
set forth in this Article V. Where such fees are paid to the Administrative
Agent for the benefit of the Lenders, the Administrative Agent shall, upon
receipt of any such fees, promptly transmit to each Lender such Lender's ratable
portion of such fees.
SECTION 5.2 Non-Use Fee. The Borrower agrees to pay to the
Administrative Agent for the ratable benefit of the Lenders a fee for the period
commencing on the Effective
20
Date and ending on the Commitment Termination Date, equal to the Applicable
Non-Use Fee Rate in effect from time to time in each case applied to the daily
average unused portion of the Commitment Amount from time to time. Accrued
non-use fees shall be payable in arrears on the last day of each Fiscal Quarter
of Borrower and on the Commitment Termination Date.
SECTION 5.3 Compensation of Administrative Agent. The Borrower shall pay
to the Administrative Agent such fees and other amounts as each shall agree to
in writing with the Borrower from time to time.
ARTICLE VI
INCREASED COSTS AND OTHER SPECIAL PROVISIONS
SECTION 6.1 Increased Costs. If, after the date hereof, any Regulatory
Change, or compliance by the Administrative Agent or any Lender with any request
or directive (whether or not having the force of law) of any Governmental
Authority, shall subject the Administrative Agent or any Lender to any Included
Tax or capital adequacy requirement with respect to, or shall otherwise increase
the effective cost of the Loans or such Lender's obligation to make, issue or
maintain the Loans (except for taxes, duties or similar charges including any
interest or penalties thereon which do not constitute Included Taxes), or shall
impose on a Lender any other condition, except with respect to taxes, duties or
similar charges including any interest or penalties thereon which do not
constitute Included Taxes, affecting the Loan, or such Lender's obligation to
make the Loans and the result of any of the foregoing is to increase the cost to
any Lender of making, issuing or maintaining the Loans, or to reduce the amount
of, or any rate of return on, any sum received or receivable by such Lender
under this Agreement or under the Note with respect thereto, then upon written
notice of such occurrence to the Borrower by such Lender (which notice shall
contain a statement setting forth a description of such occurrence and shall be
signed by an authorized officer of such Lender), the Borrower shall pay directly
to such Lender such additional amount or amounts as will compensate such Lender
for such increased cost or such reduction; provided, however, that each Lender
shall take any reasonable actions available to it (including the designation of
a different lending office) consistent with legal and regulatory restrictions
that will avoid the need for, or reduce the amount of, such compensation and
will not, in the reasonable judgment of such Lender, be otherwise materially
disadvantageous to such Lender.
SECTION 6.2 Payment for Credits. If the Borrower is required pursuant to
Section 6.1 to pay and pays a Lender for any increased costs or any reduction of
any rate of return, and if such Lender, in good faith, determines that it has
received or been granted a credit against or relief or remission for or
repayment of any tax paid or payable by it, it shall, to the extent that it
could do so without prejudice to the retention of the amount of such credit,
relief, remission or repayment, pay to the Borrower such amount as such Lender
shall, in good faith, have determined to be attributable to such payment by the
Borrower.
SECTION 6.3 Certificate Requirements. Each Lender that is not an entity
organized under the laws of the United States shall deliver to the Borrower
(with a copy to the Administrative Agent) an accurate and complete original
signed copy of an Internal Revenue Service Form W-8BEN or W-8ECI properly
claiming complete exemption from withholding,
21
within thirty days of the signing of this Agreement, and shall promptly deliver
such additional or supplemental forms thereafter as may be required in order to
maintain the effectiveness and accuracy of such forms. In addition, each Lender
shall deliver to the Borrower such other forms or documentation as the Borrower
may reasonably request in order to comply with the United States tax laws.
SECTION 6.4 General Funding Losses. The Borrower hereby agrees that upon
demand by the Administrative Agent (which demand shall be accompanied by a
statement signed by an authorized officer of the Administrative Agent setting
forth the basis for the calculations of the amount being claimed) the Borrower
will indemnify such Lender against any loss or expense which each Lender may
sustain or incur as reasonably determined by such Lender in accordance with the
provisions of this Section 6.4, as a result of any failure of the Borrower to
borrow, continue, convert or repay any Loan on a date specified therefor in a
notice (whether written or oral) of borrowing continuation, conversion or
repayment pursuant to this Agreement. For the purposes of this Section 6.4 such
loss or expense for each Lender shall include an amount equal to the excess, if
any, of (a) its cost of obtaining in the interbank eurodollar market the funds
for the Loans being repaid or not borrowed for the period from the date of such
prepayment or failure to borrow to the last day of the then current Interest
Period for such Loans (or, in the case of a failure to borrow, the Interest
Period for such Loans that would have commenced on the date of such failure)
over (b) the amount of interest that such Lender would have earned had it
invested the entire amount of funds so prepaid or the entire amount of funds
acquired to effect, fund or maintain the Loans not borrowed, at the Federal
Funds Rate. For this purpose, all notices to a Lender or the Administrative
Agent pursuant to this Agreement shall be deemed to be irrevocable.
SECTION 6.5 Discretion of Lender as to Manner of Funding. Notwithstanding
any provision of this Agreement to the contrary, each Lender shall be entitled
to fund and maintain its funding of all or its portion of the Loans in any
manner it sees fit; provided, however, that each Lender shall take any
reasonable actions available to it (including the designation of its lending
office) consistent with legal and regulatory restrictions that will avoid
increased cost to the Borrower and will not, in the reasonable judgment of such
Lender, be otherwise materially disadvantageous to the Lender.
SECTION 6.6 Conclusiveness of Statements: Survival of Provisions. In
making the determinations contemplated by this Article VI, the Administrative
Agent or the Lenders may make such reasonable estimates, assumptions,
allocations and the like that the Administrative Agent or the Lenders in good
faith determine to be appropriate. Upon making any determination pursuant to
this Article VI, the Administrative Agent shall provide the Borrower with a
certificate signed by an authorized officer of the Administrative Agent setting
forth any estimates, assumptions, allocations or other similar calculations made
by the Administrative Agent in connection with such determination. Subject to
the foregoing, determinations and statements of the Administrative Agent and the
Lenders pursuant to this Article VI and any certificates delivered in connection
therewith shall be conclusive absent manifest error. The provisions of this
Article VI shall survive termination of this Agreement.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make Loans
hereunder, the Borrower represents and warrants to each Lender that:
SECTION 7.1 Due Organization, Authorization, etc. Each of the Borrower
and each Subsidiary (a) is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation, (b) is duly
qualified to do business and in good standing in each jurisdiction where,
because of the nature of its activities or properties, such qualification is
required, which jurisdictions are set forth with respect to the Borrower and
each Subsidiary on Schedule 7.1, (c) has the requisite corporate power and
authority and the right to own and operate its properties, to lease the property
it operates under lease, and to conduct its business as now and proposed to be
conducted, and (d) has obtained all material licenses, permits, consents or
approvals from or by, and has made all filings with, and given all notices to,
all Governmental Authorities having jurisdiction, to the extent required for
such ownership, operation and conduct (including, without limitation, the
consummation of the transactions contemplated by this Agreement) as to each of
the foregoing except where the failure to do so would not have a Material
Adverse Effect on the Borrower, or on the Borrower and its Subsidiaries taken as
a whole. The execution, delivery and performance by the Borrower of this
Agreement and the consummation of the transactions contemplated hereby and
thereby are within its corporate powers and have been duly authorized by all
necessary corporate action (including, without limitation, shareholder approval,
if required). Each of the Borrower and its Subsidiaries has received all
material governmental and other consents and approvals (if any shall be
required) necessary for such execution, delivery and performance, and such
execution, delivery and performance do not and will not contravene or conflict
with, or create a Lien or right of termination or acceleration under, any
Requirement of Law or Contractual Obligation binding upon the Borrower or such
Subsidiaries. This Agreement and each of the Loan Documents is (or when executed
and delivered will be) the legal, valid, and binding obligation of the Borrower
enforceable against the Borrower in accordance with its respective terms;
provided that the Borrower assumes for purposes of this Section 7.1 that this
Agreement and the other Loan Documents have been validly executed and delivered
by each of the parties thereto other than the Borrower.
SECTION 7.2 Statutory Financial Statements. (a) The Annual Statement of
each of the Insurance Subsidiaries (including, without limitation, the
provisions made therein for investments and the valuation thereof, reserves,
policy and contract claims and Statutory Liabilities) as filed with the
appropriate Governmental Authority of its state of domicile (the "Department")
and delivered to each Lender prior to the execution and delivery of this
Agreement, as of and for the 1997, 1998, 1999, 2000 and 2001 Fiscal Years, and
as of and for the Fiscal Quarter ended March 31, 2002 (collectively, the
"Statutory Financial Statements"), have been prepared in accordance with SAP
applied on a consistent basis (except as noted therein). Each such Statutory
Financial Statement was in material compliance with applicable law when filed.
The Statutory Financial Statements fairly present the financial position, the
results of operations, changes in equity and changes in financial position of
each such Insurance Subsidiary as of and for the respective dates and periods
indicated therein in accordance with
23
SAP applied on a consistent basis, except as set forth in the notes thereto or
on Schedule 7.2(a). Except for liabilities and obligations, including, without
limitation, reserves, policy and contract claims and Statutory Liabilities (all
of which have been computed in accordance with SAP), disclosed or provided for
in the Statutory Financial Statements, the Insurance Subsidiaries did not have,
as of the respective dates of each of such financial statements, any material
liabilities or obligations (whether absolute or contingent and whether due or to
become due) which, in conformity with SAP, applied on a consistent basis, would
have been required to be or should be disclosed or provided for in such
financial statements. All books of account of each of the Insurance Subsidiaries
fully and fairly disclose all of the transactions, properties, assets,
investments, liabilities and obligations of such Insurance Subsidiary and all of
such books of account are in the possession of each such Insurance Subsidiary
and are true, correct and complete in all material respects.
(b) The investments of Insurance Subsidiaries reflected in the Annual
Statements filed with the respective Departments with respect to the 2001 Fiscal
Year (the "2001 Annual Statement") and the March 31, 2002 Quarterly Statement
(the "2002 Quarterly Statement") comply in all material respects with all
applicable requirements of the Department with respect to each such Insurance
Subsidiary as well as those of any other applicable jurisdiction relating to
investments in respect of which it may invest its funds.
(c) The provisions made by each Insurance Subsidiary in its 2001 Annual
Statement and in its 2002 Quarterly Statement for reserves, policy and contract
claims and Statutory Liabilities are in compliance in all material respects with
the requirements of the applicable Department as well as those of any other
applicable jurisdiction, and have been computed in accordance with SAP.
(d) Marketable securities and short term investments reflected in the
2001 Annual Statement and in the 2002 Quarterly Statement of each Insurance
Subsidiary are valued at cost, amortized cost or market value, as required by
applicable law.
(e) Except as set forth on Schedule 7.2(e), there has been no material
adverse change in the business, assets, operations or financial condition of the
Borrower or any Subsidiary which has had or could reasonably be expected to have
a Material Adverse Effect on the Borrower, or on the Borrower and its
Subsidiaries taken as a whole since December 31, 2001.
SECTION 7.3 GAAP Financial Statements.
(a) The Borrower has furnished to the Administrative Agent and each of
the Lenders (i) a copy of the unaudited consolidated balance sheets of the
Borrower and its Subsidiaries, and the balance sheet of the Borrower on an
unconsolidated basis as of the close of such Fiscal Quarter and the related
consolidated statements of income and cash flows for that portion of the Fiscal
Year ending as of the close of such a Fiscal Quarter and (ii) a copy of the
unaudited consolidated statement of Income of the Borrower and its Subsidiaries,
and the statement of income of the Borrower on an unconsolidated basis, for such
Fiscal Quarter, all prepared in accordance with GAAP (subject to normal year-end
adjustments and except that footnote and schedule disclosures are abbreviated)
which financial statements are complete and
24
correct and present fairly in accordance with GAAP (subject to normal year-end
adjustments) consolidated or unconsolidated, as the case may be results of
operations and cash flows of the Borrower as of the end of such Fiscal Quarter
and the period then ended.
(b) With respect to any representation and warranty which is deemed to be
made after the date hereof by the Borrower, the balance sheet and statements of
operations, of shareholders' equity and of cash flow, which as of such date
shall most recently have been furnished by or on behalf of the Borrower to each
Lender for the purposes of or in connection with this Agreement or any
transaction contemplated hereby, shall have been prepared in accordance with
GAAP consistently applied (except as disclosed therein), and shall present
fairly the consolidated financial condition of the corporations covered thereby
as at the dates thereof for the periods then ended, subject, in the case of
quarterly financial statements, to normal year-end audit adjustments.
SECTION 7.4 Litigation and Contingent Liabilities. as set forth
(including estimates of the dollar amounts involved) in Schedule 7.4 hereto and
(b) except for claims which are covered by Insurance Policies, coverage for
which has not been denied in writing, or which relate to insurance policies or
surety contracts issued by the Borrower or to which it is a party, reinsurance
treaties, reinsurance certificates, or any other such agreements entered into by
the Borrower in the ordinary course of business (referred to herein as "Ordinary
Course Litigation"), no claim, litigation (including, without limitation,
derivative actions), arbitration, governmental investigation or proceeding or
inquiry is pending or threatened against the Borrower or any of its Subsidiaries
(i) which would, if adversely determined, have a Material Adverse Effect on the
Borrower, or on the Borrower and its Subsidiaries taken as a whole or (ii) which
relates to any of the transactions contemplated hereby, and there is no basis
known to the Borrower for any of the foregoing. Other than any liability
incident to such claims, litigation or proceedings, the Borrower has no material
Contingent Liabilities not provided for or referred to in the financial
statements delivered pursuant to Section 7.3.
SECTION 7.5 Investment Company Act. Other than Horace Mann Investors,
Inc., neither the Borrower nor any of its Subsidiaries is an "investment
company" or a company "controlled by an investment company," within the meaning
of the Investment Company Act of 1940, as amended.
SECTION 7.6 Regulations T, U and X. Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock. None of the Borrower, any of its Subsidiaries or any Person acting
on their behalf has taken or will take action to cause the execution, delivery
or performance of this Agreement or the Note, the making or existence of the
Loans or the use of proceeds of the Loans to violate Regulations T, U or X of
the F.R.S. Board.
SECTION 7.7 Proceeds. The proceeds of the Loans will be used for general
corporate purposes. None of such proceeds will be used in violation of
applicable law, and none of such proceeds will be used, directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of buying or
carrying any margin stock as defined in Regulation U of the F.R.S. Board.
25
SECTION 7.8 Insurance. The Borrower and its Subsidiaries maintain
Insurance Policies to such extent and against such hazards and liabilities as is
required by law or customarily maintained by prudent companies similarly
situated.
SECTION 7.9 Accuracy of Information. All factual written information
furnished heretofore or contemporaneously herewith by or on behalf of the
Borrower or any of its Subsidiaries to the Administrative Agent or the Lenders
for purposes of or in connection with this Agreement or any of the transactions
contemplated hereby, as supplemented to the date hereof, is and all other such
factual written information hereafter furnished by or on behalf of the Borrower
or any of its Subsidiaries to the Administrative Agent or the Lenders will be,
true and accurate in every material respect on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information not misleading.
SECTION 7.10 Subsidiaries. Schedule 7.10 contains a complete list of the
Borrower's Subsidiaries.
SECTION 7.11 Insurance Licenses. Except as set forth on Schedule 7.11, to
the best of the Borrower's knowledge, no license (including, without limitation,
licenses or certificates of authority from applicable insurance departments),
permits or authorizations to transact insurance and reinsurance business
(collectively, the "Licenses") is the subject of a proceeding for suspension or
revocation or any similar proceedings, there is no sustainable basis for such a
suspension or revocation, and no such suspension or revocation is threatened by
any state insurance department.
SECTION 7.12 Taxes. The Borrower and each of its Subsidiaries has filed
all material tax returns that are required to be filed by it, and has paid or
provided adequate reserves for the payment of all material taxes, including,
without limitation, all payroll taxes and federal and state withholding taxes,
and all assessments payable by it that have become due, other than those that
are not yet delinquent or that are disclosed on Schedule 7.12 and are being
contested in good faith by appropriate proceedings and with respect to which
reserves have been established, and are being maintained, in accordance with
GAAP. Except as set forth in Schedule 7.12, there is no ongoing audit or, to the
Borrower's knowledge, other governmental investigation of the tax liability of
the Borrower or any of its Subsidiaries and there is no unresolved claim by a
taxing authority concerning the Borrower's or any such Subsidiary's tax
liability, for any period for which returns have been filed or were due. As used
in this Section 7.12, the term "taxes" includes all taxes of any nature
whatsoever and however denominated, including, without limitation, excise,
import, governmental fees, duties and all other charges, as well as additions to
tax, penalties and interest thereon, imposed by any government or
instrumentality, whether federal, state, local, foreign or other.
SECTION 7.13 Compliance with Laws. Neither the Borrower nor any of its
Subsidiaries is in violation of any law, ordinance, rule, regulation, order,
policy, guideline or other requirement of any Governmental Authority, if the
effect of such violation could reasonably be expected to have a Material Adverse
Effect on the Borrower, or on the Borrower and its Subsidiaries taken as a whole
and, to the best of the Borrower's knowledge, no such violation has been alleged
and each of the Borrower and its Subsidiaries (a) has filed in a timely
26
manner all reports, documents and other materials required to be filed by it
with any Governmental Authority, if such failure to so file could reasonably be
expected to have a Material Adverse Effect on the Borrower, or on the Borrower
and its Subsidiaries taken as a whole; and the information contained in each of
such filings is true, correct and complete in all material respects and (b) has
retained all records and documents required to be retained by it pursuant to any
law, ordinance, rule, regulation, order, policy, guideline or other requirement
of any Governmental Authority, if the failure to so retain such records and
documents could reasonably be expected to have a Material Adverse Effect on the
Borrower, or on the Borrower and its Subsidiaries taken as a whole.
ARTICLE VIII
COVENANTS
Until the Loans and all other Obligations are paid in full, and
until the Commitment Termination Date, the Borrower agrees that, unless at any
time the Required Lenders shall otherwise expressly consent in writing, it will:
SECTION 8.1 Affirmative Covenants.
8.1.1 Reports, Certificates and Other Information. Furnish or
cause to be furnished to the Administrative Agent and the Lenders:
(a) GAAP Financial Statements:
(i) Within 55 days after the close of each of the first
three Fiscal Quarters of each Fiscal Year of the Borrower, a copy
of its Form 10Q filed with the Securities and Exchange Commission
and accompanied by the certification of the chief executive
officer, chief financial officer or treasurer of the Borrower that
the financial statements set forth therein are complete and
correct and present fairly in accordance with GAAP (subject to
normal year-end adjustments) the consolidated, or unconsolidated,
as the case may be, results of operations and cash flows of the
Borrower as at the end of such Fiscal Quarter and for the period
then ended.
(ii) Within 100 days after the close of each Fiscal Year, a
copy of the annual audited consolidated financial statements of
the Borrower and its Subsidiaries, consisting of consolidated
balance sheets and consolidated statements of income and retained
earnings and cash flows, setting forth in comparative form in each
case the consolidated figures for the previous Fiscal Year, which
financial statements shall be prepared in accordance with GAAP,
certified without material qualification by the independent
certified public accountants regularly retained by the Borrower,
or any other firm of independent certified public accountants of
recognized national standing selected by the Borrower and
reasonably acceptable to the Required Lenders that all such
financial statements are complete and correct and present fairly
in accordance with GAAP the consolidated financial position and
the consolidated results of
27
operations and cash flows of the Borrower and its Subsidiaries as
at the end of such year and for the period then ended.
(b) Tax Returns. If requested by the Administrative Agent, copies
of all federal, state, local and foreign tax returns and reports in
respect of income, franchise or other taxes on or measured by income
(excluding sales, use or like taxes) filed by the Borrower or any of its
Subsidiaries.
(c) SAP Financial Statements:
(i) Within 10 days after the applicable regulatory filing
date for each of its Fiscal Quarters, but in any event within 55
days after the end of each of the first three Fiscal Quarters of
each Fiscal Year of each Insurance Subsidiary a copy of the
Quarterly Statement of such Insurance Subsidiary for such Fiscal
Quarter, all prepared in accordance with SAP and accompanied by
the certification of the chief financial officer or chief
executive officer of each Insurance Subsidiary that all such
financial statements are complete and correct and present fairly
in accordance with SAP the financial position of such Insurance
Subsidiary for the periods then ended.
(ii) Within 10 days after the applicable regulatory filing
date for each of its Fiscal Years, but in any event within 65 days
after the end of each Fiscal Year of each Insurance Subsidiary a
copy of the Annual Statement of each Insurance Subsidiary for such
Fiscal Year prepared in accordance with SAP and accompanied by the
certification of the chief financial officer or chief executive
officer of each Insurance Subsidiary that such financial statement
is complete and correct and presents fairly in accordance with SAP
the financial position of such Insurance Subsidiary for the period
then ended.
(iii) Within 10 days after the applicable regulatory filing
date for each of its Fiscal Years, but in any event within 100
days after the close of each Fiscal Year of each Insurance
Subsidiary a copy of each Insurance Subsidiary's "Statement of
Actuarial Opinion" which is provided to the applicable Department
(or equivalent information should the Department no longer require
such a statement) as to the adequacy of loss reserves of such
Insurance Subsidiary. Such opinion shall be in the format
prescribed by the applicable Insurance Code.
(d) Notice of Default, etc. Immediately after an Executive Officer
of the Borrower knows or has reason to know of the existence of any
Default, or any development or other information which would have a
Material Adverse Effect on the Borrower, or on the Borrower and its
Subsidiaries taken as a whole, telephonic notice specifying the nature of
such Default or development or information, including the anticipated
effect thereof, which notice shall be promptly confirmed in writing
within two (2) Business Days.
(e) Other Information. The following certificates and other
information related to the Borrower:
28
(i) Promptly after completion of each such item but in no event
later than the first day of April of each Fiscal Year of the Borrower, a
copy of the Borrower's (A) operating budget, (B) new business plans, if
any, and (C) estimated quarterly Statutory EBT of the Insurance
Subsidiaries for such Fiscal Year which, in the case of each of clause
(A) and (B), are in the form approved by the Board of Directors of the
Borrower.
(ii) Within five (5) Business Days of receipt, a copy of any
financial examination reports by a Governmental Authority with respect to
the Insurance Subsidiaries relating to the insurance business of the
Insurance Subsidiaries (when, and if, prepared); provided, the Borrower
shall only be required to deliver any interim report hereunder at such
time as Borrower has knowledge that a final report will not be issued and
delivered to the Administrative Agent within 90 days of any such interim
report.
(iii) Copies of all Insurance Holding Company System Act filings
with Governmental Authorities, with respect to any occurrence which might
reasonably be expected to have a Material Adverse Effect, by the Borrower
or any Subsidiary not later than five (5) Business Days after such
filings are made, including, without limitation, filings which seek
approval of Governmental Authorities with respect to transactions between
the Borrower or such Subsidiary and its Affiliates.
(iv) Within five (5) Business Days of such notice, notice of
actual suspension, termination or revocation of any material License of
the Insurance Subsidiaries by any Governmental Authority or of receipt of
notice from any Governmental Authority notifying the Borrower of a
hearing (which is not withdrawn within ten (10) days) relating to such a
suspension, termination or revocation, including any request by a
Governmental Authority which commits the Borrower to take, or refrain
from taking, any action or which otherwise materially and adversely
affects the authority of the Borrower to conduct its business.
(v) Within five (5) Business Days of such notice, notice of any
pending or threatened investigation or regulatory proceeding (other than
routine periodic investigations or reviews) by any Governmental Authority
concerning the business, practices or operations of the Borrower,
including any agent or managing general agent thereof.
(vi) Promptly, such additional financial and other information as
the Administrative Agent may from time to time reasonably request.
(vii) Promptly, notice of any actual or, to the best of the
Borrower's knowledge, proposed material changes in the Insurance Code
governing the investment or dividend practices of any Insurance
Subsidiary.
29
(f) Compliance Certificates. Concurrently with the later to
occur of delivery to the Administrative Agent of the GAAP financial
statements and delivery to the Administrative Agent of the SAP financial
statements under Sections 8.1.1(a) and 8.1.1(c), for each Fiscal Quarter
and Fiscal Year of the Borrower, and at any other time no later than
thirty (30) Business Days following a written request of the
Administrative Agent, a duly completed Compliance Certificate, signed by
the chief financial officer or treasurer of the Borrower, containing,
among other things, a computation of, and showing compliance with, each
of the applicable financial ratios and restrictions contained in Sections
8.2.1 through 8.2.3, and to the effect that, to the best of such
officer's knowledge, as of such date no Default has occurred and is
continuing.
(g) Reports to SEC and to Shareholders. Promptly upon the
filing or making thereof (i) copies of each filing and report made by the
Borrower or any of its Subsidiaries with or to any securities exchange or
the Securities and Exchange Commission and (ii) of each communication
from the Borrower to shareholders generally; provided that only those
items described in clauses (i) and (ii) of this Section 8.1.1(g) which
are material to the interest of the Lenders hereunder shall be provided
to the Administrative Agent and the Lenders hereunder.
(h) Notice of Litigation, License and ERISA Matters. Upon
learning of the occurrence of any of the following, written notice
thereof, describing the same and the steps being taken by the Borrower
with respect thereto: (i) the institution of, or any adverse
determination in, any litigation, arbitration proceeding or governmental
proceeding (including any Internal Revenue Service or Department of Labor
proceeding with respect to any Plan or Welfare Plan) which could, if
adversely determined, be reasonably expected to have a Material Adverse
Effect on the Borrower, or on the Borrower and its Subsidiaries taken as
a whole and which is not Ordinary Course Litigation, (ii) the failure of
any Person in the Controlled Group to make a required contribution to any
Plan if such failure is sufficient to give rise to a Lien under section
302(f)(1) of ERISA, (iii) the institution of any steps by any entity in
the Controlled Group to withdraw from, or the institution of any steps by
the Borrower or any other Person to terminate under a distress
termination, any Plan or the taking of any action with respect to a Plan
which could result in the requirement that the Borrower or any of its
Subsidiaries furnish a bond or other security to such Plan, or the
occurrence of any event with respect to any Plan which could result in
the incurrence by the Borrower or any of its Subsidiaries of any material
liability (other than a liability for contributions or premiums), fine or
penalty, (iv) the commencement of any dispute which might lead to the
modification, transfer, revocation, suspension or termination of this
Agreement or any Loan Document or (v) any event which could be reasonably
expected to have a Material Adverse Effect on the Borrower, or on the
Borrower and its Subsidiaries taken as a whole.
(i) Other Information. From time to time such other information
concerning the Borrower or any Subsidiary as the Administrative Agent may
reasonably request.
8.1.2 Corporate Existence; Foreign Qualification. Do and cause to
be done at all times all things necessary to (a) maintain and preserve
the corporate existence of the
30
Borrower, (b) be, and ensure that each Subsidiary of the Borrower is,
duly qualified to do business and be in good standing as a foreign
corporation in each jurisdiction where the nature of its business makes
such qualification necessary, and (c) do or cause to be done all things
necessary to preserve and keep in full force and effect the Borrower's
corporate existence.
8.1.3 Books, Records and Inspections. (a) Maintain, and cause
each of its Subsidiaries to maintain, materially complete and accurate
books and records, (b) permit, and cause each of its Subsidiaries to
permit, access at reasonable times by the Administrative Agent to its
books and records, (c) permit, and cause each of its Subsidiaries to
permit, the Administrative Agent or its designated representative to
inspect at reasonable times its properties and operations, and (d)
permit, and cause each of its Subsidiaries to permit, the Administrative
Agent to discuss its business, operations and financial condition with
its officers.
8.1.4 Insurance. Maintain, and cause each of its Subsidiaries to
maintain, Insurance Policies to such extent and against such hazards and
liabilities as is required by law or customarily maintained by prudent
companies similarly situated.
8.1.5 Taxes and Liabilities. Pay, and cause each of its
Subsidiaries to pay, when due all material taxes, assessments and other
material liabilities except as contested in good faith and by appropriate
proceedings with respect to which reserves have been established, and are
being maintained, in accordance with GAAP if and so long as such contest
could not reasonably be expected to have a Material Adverse Effect on the
Borrower, or on the Borrower and its Subsidiaries taken as a whole.
8.1.6 Compliance with Laws. Comply, and cause each of its
Subsidiaries to comply, (a) with all federal, state and local laws, rules
and regulations related to its businesses (including, without limitation,
the establishment of all insurance reserves required to be established
under SAP and applicable laws restricting the investments of the
Borrower), and (b) with all Contractual Obligations binding upon such
entity, except where failure so to comply would not in the aggregate have
a Material Adverse Effect on the Borrower, or on the Borrower and its
Subsidiaries taken as a whole.
8.1.7 Conduct of Business. Engage on a consolidated basis with
its Subsidiaries primarily in the same business in which the Borrower and
its Subsidiaries are engaged on the date hereof.
SECTION 8.2 Negative Covenants. From and after the Effective Date.
8.2.1 Consolidated Debt to Total Capitalization. Not permit the
ratio of (a) the principal amount of Consolidated Debt to (b) the sum of
(i) Net Worth plus (ii) Consolidated Debt to exceed 0.35 to 1.0 at any
time prior to January 1, 2003, 0.325 to 1.0 at any time thereafter prior
to January 1, 2004 or 0.30 to 1.0 at any time thereafter.
8.2.2 Risk Based Capital. Not permit (a) the adjusted surplus (as
defined by the applicable Department's risk based capital guidelines) of
any of the Insurance Subsidiary to be less than 175% of such Insurance
Subsidiary's respective Company Action Level
31
(as defined by the applicable Department's risk based capital guidelines)
as of the end of each Fiscal Year, (b) the adjusted surplus (as defined
by the applicable Department's risk based capital guidelines) of the Life
Subsidiaries on a Combined basis to be less than 250% of Company Action
Level (as defined by the applicable Department's risk based capital
guidelines) as of the end of each Fiscal Year or (c) the adjusted surplus
(as defined in the applicable Department's risk based capital guidelines)
of the P/C Subsidiaries on a Combined basis to be less than 250% of
Company Action Level (as defined by the applicable Department's risk
based capital guidelines), as of the end of each Fiscal Year.
8.2.3 Interest Coverage Ratio. Not permit the Interest Coverage
Ratio as at any Fiscal Quarter end to be less than 4.0 to 1.0; provided
that this Section 8.2.3 shall not be deemed breached if the Borrower
shall apply to the applicable Department within 20 days of such Fiscal
Quarter end for permission to pay a special dividend in an amount when
added to the amount set forth in clause (a) of the definition of
"Interest Coverage Ratio" would cause such ratio to be complied with, and
such permission is granted within 45 days of such Fiscal Quarter end.
8.2.4 Mergers, Consolidations and Sales. Not, and not permit any
of its Subsidiaries to, (a) merge or consolidate, or purchase or
otherwise acquire all or substantially all of the assets or stock of any
class of, or any partnership or joint venture interest in, any other
Person, other than (i) the acquisition by Borrower of all or a portion of
the capital stock of Horace Mann Life Insurance Company from Allegiance
Life Insurance Company and (ii) mergers or acquisitions where the
corporate existence of the Borrower is not affected by such merger or
acquisition and, subsequent to such merger or acquisition, the Borrower
is in compliance with all the provisions of this Agreement and no Default
shall exist, or (b) sell, transfer, convey or lease all or any
substantial part of its assets or sell or assign with or without recourse
any receivables, other than any sale, transfer, conveyance or lease in
the ordinary course of business.
8.2.5 Regulations T, U and X. Not, and not permit any of its
Subsidiaries to, use or permit any proceeds of the Loans to be used,
either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying margin stock, as
defined in Regulation U of the F.R.S. Board.
8.2.6 Other Agreements. Not, and not permit any of its
Subsidiaries to, enter into any agreement containing any provision which
would be violated or breached by the performance of obligations hereunder
or under any instrument or document delivered or to be delivered by it
hereunder or in connection herewith.
8.2.7 Transactions with Affiliates. Not, and not permit any
Subsidiary to, enter into, or cause, suffer or permit to exist, directly
or indirectly, any arrangement, transaction or contract with any of its
Affiliates unless such arrangement, transaction or contract is in the
ordinary course of business, reasonably intended to satisfy the
reasonable business requirements of the Borrower or such Subsidiary, and
on terms and conditions at least as favorable to the Borrower or such
Subsidiary as the terms and conditions which would apply in a similar
arrangement, transaction or contract with a Person or entity not an
Affiliate; provided that transactions between the Borrower and
32
any wholly-owned Subsidiary of the Borrower or between any wholly-owned
Subsidiaries of the Borrower shall be excluded from the restrictions set
forth in this Section 8.2.7.
8.2.8 Liens. Not, and not permit any of its Subsidiaries to,
create or permit to exist any Lien with respect to any assets now or
hereafter existing or acquired, except the following: (a) Liens for
current taxes not delinquent or for taxes being contested in good faith
and by appropriate proceedings and with respect to which adequate
reserves have been established, and are being maintained, in accordance
with GAAP, (b) Liens arising in the ordinary course of business or by
operation of law for sums being contested in good faith and by
appropriate proceedings and with respect to which adequate reserves have
been established, and are being maintained, in accordance with GAAP, or
for sums not due, and in either case not involving any deposits or
advances for borrowed money or the deferred purchase price of property or
services, (c) Liens in connection with the acquisition of fixed assets
after the date hereof and attaching only to the property being acquired,
(d) Liens incurred in the ordinary course of business in connection with
workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, (e) mechanics', workers',
materialmen's and other like Liens arising in the ordinary course of
business in respect of obligations which are not delinquent or which are
being contested in good faith and by appropriate proceedings and with
respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP, and (f) other Liens securing Debt
which Debt does not in the aggregate exceed $5,000,000; provided,
however, that, no Lien shall be permitted to exist on the shares
of stock of any of its Subsidiaries.
ARTICLE IX
CONDITIONS
SECTION 9.1 Conditions to Occurrence of the Effective Date. The
occurrence of the Effective Date shall be subject to receipt by the
Administrative Agent of all of the following, each duly executed and dated the
Effective Date (or such earlier date as shall be satisfactory to the
Administrative Agent), each in form and substance satisfactory to the
Administrative Agent (with sufficient copies for each Lender):
9.1.1 This Agreement and Certain Related Documents. This
Agreement, the Note and such other Loan Documents as are required to be
delivered by the terms of this Agreement.
9.1.2 Resolutions. Certified copies of resolutions of the Board
of Directors of the Borrower authorizing the execution, delivery and
performance, respectively, of those documents and matters required of it
with respect to this Agreement or the other Loan Documents.
9.1.3 Incumbency and Signatures. A certificate of an Authorized
Officer certifying the names of the individual or individuals authorized
to sign this Agreement and the other Loan Documents, together with a
sample of the true signature of each such
33
individual. (The Lenders may conclusively rely on each such certificate
until formally advised by a like certificate of any changes therein.)
9.1.4 Opinion of Counsel. The opinion of the general counsel of
the Borrower, addressed to the Administrative Agent and the Lenders, in
the form of Exhibit E.
9.1.5 Charter and By-Laws of the Borrower. Copies of the
corporate charter and by-laws of the Borrower certified by the Secretary
of the Borrower.
9.1.6 Insurance Proceedings. Certificate of an Authorized Officer
that there are no material insurance regulatory proceedings pending or
threatened against the Borrower in any state.
9.1.7 Material Adverse Change Certificate. An officer's
certificate, signed by an Authorized Officer, certifying that to such
officer's best knowledge, since December 31, 2001, no event has occurred
which individually or in the aggregate could reasonably be expected to
have a Material Adverse Effect on the Borrower, or on the Borrower and
its Subsidiaries taken as a whole.
9.1.8 Payment of Existing Credit Agreement. Evidence satisfactory
to the Administrative Agent that prior to or simultaneously with the
initial Borrowing under this Agreement all obligations of the Borrower
under that certain Credit Agreement dated as of December 31, 1996 among
the Borrower, various financial institutions and Bank of America, as
Administrative Agent, have been paid in full.
9.1.9 Other. Such other documents as the Administrative Agent may
reasonably request.
SECTION 9.2 Conditions to All Borrowings. The obligation of the
Lenders to make all Loans shall be subject to the prior or concurrent
satisfaction (in form and substance satisfactory to the Administrative Agent) of
each of the conditions precedent set forth below:
9.2.1 No Default. No Default shall have occurred and be
continuing or will result from the making of the Loans.
9.2.2 Warranties and Representations. (a) All warranties and
representations contained in this Agreement (other than Section 7.4
except in the case of the initial Borrowing and except that as to
Sections 7.1 and 7.10, Schedules 7.1 and 7.10 may be updated after the
initial Borrowing by the Borrower by written notice to the Administrative
Agent) shall be true and correct in all material respects as of the date
of any Loan, with the same effect as though made on the date of and
concurrently with the making of such Loan (except where such
representation speaks as of specified date) and (b) all covenants
contained herein and in such documents to be performed by each of the
parties thereto (other than the Administrative Agent or the Lenders)
prior to the date of any Loan shall have been performed.
9.2.3 Litigation. (a) No litigation (including, without
limitation, derivative actions), arbitration, governmental investigation
or proceeding or inquiry shall be, on the
34
date of any Loan, pending, or to the knowledge of the Borrower,
threatened which seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or to obtain material relief as a result
of, the transactions contemplated hereunder or, in the reasonable opinion
of the Required Lenders, could be reasonably expected to be materially
adverse to any of the parties to this Agreement and which is not Ordinary
Course Litigation, and (b) in the reasonable opinion of the Required
Lenders, no material adverse development shall have occurred in any
litigation (including, without limitation, derivative actions),
arbitration, government investigation or proceeding or inquiry disclosed
in Schedule 7.4 which is likely to have a Material Adverse Effect on the
Borrower, or on the Borrower and its Subsidiaries taken as a whole.
9.2.4 Fees. The fees referred to in Article V which are due and
payable on or prior to the Effective Date or the date of any Loan shall
have been paid to the Administrative Agent, where applicable, for the
benefit of the Lenders.
9.2.5 Borrowing Request. The Administrative Agent shall have
received a Borrowing Request in form and substance acceptable to the
Administrative Agent.
ARTICLE X
EVENTS OF DEFAULT AND THEIR EFFECT
SECTION 10.1 Events of Default. Each of the following shall
constitute an Event of Default under this Agreement:
10.1.1 Non-Payment of Loan. Default in the payment when due of any
principal on the Loans.
10.1.2 Non-Payment of Interest, Fees, etc. Default, and
continuance thereof for three (3) Business Days, in the payment when due
of interest on the Loans or of any other amount payable hereunder or
under the Loan Documents.
10.1.3 Non-Payment of Other Debt. (a) Default in the payment when
due (subject to any applicable grace period), whether by acceleration or
otherwise, of any other Debt of, or guaranteed by, the Borrower or any of
its Subsidiaries if the aggregate amount of Debt of the Borrower and/or
any of its Subsidiaries which is accelerated or due and payable, or which
may be accelerated or otherwise become due and payable, by reason of such
default or defaults is $10,000,000 or more, or (b) default in the
performance or observance of any obligation or condition with respect to
any such other Debt of, or guaranteed by, the Borrower and/or any of its
Subsidiaries if the effect of such default or defaults is to accelerate
the maturity of any such Debt of $10,000,000 or more in the aggregate or
to permit the holder or holders of such Debt of $10,000,000 or more in
the aggregate, or any trustee or agent for such holders, to cause such
Debt to become due and payable prior to its expressed maturity.
10.1.4 Other Material Obligations. Except for obligations covered
under other provisions of this Article X, default in the payment when
due, or in the performance or observance of, any material obligation of,
or material condition agreed to by, the
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Borrower or any of its Subsidiaries with respect to any material purchase
or Lease Obligation (except only to the extent that the existence of any
such default is being contested by the Borrower in good faith and by
appropriate proceedings and the Borrower has established, and is
maintaining, adequate reserves therefor in accordance with GAAP) which
default continues for a period of 30 days.
10.1.5 Bankruptcy, Insolvency, etc. (a) (i) The Borrower becomes
insolvent or generally fails to pay, or admits in writing its inability
to pay, debts as they become due; or (ii) the Borrower applies for,
consents to, or acquiesces in the appointment of, a trustee, receiver or
other custodian or similar Person for the Borrower or any property of any
thereof, or makes a general assignment for the benefit of creditors; or
(iii) in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian or similar Person is appointed for
the Borrower or for a substantial part of the property of any thereof,
unless (A) the Borrower institutes appropriate proceedings to contest or
discharge such appointment within 30 days and thereafter continuously and
diligently prosecutes such proceedings and (B) such appointment is in
fact discharged within 60 days of such appointment; or (iv) any
bankruptcy, reorganization, debt arrangement, or other case or proceeding
under any bankruptcy or insolvency law, or any dissolution or liquidation
proceeding is commenced in respect of the Borrower, unless (A) such case
or proceeding is not commenced by the Borrower, (B) such case or
proceeding is not consented to or acquiesced in by the Borrower, (C) the
Borrower institutes appropriate proceedings to dismiss such case or
proceeding within 30 days and thereafter continuously and diligently
prosecutes such proceedings, and (D) such case or proceeding is in fact
dismissed within 60 days after the commencement thereof; or (E) the
Borrower takes any action to authorize, or in furtherance of, any of the
foregoing; or (b) (i) there shall be commenced against any Insurance
Subsidiary any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, supervision, conservatorship, liquidation,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, rehabilitation, conservation,
supervision, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
obligations or liabilities, or (B) seeking appointment of a receiver,
trustee, custodian, rehabilitator, conservator, supervisor, liquidator or
other similar official for it or for all or any substantial part of its
assets, in each case which (1) results in the entry of an order for
relief or any such adjudication or appointment or (2) remains
undismissed, undischarged or unbonded for a period of 60 days; or (ii)
there shall be commenced against any of such Subsidiaries any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial
part of its assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iii) any of
such Subsidiaries shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set
forth in clause(b)(i) or (ii) above; or (iv) any Governmental Authority
shall issue any order of conservation, supervision or any other order of
like effect relating to any of such Subsidiaries.
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10.1.6 Non-compliance With Certain Provisions. Failure of the
Borrower to comply with the provisions of each of Sections 8.1.1(d),
8.1.1(h), 8.2.1 through 8.2.4, 8.2.7 or 8.2.8.
10.1.7 Non-compliance With Other Provisions. Failure by the
Borrower to comply with or to perform any provision of this Agreement or
the other Loan Documents (and not constituting an Event of Default under
any of the other provisions of this Article X) and continuance of such
failure for 30 days after notice thereof from the Administrative Agent to
the Borrower.
10.1.8 Warranties and Representations. Any warranty or
representation made by or on behalf of the Borrower or any Subsidiary
herein is inaccurate or incorrect or is breached or false or misleading
in any material respect as of the date such warranty or representation is
made; or any schedule, certificate, financial statement, report, notice,
or other instrument furnished by or on behalf of Borrower or any
Subsidiary to the Administrative Agent or the Lenders is false or
misleading in any material respect on the date as of which the facts
therein set forth are stated or certified.
10.1.9 Employee Benefit Plans. A contribution failure occurs
with respect to any Plan sufficient to give rise to a Lien against the
Borrower or any of its Subsidiaries under section 302(f)(1) of ERISA (as
in effect on the Effective Date); or withdrawal by one or more companies
in the Controlled Group from one or more Multiemployer Plans to which it
or they have an obligation to contribute and the withdrawal liability
(without unaccrued interest) to multiemployer plans as a result of such
withdrawal or withdrawals (including any outstanding withdrawal liability
that the Controlled Group has incurred on the date of such withdrawal) is
material.
10.1.10 Change in Control. A Change in Control occurs.
10.1.11 Litigation. (a) There shall be entered against the
Borrower one or more judgments, awards or decrees, or orders of
attachment, garnishment or any other writ, which exceed ten percent (10%)
of Net Worth at any one time outstanding, excluding judgments, awards,
decrees, orders or writs (i) for which there is insurance, but only to
the extent there is actual insurance coverage, (ii) for which there is
indemnification (upon terms and from creditworthy indemnitors which are
satisfactory to Administrative Agent), but only to the extent there is
actual indemnification, (iii) which have been in force for less than the
applicable period for filing an appeal so long as execution is not levied
thereunder (or in respect of which the Borrower or its appropriate
Subsidiary shall at the time in good faith be prosecuting an appeal or
proceeding for review and in respect of which a stay of execution or
appropriate appeal bond shall have been obtained pending such appeal or
review), (iv) which constitute Ordinary Course Litigation, or (v) which
are reserved for, to the actual extent of reserves or (b) there has been
a final judgment or final judgments for the payment of money exceeding,
in the aggregate, ten percent (10%) of Net Worth rendered against the
Borrower or any of its Subsidiaries by a court of competent jurisdiction
and such judgment(s) remain undischarged for a period (during which
execution shall not be effectively stayed) of 60 days after such
judgment(s) become final and nonappealable.
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10.1.12 Change in Law. Any change is made in the Insurance Code
which affects the dividend practices of any Insurance Subsidiary and
which is reasonably likely to have a Material Adverse Effect on the
ability of the Borrower to perform its obligations under the Agreement
and such circumstances shall continue for 120 days.
SECTION 10.2 Effect of Event of Default. If any Event of Default
described in Section 10.1.5 shall occur, the Loans and the Note and all other
Obligations shall become immediately due and payable, all without notice of any
kind; and, in the case of any other Event of Default, the Administrative Agent
may, and upon the written request of the Required Lenders shall, terminate the
Commitments hereunder and declare all or any portion of the Loans and all or
such portion of the Note and all other Obligations to be due and payable,
whereupon the Commitment shall terminate and all or such portion of the Loans
and all or such portion of the Note and all other Obligations shall become
immediately due and payable, all without further notice of any kind. The
Administrative Agent shall promptly advise the Borrower of any such declaration
but failure to do so shall not impair the effect of such declaration.
Notwithstanding the foregoing, the effect as an Event of Default of any event
described in Section 10.1.1 may not be waived except by consent of all of the
Lenders in writing.
ARTICLE XI
THE ADMINISTRATIVE AGENT
SECTION 11.1 Appointment and Authorization of Administrative
Agent. Each Lender hereby irrevocably appoints, designates and authorizes the
Administrative Agent to take such action on its behalf under the provisions of
this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere herein or in any other Loan Document, the Administrative
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, nor shall the Administrative Agent have or be deemed to have any
fiduciary relationship with any Lender or participant, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Administrative Agent. Without limiting the generality of the foregoing sentence,
the use of the term "agent" herein and in the other Loan Documents with
reference to the Administrative Agent is not intended to connote any fiduciary
or other implied (or express) obligations arising under agency doctrine of any
applicable Law. Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative relationship between
independent contracting parties.
SECTION 11.2 Delegation of Duties. The Administrative Agent may
execute any of its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys-in-fact and shall be entitled to advice
of counsel and other consultants or experts concerning all matters pertaining to
such duties. The Administrative Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects in the
absence of gross negligence or willful misconduct.
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SECTION 11.3 Liability of Administrative Agent. No Agent-Related
Person shall (a) be liable for any action taken or omitted to be taken by any of
them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own gross negligence or
willful misconduct in connection with its duties expressly set forth herein), or
(b) be responsible in any manner to any Lender or participant for any recital,
statement, representation or warranty made by any Loan Party or any officer
thereof, contained herein or in any other Loan Document, or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Administrative Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any failure
of any Loan Party or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person shall be under any
obligation to any Lender or participant to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Loan Party or any Affiliate thereof.
SECTION 11.4 Reliance by Administrative Agent.
(a) The Administrative Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, communication,
signature, resolution, representation, notice, consent, certificate,
affidavit, letter, telegram, facsimile, telex or telephone message,
electronic mail message, statement or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or
made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to any Loan Party), independent
accountants and other experts selected by the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to
take any action under any Loan Document unless it shall first receive
such advice or concurrence of the Required Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any
such action. The Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement
or any other Loan Document in accordance with a request or consent of the
Required Lenders (or such greater number of Lenders as may be expressly
required hereby in any instance) and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lender.
(b) For purposes of determining compliance with the conditions
specified in Section 9.11, each Lender that has signed this Agreement
shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to a Lender
unless the Administrative Agent shall have received notice from such
Lender prior to the proposed the date of Closing specifying its objection
thereto.
SECTION 11.5 Notice of Default. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Administrative Agent for the account of the Lenders, unless
the Administrative Agent shall have received
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written notice from a Lender or the Borrower referring to this Agreement,
describing such Default and stating that such notice is a "notice of default."
The Administrative Agent will notify the Lenders of its receipt of any such
notice. The Administrative Agent shall take such action with respect to such
Default as may be directed by the Required Lenders in accordance with Article X;
provided, however, that unless and until the Administrative Agent has received
any such direction, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable or in the best interest of the Lenders.
SECTION 11.6 Credit Decision; Disclosure of Information by
Administrative Agent. Each Lender acknowledges that no Agent-Related Person has
made any representation or warranty to it, and that no act by the Administrative
Agent hereafter taken, including any consent to and acceptance of any assignment
or review of the affairs of any Loan Party or any Affiliate thereof, shall be
deemed to constitute any representation or warranty by any Agent-Related Person
to any Lender as to any matter, including whether Agent-Related Persons have
disclosed material information in their possession. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Loan Parties and their respective Subsidiaries, and all
applicable bank or other regulatory Laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to the Borrower hereunder. Each Lender also represents that it
will, independently and without reliance upon any Agent-Related Person and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent herein, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of any of the Loan Parties or any of their
respective Affiliates which may come into the possession of any Agent-Related
Person.
SECTION 11.7 Indemnification of Administrative Agent. Whether or
not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand each Agent-Related Person (to the extent not reimbursed by
or on behalf of any Loan Party and without limiting the obligation of any Loan
Party to do so), pro rata, and hold harmless each Agent-Related Person from and
against any and all Indemnified Liabilities incurred by it; provided, however,
that no Lender shall be liable for the payment to any Agent-Related Person of
any portion of such Indemnified Liabilities to the extent determined in a final,
nonappealable judgment by a court of competent jurisdiction to have resulted
from such Agent-Related Person's own gross negligence or willful misconduct;
provided, however, that no action taken in accordance with the directions of the
Required Lenders shall be deemed to constitute gross negligence or willful
misconduct for purposes of this Section. Without limitation of the foregoing,
each Lender shall reimburse the Administrative Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including Attorney Costs) incurred
by the
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Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the
Administrative Agent is not reimbursed for such expenses by or on behalf of the
Borrower. The undertaking in this Section shall survive termination of the
combined Commitments, the payment of all other Obligations and the resignation
of the Administrative Agent.
SECTION 11.8 Administrative Agent in its Individual Capacity. Bank of
America and its Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory, underwriting or other
business with each of the Loan Parties and their respective Affiliates as though
Bank of America were not the Administrative Agent hereunder and without notice
to or consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, Bank of America or its Affiliates may receive information regarding
any Loan Party or its Affiliates (including information that may be subject to
confidentiality obligations in favor of such Loan Party or such Affiliate) and
acknowledge that the Administrative Agent shall be under no obligation to
provide such information to them. With respect to its Loans, Bank of America
shall have the same rights and powers under this Agreement as any other Lender
and may exercise such rights and powers as though it were not the Administrative
Agent, and the terms "Lender" and "Lenders" include Bank of America in its
individual capacity.
SECTION 11.9 Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 30 days' notice to the Lenders. If the
Administrative Agent resigns under this Agreement, the Required Lenders shall
appoint from among the Lenders a successor administrative agent for the Lenders,
which successor administrative agent shall be consented to by the Borrower at
all times other than during the existence of an Event of Default (which consent
of the Borrower shall not be unreasonably withheld or delayed). If no successor
administrative agent is appointed prior to the effective date of the resignation
of the Administrative Agent, the Administrative Agent may appoint, after
consulting with the Lenders and the Borrower, a successor administrative agent
from among the Lenders. Upon the acceptance of its appointment as successor
administrative agent hereunder, the Person acting as such successor
administrative agent shall succeed to all the rights, powers and duties of the
retiring Administrative Agent and the term "Administrative Agent shall mean such
successor administrative agent and the retiring Administrative Agent's
appointment, powers and duties as Administrative Agent shall be terminated.
After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article XI and Sections 13.4 and
13.5 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement. If no successor
administrative agent has accepted appointment as Administrative Agent by the
date which is 30 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
the Administrative Agent hereunder until such time, if any, as the Required
Lenders appoint a successor agent as provided for above.
SECTION 11.10 Administrative Agent May File Proofs of Claim. In case of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement,
41
adjustment, composition or other judicial proceeding relative to any Loan Party,
the Administrative Agent (irrespective of whether the principal of any Loan
shall then be due and payable as herein expressed or by declaration or otherwise
and irrespective of whether the Administrative Agent shall have made any demand
on the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise
(a) to file and prove a claim for the whole amount of the
principal and interest owing and unpaid in respect of the Loans and all
other Obligations that are owing and unpaid and to file such other
documents as may be necessary or advisable in order to have the claims of
the Lenders and the Administrative Agent (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Lenders and the Administrative Agent and their respective agents and
counsel and all other amounts due the Lenders and the Administrative
Agent under Article V and Section 13.4 allowed in such judicial
proceeding; and
(b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Article V and Section 13.4.
Nothing contained herein shall be deemed to authorize the Administrative
Agent to authorize or consent to or accept or adopt on behalf of any Lender any
plan of reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or to authorize the Administrative Agent
to vote in respect of the claim of any Lender in any such proceeding.
ARTICLE XII
ASSIGNMENTS AND PARTICIPATIONS
SECTION 12.1 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that the Borrower may
not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender and no Lender may assign or
otherwise transfer any of its rights or obligations hereunder except (i) to an
Eligible Assignee in accordance with the provisions of Section 12.2, (ii) by way
of participation in accordance with the provisions of Section 12.4, or (iii) by
way of pledge or assignment of a security interest subject to the restrictions
of Section 12.6 (and any other attempted assignment or transfer by any party
hereto shall be null and void). Nothing in this Agreement, expressed or implied,
shall be construed to confer upon any Person (other than the parties hereto,
their respective successors and assigns permitted hereby, Participants to the
extent provided in
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subsection (d) of this Section and, to the extent expressly contemplated hereby,
the Indemnitees) any legal or equitable right, remedy or claim under or by
reason of this Agreement.
SECTION 12.2 Assignments. Any Lender may at any time assign to one or
more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans at
the time owing to it); provided that (i) except in the case of an assignment of
the entire remaining amount of the assigning Lender's Commitment and the Loans
at the time owing to it or in the case of an assignment to a Lender or an
Affiliate of a Lender or an Approved Fund (as defined in subsection (g) of this
Section) with respect to a Lender, the aggregate amount of the Commitment (which
for this purpose includes Loans outstanding thereunder) subject to each such
assignment, determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Administrative Agent or, if "Trade Date"
is specified in the Assignment and Assumption, as of the Trade Date, shall not
be less than $5,000,000 unless each of the Administrative Agent and, so long as
no Event of Default has occurred and is continuing, the Borrower otherwise
consents (each such consent not to be unreasonably withheld or delayed); (ii)
each partial assignment shall be made as an assignment of a proportionate part
of all the assigning Lender's rights and obligations under this Agreement with
respect to the Loans or the Commitment assigned; (iii) any assignment of a
Commitment must be approved by the Administrative Agent unless the Person that
is the proposed assignee is itself a Lender (whether or not the proposed
assignee would otherwise qualify as an Eligible Assignee); and (iv) the parties
to each assignment shall execute and deliver to the Administrative Agent an
Assignment and Assumption, together with a processing and recordation fee of
$3,500. Subject to acceptance and recording thereof by the Administrative Agent
pursuant to subsection (c) of this Section, from and after the effective date
specified in each Assignment and Assumption, the Eligible Assignee thereunder
shall be a party to this Agreement and, to the extent of the interest assigned
by such Assignment and Assumption, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 6.1, 6.4, 13.4 and 13.5 with respect
to facts and circumstances occurring prior to the effective date of such
assignment). Upon request, the Borrower (at its expense) shall execute and
deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
subsection shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
subsection (d) of this Section.
SECTION 12.3 Register. The Administrative Agent, acting solely for this
purpose as an agent of the Borrower, shall maintain at the Administrative
Agent's Office a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive, and the Borrower, the Administrative Agent and
the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the
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contrary. The Register shall be available for inspection by the Borrower and any
Lender, at any reasonable time and from time to time upon reasonable prior
notice.
SECTION 12.4 Participations. Any Lender may at any time, without the
consent of, or notice to, the Borrower or the Administrative Agent, sell
participations to any Person (other than a natural person or the Borrower or any
of the Borrower's Affiliates or Subsidiaries) (each, a "Participant") in all or
a portion of such Lender's rights and/or obligations under this Agreement
(including all or a portion of its Commitment and/or the Loans owing to it);
provided that (i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, waiver or other modification
requiring consent of all Lenders that directly affects such Participant. Subject
to subsection (e) of this Section, the Borrower agrees that each Participant
shall be entitled to the benefits of Sections 6.1 and 6.4 to the same extent as
if it were a Lender and had acquired its interest by assignment pursuant to
subsection (b) of this Section. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 3.5 as though it were a
Lender, provided such Participant agrees to be subject to Section 3.5 as though
it were a Lender.
SECTION 12.5 Greater Payment. A Participant shall not be entitled to
receive any greater payment under Section 6.4 or 6.4 than the applicable Lender
would have been entitled to receive with respect to the participation sold to
such Participant, unless the sale of the participation to such Participant is
made with the Borrower's prior written consent. A Participant that would be a
Lender not organized in the United States shall not be entitled to the benefits
of Section 6.1 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to
comply with Section 6.4 as though it were a Lender.
SECTION 12.6 Pledge. Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall release such Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.
SECTION 12.7 Definitions. As used herein, the following terms have the
following meanings:
"Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c)
an Approved Fund; and (d) any other Person (other than a natural person)
approved by (i) the Administrative Agent, and (ii) unless an Event of Default
has occurred and is continuing, the Borrower (each such approval not to be
unreasonably withheld or
44
delayed); provided that notwithstanding the foregoing, "Eligible
Assignee" shall not include the Borrower or any of the Borrower's
Affiliates or Subsidiaries.
"Fund" means any Person (other than a natural person) that is (or
will be) engaged in making, purchasing, holding or otherwise investing in
commercial loans and similar extensions of credit in the ordinary course
of its business.
"Approved Fund" means any Fund that is administered or managed by
(a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.
ARTICLE XIII
GENERAL
SECTION 13.1 Waiver; Amendments. No delay on the part of the
Administrative Agent or any Lender or any holder of a Note or other Obligation
in the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise by any of them of any right, power or
remedy preclude other or further exercise thereof, or the exercise of any other
right, power or remedy. No amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or the Note or any Loan Document
shall in any event be effective unless the same shall be in writing and signed
and delivered by the Borrower and the Required Lenders and acknowledged by the
Administrative Agent and then any such amendment, modification, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. Notwithstanding the foregoing, no amendment,
modification, waiver or consent which would do any of the following shall be
effective unless in writing and signed by the Borrower and each of the Lenders
and acknowledged by the Administrative Agent: (a) extend the due date for, or
reduce the amount of, any payment or prepayment of principal of or interest on
any Loan (or reduce the principal amount of or rate of interest on any Loan) or
any fees; (b) change the definition of Required Lenders or subject any Lender to
any additional obligations including, without limitation, any increase in the
Commitment Amount; (c) waive any of the conditions precedent set forth in
Article IX (other than Sections 9.1.5, 9.1.6, 9.1.7, and 9.1.8), or (d) amend
this Section 13.1, Section 10.2 with regard to the waiver of an Event of Default
under Section 10.1.1 or 13.9. Notwithstanding the foregoing, no provisions of
Article XI shall be amended, modified or waived without the written consent the
Administrative Agent.
SECTION 13.2 Confirmations. The Borrower and the Administrative
Agent (or any holder of a Note) agree from time to time, upon written request
received by it from the other, to confirm to the other in writing the aggregate
unpaid principal amount of the Loan then outstanding under such Note.
SECTION 13.3 Notices and Other Communications; Facsimile Copies.
(a) General. Unless otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in
in writing (including by facsimile transmission). All such written
notices shall be mailed, faxed or delivered to the
45
applicable address, facsimile number or (subject to subsection (c) below)
electronic mail address, and all notices and other communications
expressly permitted hereunder to be given by telephone shall be made to
the applicable telephone number, as follows:
(i) if to the Borrower or the Administrative Agent, to the
address, facsimile number, electronic mail address or telephone
number specified for such Person on Schedule 13.3 or to such other
address, facsimile number, electronic mail address or telephone
number as shall be designated by such party in a notice to the
other parties; and
(ii) if to any other Lender, to the address, facsimile
number, electronic mail address or telephone number specified in
its Administrative Questionnaire or to such other address,
facsimile number, electronic mail address or telephone number as
shall be designated by such party in a notice to the Borrower and
the Administrative Agent.
All such notices and other communications shall be deemed to be given or made
upon the earlier to occur of (i) actual receipt by the relevant party hereto and
(ii) (A) if delivered by hand or by courier, when signed for by or on behalf of
the relevant party hereto; (B) if delivered by mail, four Business Days after
deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent
and receipt has been confirmed by telephone; and (D) if delivered by electronic
mail (which form of delivery is subject to the provisions of subsection (c)
below), when delivered; provided, however, that notices and other communications
to the Administrative Agent pursuant to Article II shall not be effective until
actually received by such Person. In no event shall a voicemail message be
effective as a notice, communication or confirmation hereunder.
(b) Effectiveness of Facsimile Documents and Signatures. Loan
Documents may be transmitted and/or signed by facsimile. The
effectiveness of any such documents and signatures shall, subject to
applicable Law, have the same force and effect as manually-signed
originals and shall be binding on the Borrower, the Administrative Agent
and the Lenders. The Administrative Agent may also require that any such
documents and signatures be confirmed by a manually-signed original
thereof; provided, however, that the failure to request or deliver the
same shall not limit the effectiveness of any facsimile document or
signature.
(c) Limited Use of Electronic Mail. Electronic mail and Internet
and intranet websites may be used only to distribute routine
communications, such as financial statements and other information as
provided in Section 8.1, and to distribute Loan Documents for execution
by the parties thereto, and may not be used for any other purpose.
(d) Reliance by Administrative Agent and Lenders. The
Administrative Agent and the Lenders shall be entitled to rely and act
upon any notices (including telephonic Borrowing Requests and
Continuation/Conversion Notices) purportedly given by or on behalf of the
Borrower even if (i) such notices were not made in a manner specified
herein, were incomplete or were not preceded or followed by any other
form of notice specified herein, or (ii) the terms thereof, as understood
by the recipient, varied
46
from any confirmation thereof. The Borrower shall indemnify each
Agent-Related Person and each Lender from all losses, costs, expenses and
liabilities resulting from the reliance by such Person on each notice
purportedly given by or on behalf of the Borrower. All telephonic notices
to and other communications with the Administrative Agent may be recorded
by the Administrative Agent, and each of the parties hereto hereby
consents to such recording.
SECTION 13.4 Attorney Costs, Expenses and Taxes. The Borrower
agrees to pay or reimburse the Administrative Agent and each Lender for all
costs and expenses incurred in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this Agreement or
the other Loan Documents (including all such costs and expenses incurred during
any "workout" or restructuring in respect of the Obligations and during any
legal proceeding, including any proceeding under any bankruptcy or insolvency
laws), including all Attorney Costs. The foregoing costs and expenses shall
include all search, filing, recording, title insurance and appraisal charges and
fees and taxes related thereto, and other out-of-pocket expenses incurred by the
Administrative Agent and the cost of independent public accountants and other
outside experts retained by the Administrative Agent or any Lender. All amounts
due under this Section 13.4 shall be payable within ten Business Days after
demand therefor. The agreements in this Section shall survive the termination of
the aggregate Commitments and repayment of all other Obligations.
SECTION 13.5 Indemnification by the Borrower. Whether or not the
transactions contemplated hereby are consummated, the Borrower shall indemnify
and hold harmless each Agent-Related Person, each Lender and their respective
Affiliates, directors, officers, employees, counsel, agents and
attorneys-in-fact (collectively the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, claims, demands, actions,
judgments, suits, costs, expenses and disbursements (including Attorney Costs)
of any kind or nature whatsoever which may at any time be imposed on, incurred
by or asserted against any such Indemnitee in any way relating to or arising out
of or in connection with (a) the execution, delivery, enforcement, performance
or administration of any Loan Document or any other agreement, letter or
instrument delivered in connection with the transactions contemplated thereby or
the consummation of the transactions contemplated thereby, (b) any Commitment or
Loan or the use or proposed use of the proceeds therefrom or (c) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory (including
any investigation of, preparation for, or defense of any pending or threatened
claim, investigation, litigation or proceeding) and regardless of whether any
Indemnitee is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such liabilities, obligations, losses, damages,
penalties, claims, demands, actions, judgments, suits, costs, expenses or
disbursements are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee. No Indemnitee shall be liable for any damages
arising from the use by others of any information or other materials obtained
through IntraLinks or other similar information transmission systems in
connection with this Agreement, nor shall any Indemnitee have any liability for
any indirect or consequential damages relating to this Agreement or any other
Loan Document or arising out of its activities in connection herewith or
therewith (whether before or after the Closing Date). All amounts due under this
Section 13.5 shall be payable within ten
47
Business Days after demand therefor. The agreements in this Section shall
survive the resignation of the Administrative Agent, the replacement of any
Lender, the termination of the aggregate Commitments and the repayment,
satisfaction or discharge of all the other Obligations.
SECTION 13.6 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any other Loan Document or
other document delivered pursuant hereto or thereto or in connection herewith or
therewith shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by the
Administrative Agent and each Lender, regardless of any investigation made by
the Administrative Agent or any Lender or on their behalf and notwithstanding
that the Administrative Agent or any Lender may have had notice or knowledge of
any Default at the time of any Loan, and shall continue in full force and effect
as long as any Loan or any other Obligation hereunder shall remain unpaid or
unsatisfied.
SECTION 13.7 GOVERNING LAW. THIS AGREEMENT, THE LOAN DOCUMENTS AND
THE NOTE SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF ILLINOIS WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. WHENEVER
POSSIBLE EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS
TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS
AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION
SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
AGREEMENT. ALL OBLIGATIONS OF THE BORROWER AND RIGHTS OF ANY LENDER EXPRESSED
HEREIN OR IN THE LOAN DOCUMENTS SHALL BE IN ADDITION TO AND NOT IN LIMITATION OF
THOSE PROVIDED BY APPLICABLE LAW OR IN ANY OTHER WRITTEN INSTRUMENT OR AGREEMENT
RELATING TO ANY OF THE OBLIGATIONS.
SECTION 13.8 JURY TRIAL. EACH PARTY HEREBY EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS TO WHICH IT IS A PARTY,
OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY LOAN DOCUMENTS,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
SECTION 13.9 Successors and Assigns. This Agreement shall be
binding upon Borrower, the Administrative Agent, the Lenders and their
respective successors and assigns, and shall inure to the benefit of the
Borrower, the Administrative Agent, the Lenders and their respective successors
and assigns; provided, however, that the Borrower shall have no right to assign
its rights or delegate its duties under this Agreement. This Agreement and the
Loan Documents contain the entire agreement of the parties hereto with respect
to the matters covered hereby.
48
Delivered at Chicago, Illinois, as of the day and year first above
written.
HORACE MANN EDUCATORS CORPORATION
By: /s/ Peter H. Heckman
Title: Executive V.P. & Chief Financial Officer
By: /s/ Ann Caparros
Title: Corporate Secretary & General Counsel
BANK OF AMERICA, N.A., as Administrative
Agent and Lender
By: /s/ Debra Basler
Title: Vice President
SCHEDULE 2.1
COMMITMENTS
Lender Commitment
Bank of America, N.A. $25,000,000
SCHEDULE 7.1
* - Notes state of domicile
A.12/K.2.
(TIC redomesticated from Delaware to Illinois 12-23-88. HMIC redomesticated from
Florida to Illinois 12-23-88.)
CERTIFICATES OF AUTHORITY BY STATE AND DATE ISSUED
-----------------------------------------------------------------------------------------------------------------------------------
STATE HMIC TIC HMP&CIC HMLIC ALIC HMEBCC HMSC ELICA
===================================================================================================================================
Alabama 12-19-66 04-18-73 Pending 12-15-58 06-28-85 X
-----------------------------------------------------------------------------------------------------------------------------------
Alaska 01-31-64 03-26-73 12-22-87 02-02-62 03-09-01 X
-----------------------------------------------------------------------------------------------------------------------------------
Arizona 05-27-59 11-12-74 06-09-80 07-15-59 08-21-57 10-28-86 X 03-18-64*
-----------------------------------------------------------------------------------------------------------------------------------
Arkansas 01-31-64 10-06-77 11-19-75 05-06-50 09-13-88 X
-----------------------------------------------------------------------------------------------------------------------------------
California 01-31-64 03-25-65* 08-18-67 12-22-00 X
-----------------------------------------------------------------------------------------------------------------------------------
Colorado 06-05-64 09-05-73 11-13-81 11-02-56 12-31-84 12-04-87 X
-----------------------------------------------------------------------------------------------------------------------------------
Connecticut 06-28-74 11-18-99 11-18-99 11-20-78 11-25-86 X
-----------------------------------------------------------------------------------------------------------------------------------
Delaware 06-02-59 03-02-71 09-25-98 12-08-55 09-18-86 X
-----------------------------------------------------------------------------------------------------------------------------------
Dist. of Col. 08-20-59 01-30-73 05-01-97 12-03-65 pending X
-----------------------------------------------------------------------------------------------------------------------------------
Florida 12-23-63 08-19-76 07-16-62 08-15-66 11-07-85 X
-----------------------------------------------------------------------------------------------------------------------------------
Georgia 01-31-64 02-09-78 Pending 04-05-61 03-30-83 X
-----------------------------------------------------------------------------------------------------------------------------------
Hawaii 08-25-87 02-01-85
-----------------------------------------------------------------------------------------------------------------------------------
Idaho 12-16-68 04-16-73 05-26-88 05-09-60 12-07-87 X
-----------------------------------------------------------------------------------------------------------------------------------
Illinois 01-31-64* 03-09-77* 04-25-75 08-09-49* 12-31-84* 10-19-79* 08-13-73*
-----------------------------------------------------------------------------------------------------------------------------------
Indiana 05-01-68 12-01-77 01-15-98 05-01-57 12-19-00 X
-----------------------------------------------------------------------------------------------------------------------------------
Iowa 12-29-64 05-04-73 11-26-74 08-01-52 05-15-85 X
-----------------------------------------------------------------------------------------------------------------------------------
Kansas 01-31-64 09-13-96 12/21/99 11-12-61 12-29-87 X
-----------------------------------------------------------------------------------------------------------------------------------
Kentucky 01-31-64 08-02-64 11-01-99 02-21-69 12-20-00 X
-----------------------------------------------------------------------------------------------------------------------------------
Louisiana 12-23-58 11-14-73 09-30-99 05-16-61 09-03-85 X
-----------------------------------------------------------------------------------------------------------------------------------
Maine 06-01-70 05-04-88 12-30-98 09-02-60 12-16-85 X
-----------------------------------------------------------------------------------------------------------------------------------
Maryland 01-10-68 10-29-91 03-31-98 06-26-56 12-16-85 X
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Page 2
-----------------------------------------------------------------------------------------------------------------
STATE HMIC TIC HMP&CIC HMLIC ALIC HMEBCC HMSC ELICA
=================================================================================================================
Massachusetts 10-25-68 02-12-81 09-09-68 pending X
-----------------------------------------------------------------------------------------------------------------
Michigan 03-19-59 12-14-77 02-23-99 10-27-59 12-21-00 X
-----------------------------------------------------------------------------------------------------------------
Minnesota 02-11-64 06-01-74 08-19-98 10-08-56 12-16-85 X
-----------------------------------------------------------------------------------------------------------------
Mississippi 06-01-58 07-19-74 06-01-97 10- -61 07-26-85 X
-----------------------------------------------------------------------------------------------------------------
Missouri 03-01-64 07-19-88 11-25-74 06-27-60 12-16-86 X
-----------------------------------------------------------------------------------------------------------------
Montana 01-31-64 06-01-73 02-26-88 01-02-54 12-16-87 X
-----------------------------------------------------------------------------------------------------------------
Nebraska 08-30-60 12-15-76 06-24-97 10-29-59 09-28-61 09-18-86 X
-----------------------------------------------------------------------------------------------------------------
Nevada 02-12-68 06-14-99 06-17-99 05-10-60 02-04-83 02-25-87 X
-----------------------------------------------------------------------------------------------------------------
New Hampshire 04-09-69 11-15-76 03-19-01 07-13-61 12-15-86 X
-----------------------------------------------------------------------------------------------------------------
New Jersey Cancelled 12-22-00 X
05-30-96
-----------------------------------------------------------------------------------------------------------------
New Mexico 03-01-64 08-15-73 Pending 05-21-56 02-03-87 X
-----------------------------------------------------------------------------------------------------------------
New York 01-31-64 Pending 03-27-00 pending X
-----------------------------------------------------------------------------------------------------------------
North Carolina 10-18-68 07-01-74 03-05-98 07-10-59 04-21-83 X
-----------------------------------------------------------------------------------------------------------------
North Dakota 05-08-62 03-22-73 06-21-88 05-29-62 09-23-86 X
-----------------------------------------------------------------------------------------------------------------
Ohio 02-07-64 12-03-84 12-31-96 12-02-59 10-09-84 12-28-00 X
-----------------------------------------------------------------------------------------------------------------
Oklahoma 03-01-68 11-25-74 11-07-74 12-07-60 08-02-66 12-07-87 X
-----------------------------------------------------------------------------------------------------------------
Oregon 07-15-70 09-01-73 11-15-74 11-01-53 06-05-57 12-08-87 X
-----------------------------------------------------------------------------------------------------------------
Pennsylvania 12-29-63 04-16-81 12-20-99 09-01-49 01-09-01 X
-----------------------------------------------------------------------------------------------------------------
Rhode Island 01-23-70 12-13-73 01-12-98 09-05-61 11-24-86 09-10-73
-----------------------------------------------------------------------------------------------------------------
South Carolina 10-02-58 02-08-74 05-04-82 08-14-61 09-06-83 X
-----------------------------------------------------------------------------------------------------------------
South Dakota 05-01-62 01-22-74 09-14-88 08-03-53 10-23-86 X
-----------------------------------------------------------------------------------------------------------------
Tennessee 01-31-64 09-07-77 11-19-97 03-28-56 01-14-83 X
-----------------------------------------------------------------------------------------------------------------
Texas 01-31-64 12-29-78 05-29-75 07-14-60 06-26-68 08-02-85 09-10-73
-----------------------------------------------------------------------------------------------------------------
Page 3
------------------------------------------------------------------------------------------------------
STATE HMIC TIC HMP&CIC HMLIC ALIC HMEBCC HMSC ELICA
======================================================================================================
Utah 03-01-64 06-14-73 04-05-88 11-22-55 12-20-00 X
------------------------------------------------------------------------------------------------------
Vermont 10-01-68 08-25-99 08-25-97 04-18-56 12-19-00 X
------------------------------------------------------------------------------------------------------
Virginia 02-03-64 03-19-91 03-30-99 04-18-56 06-21-83 X
------------------------------------------------------------------------------------------------------
Washington 02-10-64 12-28-73 12-31-98 11-13-58 09-20-57 12-24-87 X
------------------------------------------------------------------------------------------------------
West Virginia 01-23-64 10-23-89 03-29-99 12-28-60 08-08-85 X
------------------------------------------------------------------------------------------------------
Wisconsin 01-31-64 09-14-73 06-27-74 11-22-68 08-01-85 X
------------------------------------------------------------------------------------------------------
Wyoming 12-24-58 07-23-87 01-18-88 03-24-53 12-10-87 X
------------------------------------------------------------------------------------------------------
Puerto Rico 08-15-00
------------------------------------------------------------------------------------------------------
HMIC: Horace Mann Insurance Company
TIC: Teachers Insurance Company
HMP&CIC: Horace Mann Property & Casualty Insurance Company
HMLIC: Horace Mann Life Insurance Company
ALIC: Allegiance Life Insurance Company
HMEBCC: Horace Mann Educator Benefits Consulting Corporation
HMSC: Horace Mann Service Corporation
ELICA: Educators Life Insurance Company of America
Page 4
SCHEDULE 7.2 (a)
SAP EXCEPTIONS
None
Page 5
SCHEDULE 7.2 (e)
ADVERSE CHANGES AND DIVIDENDS
None
SCHEDULE 7.4
LITIGATION
None
SCHEDULE 7.10
SUBSIDIARIES
AIC Acquisition Corporation
Allegiance Life Insurance Company
Association & Consumer Marketing Services Corp.
Educators Life Insurance Company of America
Horace Mann Balanced Fund, Inc.
Horace Mann Equity Fund, Inc.
Horace Mann Investment Fund, Inc.
Horace Mann Short-Term Fund, Inc.
Horace Mann Insurance Company
Horace Mann Investors, Inc.
Horace Mann Life Insurance Company
Horace Mann Property & Casualty Insurance Company
Horace Mann Service Corporation
Senior Marketing Insurance Service Corporation
Teachers Insurance Company
Well-Care, Inc.
SCHEDULE 7.11
INSURANCE COMPANY LICENSES
Property & Casualty
State Lines Authorized
Subsidiary
Horace Mann Insurance Alabama Property; Miscellaneous Casualty,
Company excluding Official Surety Bonds.
Alaska Property (as 21.12.060); Casualty (as
21.12.070) All Clauses (1-14); Surety
(as 21.12.080); Marine, Wet Marine &
Transportation (as 21.12.090).
Arizona Casualty without Worker's Compensation;
Marine and Transportation; Property;
Vehicle.
Arkansas Property; Marine; Casualty; Workmen's
Compensation
California Fire; Marine; Plate Glass; Liability;
Boiler and Machinery; Burglary;
Sprinkler; Automobile; and
Miscellaneous.
Colorado (21) Plate Glass; (22) Steam Boiler,
Machinery; (23) Burglary and Theft;
(24) Fidelity and Surety; (25) Motor
Vehicle-Full Coverage; (26) Worker's
Compensation; (27) Liability; (28)
Personal Property Floaters; (41) Fire &
Lighting; (42) Extended Coverage; (44)
Earthquake; (46) Aircraft; (47) Inland
Marine; (48) Ocean Marine; (54)
Homeowners Multiple Peril; (55)
Commercial Multiple Peril; (56) Farm
Owners Multiple Peril.
Connecticut Fire, Extended Coverage and Other
Allied Lines; Homeowners Multiple
Peril; Inland Marine; Auto Liability
(B.I. and P.D.); Auto Physical Damage;
Reinsurance.
Delaware Property; Marine & Transportation;
Casualty, including: Vehicle,
Liability, Burglary & Theft, Personal
Property Floater, Glass, Boiler &
Machinery, Leakage & Fire
Extinguisher Equipment, Elevator,
Livestock, and Miscellaneous.
District of (1) Fire; (16) Worker's Compensation;
Columbia (17) Other Liability; (19.2) Other
Private Passenger Auto; (19.4) Other
Commercial Auto Liability; (2.1) Allied
Lines; (21.1) Private Passenger Auto
Physical Damage; (21.2) Commercial Auto
Physical Damage; (22) Aircraft (all
perils); (23) Fidelity; (24) Surety;
(25) Glass; (26) Burglary and Theft;
(27) Boiler and Machinery; (3)
Farmowners Multiple Peril; (4)
Homeowners Multiple Peril; (5.1)
Commercial Multiple Peril; (8) Ocean
Marine; (9) Inland Marine; (PC)
Property and Casualty.
Florida 010 Fire; 020 Allied Lines; 040
Homeowners Multi Peril; 050 Commercial
Multi Peril; 080 Ocean Marine; 090
Inland Marine; 170 Other Liability; 192
Auto Casualty; 211 Ppa Physical Damage;
220 Aircraft; 230 Fidelity; 240 Surety;
450 Accident and Health; 540 Mobile
Home Multi Peril.
Georgia Property; Marine and Transportation;
Casualty (excluding Worker's
Compensation).
Idaho Property; Marine & Transportation;
Casualty - excluding Workers'
Compensation; Surety.
Illinois Casualty, Fidelity, Surety, as provided
in Clauses (a), (b), (c), (d), (e),
(f), (g), (h), (i), (j) of Class 2 and
Fire and Marine as provided in Clauses
(a), (b), (c), (d), (e), (f), (g), (h)
of Class 3 in accordance with 215 ILCS
5/4.
Indiana Multi Line Property and Casualty as
provided in Class II (a) (b) (c) (e)
(f) (g) (h) (i) (j) (l) and Class III
(a) (b) (c) (d) in accordance with IC
27-1-5-1.
Iowa Fire; Extended coverage; Other allied
lines; Homeowners multiple peril
10
(Inc. B.I.); Commercial multiple peril;
Earthquake; Growing crops; Ocean
marine; Inland marine; Accident only
(Individual); Accident and health
(Individual); Hospital and Medical
Expense (Individual); Group Accident
and Health; Non-cancellable Accident
and Health; Workers' Compensation;
Liability other than Auto (B.I.);
Liability other than Auto (P.D.); Auto
Liability (B.I.); Auto Liability
(P.D.); Auto Physical Damage; Aircraft
Physical Damage; Fidelity; Surety;
Glass; Burglary and Theft; Boiler and
Machinery.
Kansas Fire; Windstorm & Hail; Extended
Coverage; Sprinkler Leakage; Business
Interruption; Inland Marine; Automobile
Physical Damage; Homeowners Policies;
Accident & Health; Automobile
Liability; General Liability; Glass;
Burglary; Theft & Robbery; Malpractice
Liability; Aircraft Liability.
Kentucky Multiple Line - Property, Casualty,
Marine and Transportation.
Louisiana Vehicle; Liability; Workmen's
Compensation; Burglary and Forgery;
Glass; Fire and Extended Coverage;
Steam Boiler and Sprinkler Leakage;
Marine and Transportation (Inland
Marine); Miscellaneous.
Maine Fire; Allied Lines; Homeowners Multiple
Peril; Inland Marine; Earthquake; Other
Liability; Auto Liability; Auto
Physical Damage.
Maryland Workers' Compensation - Sections 1-
101(k), 19-101, 19-402; Casualty (not
including Vehicle Liability, Mortgage
Guaranty & Workers' Compensation) -
Section 1-101(k); Health - Section
1-101(q); Property and Marine
(excluding Wet Marine and
Transportation) - Section 1-101(ee);
Surety - Section 1-101(mm); Vehicle
Liability - Sections 1-101 (k), 19-101,
11
19-502, 19-503, 19-504.
Massachusetts Fire; Burglary; Robbery and Theft;
Repair - Replacement; Inland Marine
Only; Liability other than Auto; Auto
Liability; Glass;; Water Damage and
Sprinkler Leakage.
Michigan Disability; Property; Ocean Marine;
Inland Marine; Automobile Insurance -
limited; Casualty: Steam Boiler,
Flywheel & Machinery; Casualty:
Automobile; Casualty: Workers'
Compensation; Casualty: Liability;
Casualty: Plate Glass; Casualty:
Sprinkler and Water Damage; Casualty:
Burglary and Theft; Casualty:
Livestock; Casualty: Malpractice;
Disability coverage supplemental to
Auto Insurance; Surety & Fidelity in
accordance with Sections 606, 610, 614,
616, 620, 624, 625 and 628 of Chapter 6
of P.A. 218.
Minnesota Property, Liability, Accident and
Health, Surety and Casualty as
specified in Minnesota Statutes,
Section 60A.06, Subdivision 1, Clauses
1, 2A, 2B, 3, 5A, 5B, 6, 8, 9A, 9B, 9C,
9D, 12, 13, 14.
Mississippi (01) Fire and Allied Lines; (03)
Casualty/Liability; (04) Fidelity; (05)
Surety; (06) Workers' Compensation;
(07) Boiler and Machinery;; (08) Plate
Glass; (13) Inland Marine; (14) Ocean
Marine; (26) Auto Phy Damage/Liability;
(30 Home/Form Owners.
Missouri (B1) Property; (B2) Liability; (B3)
Fidelity and Surety; (B5)
Miscellaneous.
Montana Property; Casualty; Marine.
Nebraska 05 Property Insurance; 07 Glass
Insurance; 08 Burglary and Theft
Insurance; 09 Boiler and Machinery
Insurance; 10 Liability Insurance; 11
Worker's Comp & Employer's Liability;
12 Vehicle Insurance; 13
12
Fidelity Insurance; 14 Surety
Insurance; and18 Marine Insurance as
described in Section 44-201 of the
Statutes of Nebraska.
Nevada Property; Casualty; Surety.
New Hampshire Property & Casualty lines in
accordance with paragraphs I, II, V,
VI of State Statutes.
New Mexico General Casualty and/or Surety;
Property and/or Marine &
Transportation; and Vehicle Insurance.
New York Accident and health, fire,
miscellaneous property, water damage,
burglary and theft, glass boiler and
machinery, collision, personal injury
liability, property damage liability,
workers' compensation and employers'
liability, fidelity and surety, motor
vehicle and aircraft physical damage,
and marine and inland marine (inland
only) insurance, as specified in
paragraph(s) 3, 4, 5, 6, 7, 8, 9, 12,
13, 14, 15, 16, 19, and 20 of Section
1113(a) of the New York Insurance Law
to the extent permitted by certified
copy of the Company's charter document
on file with the Department.
North Carolina (04) Fire; (05a) Extended Coverage;
(06a) Commercial Water Damage; (07)
Burglary and Theft; (08) Glass; (09)
Boiler and Machinery; (10) Elevator;
(11) Animal; (12a) Automobile
Collision; (12b) Other Collision;
(13a) Personal Injury Liability -
Automobile; (13b) Personal Injury
Liability - Other; (14a) Property
Damage Liability - Automobile; (14b)
Property Damage Liability - Other;
(15) Workmen's Compensation &
Employer's Liability; (16) Fidelity
and Surety; (19a) Motor Vehicle and
Aircraft - Property Damage; (19b)
Motor
13
Vehicle and Aircraft - Fire; (19c)
Motor Vehicle and Aircraft - Theft;
(19d) Motor Vehicle and Aircraft -
Comprehensive; (19e) Motor Vehicle and
Aircraft - Collision; (20a) Inland
Marine; and (21) Marine Protection and
Indemnity, as defined in N.C.G.S.
58-7-15.
North Dakota Accident and Health; Casualty;
Property.
Ohio Allied Lines; Earthquake; Fire; Inland
Marine; Multiple Peril - Commercial;
Multiple Peril - Homeowners; Other
Liability; Private Passenger Auto -
Liab.; Private Passenger Auto - Other;
Private Passenger - Phys Damage
Oklahoma Property; Casualty; Marine; Vehicle.
Oregon Property; Casualty (excluding Workers'
Compensation); Marine and
Transportation.
Pennsylvania Auto Liability; Burglary and Theft;
Fidelity and Surety; Inland Marine and
Physical Damage; Other Liability;
Worker's Compensation; Boiler and
Machinery; Elevator; Glass; Ocean
Marine; Property and Allied Lines.
Puerto Rico Casualty insurance.
Rhode Island Fire and Allied Lines; Homeowners; SMP
Programs as approved; Inland Marine;
Automobile Physical Damage including
Collision; Automobile Bodily Injury
and Property Damage; Aircraft; Plate
Glass; Burglary; General Liability;
Fidelity and Surety; Workmen's
Compensation and Employer's Liability;
Accident and Sickness.
South Carolina 22 - Property; 23 - Casualty; 25 -
Marine.
South Dakota Fire & Allied Lines; Inland & Ocean
Marine; Bodily Injury (No Auto);
Property Damage (No Auto); Bodily
Injury (Auto); Property Damage (Auto);
Physical Damage (Auto);
14
Glass; Burglary & Theft.
Tennessee Property; Casualty; Vehicle; Surety
Texas Fire; Allied Coverages; Hail-growing
crops only; Rain; Inland Marine; Ocean
Marine; Aircraft--Liability & Physical
Damage; Employers' Liability;
Automobile--Liability & Physical
Damage; Liability other than
Automobile; Fidelity & Surely; Glass;
Burglary & Theft; Boiler & Machinery;
Livestock.
Utah Disability; Property; Surety;
Liability (incl. veh., excl. dis.);
Marine and Transport; Workers'
Compensation; Vehicle Liability;
Professional Liability (incl med mal).
Vermont The insurance business authorized by
the Company's Charter in accordance
with the laws of the State of Vermont
(see Illinois).
Virginia Fire; Miscellaneous Property; Farm
Multiple Peril; Homeowners Multiple
Peril; Ocean Marine; Inland Marine;
Liability other than Auto; Automobile
Liability; Automobile Physical Damage;
Aircraft Liability; Air Physical
Damage; Glass; Burglary and Theft;
Boiler and Machinery; Water Damage.
Washington Property; Marine and Transportation;
General Casualty; Surety.
West Virginia Business of Insurance as defined in
Chapter 33, Article 1, Section 10(c)
Fire; Article 1, Section 10(d) Marine;
Article 1, Section 10(e) Casualty; and
Article 1, Section 10(f)(1)(2)&(3)
Surety.
Wisconsin (1) Fire; (2) Marine; (4) Disability;
(5) Liability; (6) Steam Boiler; (7)
Fidelity; (10) Burglary, (11) Plate
Glass; (12) Sprinkler Leakage; (13)
Elevator; (14) Livestock; (15)
Automobile; (17) Other Casualty; (18)
Medical Payments Insurance.
Wyoming Multiple Lines.
15
Horace Mann Property & Alaska Property (AS 21.12.060); Casualty (AS
Casualty Insurance 21.12.070) All Clauses (except 3 and
Company 6-13); Company Marine, Wet Marine and
Transportation (AS 21.12.090).
Arizona Property; Vehicle; Casualty (excluding
Workers' Compensation; Boiler and
Machinery; Leakage and Fire
Extinguishing Equipment; Credit,
Malpractice and Miscellaneous Casualty
Insurances).
Arkansas Casualty (a)
California Fire; Marine; Plate Glass; Liability;
Burglary; Automobile; Aircraft and
Miscellaneous
Colorado Multiple Line - Credit (Casualty,
Accident & Health); General Property;
General Casualty' Motor Vehicle
(Property).
Connecticut Fire, Extended Coverage and Other
Allied Lines; Homeowners Multiple
Peril; Inland Marine; Liability other
than Auto (B.I. and P.D.); Auto
Liability (B.I. and P.D.); Auto
Physical Damage.
Delaware Property; Marine & Transportation;
Casualty, including: Vehicle,
Liability, Personal Property Floater
and Miscellaneous.
District of (1) Fire; (12) Earthquake; (19.2)
Columbia Other Private Passenger Auto; (21.1)
Private Passenger Auto Physical
Damage; (4) Homeowners Multiple Peril;
(9) InlandMarine; (PC) Property and
Casualty.
Idaho Casualty, Excluding Workers
Compensation; Property.
Illinois Casualty, Fidelity, Surety, as
provided in Clauses (b), (c), (i) of
Class 2 of the Insurance Code.
Indiana Multi Line Property and Casualty as
provided in Class II (f), (h), (l) and
Class III (a) and (d) of the Indiana
Insurance Code.
Iowa Auto liability (B.I.); Auto liability
16
(P.D.); Auto physical damage.
Kansas Fire; Windstorm & Hail; Extended
Coverage; Earthquake; Inland Marine;
Automobile Physical Damage; Homeowners
Policies; Automobile Liability,
General Liability.
Kentucky Property; Marine and Transportation;
and Casualty (vehicle, liability,
burglary and theft, and personal
property floater) Insurance.
Louisiana Vehicle; Liability; Burglary &
Forgery; Glass; Fire & Extended
Coverage; Steam Boiler & Sprinkler
Leakage; Marine & Transportation
(inland marine); and Miscellaneous.
Maine Fire; Allied Lines; Homeowners
Multiple Peril; Inland Marine;
Earthquake; Auto Liability; Auto
Physical Damage.
Maryland (P) Property and Marine (excluding Wet
Marine and Transportation) - Section 1
- 101 (ee); (C) Casualty (not
including Vehicle Liability, Mortgage
Guaranty & Worker's Compensation-
Section 1-101 (k); and (V) Vehicle
Liability - Sections 1-101(k); 19-101,
19-502, 19-503, 19-504.
Michigan Property; Inland Marine; Automobile
Insurance - limited; Casualty:
Workers' Compensation; Casualty:
Liability; Casualty: Automobile;
Disability coverage supplemental to
Auto Insurance.
Minnesota Property, Liability, Accident and
Health, Surety, and Casualty as
specified in Minnesota Statutes,
Section 60A.06, Subdivision 1,
Clause(s) 1, 2A, 2B, 3, 5A, 5B, 6, 8,
9A, 9B, 9C, 9D, 12, 13, 14.
Mississippi Fire and Allied Lines;
Casualty/Liability; Auto Physical
Damage/Liability; Home/Farm Owners.
Missouri Liability; Miscellaneous; Property.
Montana Property; Casualty; Marine.
Nebraska Property; Liability; Vehicle; Marine;
17
Miscellaneous.
Nevada Property and Casualty.
New Hampshire Property & Casualty in accordance with
paragraphs I, II, V, VI of the State
Statutes.
New York Fire; Miscellaneous Property; Water
Damage; Burglary and Theft; Glass;
Boiler and Machinery; Collision;
Personal Injury Liability; Property
Damage Liability; Workers'
Compensation and Employers' Liability;
Credit; Motor Vehicle and Aircraft
Physical Damage; Marine and Inland
Marine; Marine Protection and
Indemnity Insurance; as specified in
paragraphs 4, 5, 6, 7, 8, 9, 12, 13,
14, 15, 17, 19, 20, and 21 of Section
1113(a) of the New York Insurance Law
. and also such workers' compensation
insurance as may be incident to
coverages contemplated under
paragraphs 20 and 21 of Section
1113(a), including insurances
described in the Longshoremen's and
Harbor Workers' Compensation Act
(Public Law No. 803, 69 Cong. As
amended; 33 USC Section 901 et. Seq.
as amended) to the extent permitted by
certified copy of its charter
documents on file in this Department.
North Carolina
Fire
Fire; Miscellaneous Property, Extended
Coverage; Water Damage (including
Sprinkler Leakage) Residential;
Burglary and Theft; Glass; Collision,
Automobile and other; Marine, Inland.
Casualty
Personal Injury Liability, Automobile
and Other; Property Damage Liability,
Automobile and Other; Motor Vehicle
and Aircraft, Property Damage, Fire,
Theft, Comprehensive,
18
Collision; Marine Protection and
Indemnity.
North Dakota Casualty; Property as defined in Title
26.1 of the insurance Laws of ND.
Ohio Allied Lines; Earthquake; Fire; Inland
Marine; Multiple Peril - Homeowners;
Other liability; Private Passenger
Auto-Liability; Private Passenger Auto
- Other; Private Passenger - Physical
Damage.
Oklahoma Property & Casualty
Oregon Casualty (excluding Workers'
Compensation.
Pennsylvania Auto Liability; Inland Marine and
Physical Damage; Property and Allied
Lines; Burglary and Theft; Other
Liability
Rhode Island Fire; Allied Lines; Homeowners
Multiple Peril; Inland Marine;
Earthquake, Other Liability; Full
Coverage Automobile.
South Carolina Property; Casualty.
South Dakota Fire & Allied Lines; Inland & Ocean
Marine; Bodily Injury (No Auto);
Property Damage (No Auto); Bodily
Injury (Auto); Property Damage (Auto);
Physical Damage (Auto).
Tennessee Property; Casualty; Vehicle.
Texas Fire; Allied Coverages; Inland Marine;
Automobile--Liability & Physical
Damage; Liability other than
Automobile; Glass and Burglary &
Theft.
Utah Property; Liability; Marine &
Transport.
Vermont Insurance business authorized by the
Company's Charter in accordance with
the Laws of the State of Vermont. (See
Illinois)
Virginia Fire; Miscellaneous Property;
Homeowners Multiple Peril; Inland
Marine; Liability other than Auto;
Automobile Liability; Automobile
Physical Damage; Glass; Burglary and
Theft.
Washington Property; Marine & Transportation;
19
Vehicle; General Casualty.
West Virginia Business of Insurance as defined in
Chapter 33
Article 1, Section 10(c) Fire
Article 1, Section 10(d) Marine
Article 1, Section 10(e) Casualty
Article 1, Section 10(f) (1), (2), &
(3) Surety.
Wisconsin Disability Insurance; Liability and
Incidental Medical Expense Insurance;
Automobile and Aircraft Insurance.
Wyoming Multiple Lines
Alabama Property; Miscellaneous Casualty
(excluding Official Surety Bonds).
Teachers Insurance
Company Alaska Disability (as 21.12.050); Property
(as 21.12.060); Casualty (as
21.12.070) all clauses (1-14); Surety
(as 21.12.080); and Marine, Wet Marine
& Transportation (as 21.12.090).
Arizona Disability; Property; Casualty
(excluding Workers' Compensation);
Vehicle; Marine and Transportation.
Arkansas Disability; Property; Casualty
(excluding workmen's compensation);
and, Marine.
Colorado Accident and Health; Livestock; Plate
Glass; Steam Boiler, Machinery;
Burglary and Theft; Fidelity and
Surety; Motor Vehicle-Full Coverage;
Workmen's Compensation; Liability;
Personal Property Floaters; Mortgage;
Credit; Credit - A&H Franchise A&H;
Fire & Lighting; Extended Coverage;
Hail on Growing Crops; Earthquake;
Motor Vehicle-Full Coverage; Aircraft;
Inland Marine; Ocean Marine.
Connecticut Fire, Extended Coverage, and Other
Allied Lines; Homeowners Multiple
Peril: Inland Marine; Liability other
than Auto (B.I. and P.D.); Auto
20
Liability (B.I. and P.D.); and,
Auto Physical Damage.
Delaware Health; Credit Health; Property;
Surety; Marine & Transportation;
Casualty, including: Vehicle,
Liability, Burglary & Theft,
Personal Property Floater, Glass,
Boiler & Machinery, Credit,
Workmen's Compensation &
Employers' Liability, Leakage &
Fire Extinguisher Equipment,
Malpractice, Elevator, Congenital
Defects, Livestock,
Entertainments and Miscellaneous.
District of Fire; Earthquake; Group Accident
Columbia and Health; Non-Renewable for
Stated Reason; Other Liability;
Other Private Passenger Auto;
Allied Lines; Private Passenger
Auto Physical Damage; Commercial
Auto Physical Damage; Aircraft
(all perils); Fidelity; Surety;
Glass; Burglary and Theft; Boiler
and Machinery; Credit; Farmowners
Multiple Peril; Homeowners
Multiple Peril; Commercial
Multiple Peril; Ocean Marine;
Inland Marine; and, Property and
Casualty.
Florida Fire; Allied Lines; Homeowners
Multi Peril; Commercial Multi
Peril; Inland Marine; Other
Liability; Auto Casualty; Ppa
Physical Damage; Boiler and
Machinery; Mobile Home Multi
Peril.
Georgia Property; Marine and
Transportation; Casualty
(excluding Workers'
Compensation).
Idaho Disability; Property; Marine &
Transportation; Casualty
(excluding Workers'
Compensation); Surety
Illinois Casualty, Fidelity, Surety, as
provided in clauses (a), (b),
(c), (d), (e), (f), (g), (h),
(i), (j) of Class 2 and Fire and
Marine as provided in clauses
(a), (b), (c), (d), (e), (f),
(g), (h) of Class 3, in
accordance with 215
21
ILCS 5/4.
Indiana Multi-Line Property and Casualty
as provided in Class II (a), (b),
(c), (d), (e), (f), (h), (l) and
Class III (a), (b), (c), (d) in
accordance with IC 27-1-5-1.
Iowa Fire; Extended Coverage; Other
allied lines; Homeowners Multiple
Peril (Inc. B.I.); Commercial
Multiple Peril; Earthquake;
Growing Crops; Ocean Marine;
Inland Marine; Accident only
(Individual); Accident and Health
(Individual); Hospital and
Medical Expense (Individual);
Group Accident and Health;
Non-Cancellable Accident and
Health; Workers' Compensation;
Liability other than Auto (B.I.);
Liability other than Auto (P.D.);
Auto Liability (B.I.); Auto
Liability (P.D.); Auto Physical
Damage; Aircraft Physical Damage;
Fidelity; Surety; Glass; Burglary
and Theft; Boiler and Machinery.
Kansas Fire; Windstorm & Hail; Extended
Coverage; Earthquake; Inland
Marine; Automobile Physical
Damage; Homeowners Policies;
Automobile Liability.
Kentucky Multiple Line - Property,
Casualty and Marine &
Transportation insurance
Louisiana Vehicle; Liability; Workmen's
Compensation; Glass; Burglary and
Forgery; Fidelity and Surety;
Fire and Extended Coverage; Steam
Boiler and Sprinkler Leakage;
Crop and Livestock; Marine and
transportation (Inland Marine);
Miscellaneous.
Maine Fire; Allied Lines; Homeowners
Multiple Peril; Inland Marine;
Earthquake; Auto Liability; Auto
Physical Damage.
Maryland Casualty (not including Vehicle
Liability, Mortgage Guaranty &
Worker's Compensation) - Section
1-
22
101(k); Property and Marine
(excluding Wet Marine and
Transportation) - Section
1-101(ee); Vehicle Liability -
Sections 1-101(k), 19-101,
19-502, 19-503, 19-504.
Massachusetts Fire; Variable Annuity
Authorization; Inland Marine
Only; Dwellings; Commercial
Property; Liability other than
Auto; Auto Liability.
Michigan Property; Inland Marine;
Automobile Insurance - limited;
Casualty: Liability; Casualty:
Automobile; Disability coverage
supplemental to Auto Insurance,
as defined in Sections 610, 616,
620, 624 and 625 of Chapter 6 of
P.A. 218.
Minnesota Property, Liability, Accident and
Health, Surety, and Casualty as
specified in Minnesota Statutes,
Section 60A.06, Subdivision 1,
clauses 1, 2A, 2B, 3, 5A, 5B, 6,
8, 9A, 9B, 9C, 9D, 10, 11, 12, 13
and 14.
Mississippi Fire and Allied Lines;
Casualty/Liability; Fidelity;
Surety; Workers' Compensation;
Boiler and Machinery; Plate
Glass; Inland Marine; Ocean
Marine; Accident & Health; Auto
Phy Damage/Liab; Home/Farm
Owners.
Missouri Property ((S)379.010.1(1), RSMo);
Liability ((S)379.010.1(2),
RSMo); Accident and Health
((S)379.010.1(4), RSMo);
Miscellaneous ((S)379.010.1(5),
RSMo).
Montana Disability; Property; Casualty;
Surety; Marine.
Nebraska 05 Property Insurance; 07 Glass
Insurance; 08 Burglary and Theft
Insurance; 09 Boiler and
Machinery Insurance; 10 Liability
Insurance; 11 Worker's Comp &
Employer's Liability; 12 Vehicle
Insurance; and, 18 Marine
Insurance, in accordance with
Section 44-201 of the Statutes of
Nebraska.
23
Nevada Property and Casualty (excluding
Workmen's Compensation).
New Hampshire Property and Casualty lines in
accordance with paragraphs I, II,
V, VI of State Statutes.
New Mexico General Casualty and/or Surety;
Property and/or Marine &
Transportation; Vehicle
Insurance.
New York Accident and health; fire;
miscellaneous property; water
damage; burglary and theft;
glass; boiler and machinery;
elevator; collision; personal
injury liability; property damage
liability; workers' compensation
and employers' liability;
fidelity and surety; credit;
motor vehicle and aircraft
physical damage; marine and
inland marine and marine
protection and indemnity
insurance, as specified in
paragraphs 3, 4, 5, 6, 7, 8, 9,
10, 12, 13, 14, 15, 16, 17, 19,
20 and 21 of Section 1113(a) of
the New York Insurance Law and
also such workers' compensation
insurance as may be incident to
coverages contemplated under
paragraphs 20 and 21 of Section
1113(a), including insurances
described in Longshoremen's and
Harbor Workers' Compensation Act
(Public Law No. 803, 69 Cong. as
amended; 33 USC Section 901 et.
seq. as amended) to the extent
permitted by certified copy of
its charter document on file with
the Department.
North Carolina (04) Fire; (05a) Extended
Coverage; (05b) Growing Crops;
(06a) Commercial Water Damage
(including sprinkler leakage);
(06b) Residential Water Damage
(including sprinkler leakage);
(07) Burglary and Theft; (08)
Glass; (09) Boiler and Machinery;
(10) Elevator; (11) Animal; (12a)
Automobile Collision; (12b) Other
Collision; (13a)
24
Automobile Personal Injury
Liability; (13b) Other Personal
Injury Liability; (14a)
Automobile Property Damage
Liability; (14b) Other Property
Damage Liability; (15) Workmen's
Compensation and Employer's
Liability; (21) Marine Protection
and Indemnity, as defined in
N.C.G.S. 58-7-15.
North Dakota Accident & Health, Casualty and
Property, as defined in Title
26.1 of the North Dakota
insurance laws.
Ohio Allied Lines, Earthquake, Fire,
Inland Marine, Multiple Peril -
Commercial, Multiple Peril -
Homeowners, Other Liability,
Private Passenger Auto - Liab.,
Private Passenger Auto - Other
and Private Passenger - Phys
Damage, as defined in Section
3929.01(A) of Ohio laws.
Oklahoma Accident & Health; Property;
Casualty; Marine; Vehicle;
Surety.
Oregon Property; Casualty (excluding
Workers' Compensation); Marine
and Transportation; Surety;
Health.
Pennsylvania Auto Liability 40-5-102(c)(11);
Fidelity and Surety
40-5-102(c)(1); Inland Marine and
Physical Damage 40-5-102(b)(2);
Other Liability 40-5-102(c)(4);
Property and Allied Lines
40-5-102(b)(1); Burglary and
Theft 40-5-102(c)(6); Glass
40-5-102(c)(3); Ocean Marine
40-5-102(b)(3); Personal Property
Floater 40-5-102(c)(13).
Rhode Island Property; Casualty; Surety;
Marine and Transportation.
South Carolina Accident & Health; Property;
Casualty; Surety; Marine.
South Dakota Health; Fire & Allied Lines;
Inland & Ocean Marine; Worker's
Compensation; Bodily Injury (No
Auto); Property Damage (No Auto);
Bodily Injury (Auto); Property
Damage (Auto); Physical Damage
(Auto); Fidelity & Surety Bonds;
25
Glass; Burglary & Theft; Boiler &
Machinery; Aircraft; Credit
(Mortgage Guaranty); Crop Hail;
Livestock.
Tennessee Property; Casualty; Vehicle;
Surety.
Texas Fire; Allied Coverages; Inland
Marine; Automobile--Liability &
Physical Damage; Liability other
than Automobile; Glass and
Burglary & Theft.
Utah Disability; Property; Surety;
Liability (incl. veh., excl.
dis.); Marine and Transport;
Workers' Compensation; Vehicle
Liability; Professional Liability
(incl. med. mal.).
Vermont The insurance business authorized
by the Company's Charter in
accordance with the laws of the
State of Vermont (see Illinois).
Virginia Fire; Miscellaneous Property;
Homeowners Multiple Peril; Inland
Marine; Liability other than
Auto; Automobile Liability;
Automobile Physical Damage.
Washington Property; Marine &
Transportation; Vehicle; General
Casualty; Surety
West Virginia Business of Insurance as defined
in Chapter 33, Article 1, Section
10(c) Fire; Article 1, Section
10(d) Marine; and Article 1,
Section 10(e) Casualty.
Wisconsin Fire, inland marine and other
property; Ocean marine insurance;
Casualty disability insurance;
Liability and nonauto medical
insurance; Auto and aircraft
insurance; Fidelity insurance;
Surety insurance; Credit
insurance; Workers compensation
insurance; Miscellaneous
insurance.
Wyoming Multiple Lines.
Horace Mann Lloyds Management Texas Fire; Allied Coverages; Inland
Corporation Marine; Liability other than
Automobile and Reinsurance on all
26
lines authorized to be written on
a direct basis.
Life
Allegiance Life Insurance Arizona Disability; Life.
Company
Colorado General Life; Accident and
Health; Annuities; Credit;
Variable Contracts.
Florida Life; Group Life and Annuities;
Accident and Health.
Hawaii Life; Disability.
Illinois Life; Accident and Health.
Nebraska Life; Sickness and Accident
Nevada Life; Health; Variable Annuities.
Ohio Life; Health; Annuities.
Oklahoma Life; Accident and Health.
Oregon Life; Health,
Texas Life; Accident and Health.
Washington Life; Disability.
Educators Life Insurance Arizona Life and Disability Reinsurance
Company of America
Horace Mann Life Insurance Alabama Life, Disability and Annuities.
Company Alaska Life, Annuities and Disability
Insurance as defined in Title 21,
Sections 21.12.040 = 21.12.055 of
the Alaska Statutes.
Arizona Disability; Life; Variable
Annuities.
Arkansas Life; Disability; Variable
Contracts.
California Life and Disability.
Colorado Life (Ordinary, Group Life,
Accident & Health, Annuity
Contracts, Variable Annuities,
Franchise-Life, Franchise-A&H,
Group A&H).
Connecticut Accident and Health; Life
Non-Participating; Variable
Annuities.
Delaware Life; Variable Annuities; Health
District of Group Accident & Health; Group
Columbia Annuities; Group Life and Health;
Individual Accident and Health;
Individual Annuities; Individual
Life; Life and Health.
Florida Life; Variable Annuities; Group
Life and Annuities; Accident and
Health.
Georgia Life; Accident; Sickness
(including
27
Variable Annuity)
Hawaii Life; Disability.
Idaho Life; Disability.
Illinois Life (including Variable
Contracts); Accident & Health
Indiana Class 1 (a), (b), (c)
Iowa Accident Only (Individual);
Accident and Health (Individual);
Hospital and Medical Expense
(Individual); Group Accident and
Health; Non-cancellable Accident
and Health; Life (includes Credit
Life, Variable Life, Annuities,
Variable Annuities and Group).
Kansas Life; Accident and Health.
Kentucky Life; Health; Variable Annuities.
Louisiana Life; Health and Accident.
Maine Life (including Credit Life);
Health (including Credit Health);
Variable Annuities.
Maryland Variable Annuities; Health; Life,
including Annuities and Health
(except Variable Life and
Variable Annuities).
Massachusetts Life - All Kinds; Variable
Annuity Authorization; Accident -
All Kinds; Health - All Kinds.
Michigan Life and Annuities; Disability;
Variable Annuities.
Minnesota An insurance company for the
lines of insurance specified in
Minnesota Statutes, Section
60A.06, Subdivision 1, Clause 4
(including Variable Contracts).
Mississippi Life; Accident and Health;
Variable Contracts.
Missouri Life and Health which includes
Life, Annuities and Endowments;
Accident and Health; Variable
Contracts.
Montana Life; Disability.
Nebraska Life; Variable Annuities;
Sickness and Accident.
Nevada Life; Health; Variable Annuities.
New Hampshire Life; Accident and Health.;
Variable Products.
New Mexico Life; Health; Variable Annuities.
North Carolina Life, including Industrial Sick
Benefit
28
Insurance; Annuities, including
Annuities and Variable Annuities;
Accident and Health, including
Hospitalization (Cancelable and
Non-cancelable).
North Dakota Life and Annuity; Accident and
Health; Variable Life and
Annuities.
Ohio Life; Health; Annuities.
Oklahoma Life; Accident & Health;
Variable.
Oregon Life; Health.
Pennsylvania Accident and Health; Separate
Account Annuities; Life and
Annuities.
Rhode Island Life; Accident and Health;
Annuities including Variable
Annuities.
South Carolina Life; Variable Annuity; Accident
and Health.
South Dakota Life; Health; Variable Annuities.
Tennessee Life; Variable Contracts;
Disability.
Texas Life; Health and Accident;
Variable Annuities.
Utah Life; Annuity' Variable
Life/Annuity; Disability.
Vermont Insurance business authorized by
its Charter in accordance with
the Laws of the State of Vermont.
Virginia Life; Annuities; Variable
Annuities; Accident and Sickness.
Washington Life; Disability.
West Virginia Life; Accident & Sickness;
Variable Annuities.
Wisconsin Life Insurance and Annuities
(Nonparticipating); Variable Life
Insurance and Variable Annuities;
Disability Insurance.
Wyoming Life; Disability; Annuity.
29
SCHEDULE 7.12
TAXES
None
SCHEDULE 13.3
ADDRESSES
1. Notices to Horace Mann Educators Corporation should be sent to:
Ann Caparros
Vice President, General Counsel and Corporate Secretary
Horace Mann Educators Corporation
1 Horace Mann Plaza
Springfield, Illinois 62715-0001
Phone: (217) 788-5757
Fax: (217) 527-4029
2. Notices to Bank of America, N.A. as Lender should be sent to:
Debra Basler
Bank of America, N.A.
231 South LaSalle Street
Chicago, Illinois 60697
Phone: (312) 828-3734
Fax: (312) 987-0889
3. Notices to Bank of America, N.A. as Administrative Agent should be sent to:
Jesus Lopez
Bank of America, N.A.
231 South LaSalle Street
Chicago, Illinois 60697
Phone: (312) 828-6580
Fax: (312) 987-0889
EXHIBIT A
FORM OF BORROWING REQUEST
Bank of America, N.A.,
as Administrative Agent
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Jesus Lopez
Re: Horace Mann Educators Corporation
Gentlemen and Ladies:
This Borrowing Request is delivered to you pursuant to Section 2.3 of
that certain Credit Agreement, dated as of May ___, 2002 (as amended, modified,
supplemented, restated, refunded or renewed from time to time and in effect, the
"Credit Agreement"), among Horace Mann Educators Corporation, a Delaware
corporation (the "Borrower"), various financial institutions which are, or may
become, parties thereto (the "Lenders"), and Bank of America, N.A., as
Administrative Agent for the Lenders. Unless otherwise defined herein or the
context otherwise requires, capitalized terms used herein have the meanings
provided in the Credit Agreement.
The Borrower hereby requests that a Borrowing be made in the aggregate
principal amount of $________ on _____, 20__ as a [Eurodollar Loan having an
Interest Period of _____ months] [Base Rate Loan].
The Borrower hereby certifies and warrants that (a) that no Default
under any of the Loan Documents has occurred and is continuing or, after giving
effect to the Borrowing requested hereby, will have occurred and be continuing;
(b) all representations and warranties contained in the Credit Agreement [(other
than Section 7.4)]* and the other Loan Documents are true and correct in all
material respects on the date of this Borrowing Request and (except as otherwise
disclosed in writing to the Administrative Agent and the Lenders prior to the
date of such Borrowing) shall be true and correct in all material respects on
the date of the Borrowing requested hereunder with the same effect as though
made on the date of and concurrently with such Borrowing Request and such
Borrowing hereunder (except where such representation or warranty speaks as of
specified date); and (c) all covenants contained in the Credit Agreement and the
other Loan Documents to be performed by each of the parties thereto (other than
the Administrative Agent or the Lenders) have been performed in all material
respects and, prior to the date of the Borrowing requested hereunder, will be
performed in all material respects.
Please disburse the proceeds of the Borrowing requested hereby as
follows:
* Delete for the initial Borrowing.
The Borrower has caused this Borrowing Request to be executed and
delivered, and the certification and warranties contained herein to be made, by
its duly Authorized Officers this __ day of __________, 20__.
HORACE MANN EDUCATORS CORPORATION
By _________________________________
Name Printed _______________________
Title ______________________________
By _________________________________
Name Printed _______________________
Title ______________________________
EXHIBIT B
NOTE
U.S. $25,000,000 Chicago, Illinois
May ___, 2002
The undersigned, FOR VALUE RECEIVED, promises to pay to the order of
BANK OF AMERICA, N.A., as Administrative Agent for the ratable benefit of the
Lenders, at its principal office at 231 South LaSalle Street, Chicago, Illinois
60697, TWENTY FIVE MILLION DOLLARS ($25,000,000) or, if less, the aggregate
unpaid principal amount of all Loans made by the Lenders to the undersigned
pursuant to that certain Credit Agreement, dated as of May ___, 2002 (as
amended, modified, supplemented, restated, refunded or renewed from time to time
and in effect, the "Credit Agreement") among the undersigned, various financial
institutions which are, or may become, parties thereto and Bank of America,
N.A., as Administrative Agent for the Lenders, as shown either in the schedule
attached hereto (and any continuation thereof) or in the records of the payee.
Unless otherwise defined herein or the context otherwise requires, capitalized
terms used herein shall have the meanings provided in the Credit Agreement.
The unpaid principal amount hereof from time to time outstanding shall
bear interest from the date hereof at the rates, and such interest shall be
payable at the times, set forth in the Credit Agreement. Payments of both
principal and interest are to be made in lawful money of the United States of
America.
This Note is the Note described in, and is subject to the terms and
provisions of, the Credit Agreement. Reference is hereby made to the Credit
Agreement for a statement of the maturity of the Loans, the prepayment rights
and obligations of the undersigned, the nature and extent of the collateral
security and the rights of the parties to the Loan Documents in respect of such
collateral security, and for a statement of the terms and conditions under which
the due date of this Note may be accelerated.
In addition to and not in limitation of the foregoing and the
provisions of the Credit Agreement, the undersigned further agrees, subject only
to any limitation imposed by applicable law, to pay all expenses, including
reasonable attorneys' fees and legal expenses, incurred by the holder of this
Note in endeavoring to collect any amounts payable hereunder which are not paid
when due, whether by acceleration or otherwise.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE HAS BEEN DELIVERED IN CHICAGO, ILLINOIS AND SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ILLINOIS.
HORACE MANN EDUCATORS CORPORATION
By _____________________________________
Title __________________________________
By _____________________________________
Title __________________________________
LOANS AND PRINCIPAL PAYMENTS
Amount of Amount of Unpaid Principal
Loan Made Principal Repaid Balance
--------- ---------------- -------
Interest
Base Eurodollar Period (if Base Eurodollar Base Eurodollar Notation
Date Rate Rate applicable) Rate Rate Rate Rate Made By
---- ---- ---- ----------- ---- ---- ---- ---- -------
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EXHIBIT C
FORM OF CONTINUATION/CONVERSION NOTICE
Bank of America, N.A.,
as Administrative Agent
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Jesus Lopez
Re: Horace Mann Educators Corporation
Ladies and Gentlemen:
This Continuation/Conversion Notice (the "Notice") is delivered to you
pursuant to Section 4.5 of that certain Credit Agreement, dated as of May ___,
2002 (as amended, modified, supplemented, restated, refunded or renewed from
time to time and in effect, the "Credit Agreement"), among Horace Mann Educators
Corporation, a Delaware corporation (the "Borrower"), various financial
institutions which are or may become parties thereto (the "Lenders") and Bank of
America, N.A., as Administrative Agent for the Lenders. Unless otherwise defined
herein or the context otherwise requires, capitalized terms used herein shall
have the meanings provided in the Credit Agreement.
The Borrower hereby requests that:
1. on __________, 20__, $________ of the presently outstanding
principal amount of the Loans originally made on ______, 20__, currently
being maintained as Base Rate Loans, be converted from Base Rate Loans into
Eurodollar Loans; and
2. on __________, 20__, $________ of the presently outstanding
principal amount of the Loans originally made on ______, 20__ currently
being maintained as a Eurodollar Loan, be [continued as] [Eurodollar Loans
having an Interest Period of months] [converted into] [Base Rate Loans].
The Borrower hereby certifies and warrants that no Default has
occurred and is continuing or, after giving effect to the continuation and/or
conversion of any Loan requested hereby, will have occurred and be continuing.
The Borrower has caused this Notice to be executed and delivered, and
the certification and warranties contained herein to be made, by its duly
Authorized Officer this _____ day of __________, 20__.
HORACE MANN EDUCATORS CORPORATION
By _________________________________
Name Printed _______________________
Title ______________________________
By _________________________________
Name Printed _______________________
Title ______________________________
EXHIBIT D
FORM OF COMPLIANCE CERTIFICATE
Date: ________, 20__
TO: Bank of America, N.A.,
as Administrative Agent, and
the Lenders under the
Credit Agreement referred
to below
Re: Horace Mann Educators Corporation
Please refer to that certain Credit Agreement (as heretofore amended,
modified, supplemented, restated, refunded or renewed and as currently in
effect, herein called the "Agreement"), dated as of May ___, 2002, among Horace
Mann Educators Corporation (the "Borrower"), the Lenders referred to therein,
and Bank of America, N.A., as Administrative Agent.
Terms defined in the Agreement shall have the same meanings when used
herein.
In accordance with Section 8.1.1(f) of the Agreement, the Borrower hereby
certifies that the statements and calculations set forth below are true and
correct as of _______, 20__ (the "Calculation Date"):
I. Section 8.2.1 - Consolidated Debt to Capital.
A. Consolidated Debt $___________
B. Net Worth $___________
C. Sum of Item A plus Item B $___________
D. Ratio of Item A to Item C ____________
[Item D is not permitted to exceed 0.35 to 1.0 at any time prior to January
1, 2003, 0.325 to 1.0 at any time thereafter prior to January 1, 2004 or
0.30 to 1.0 at any time thereafter.]
II. Section 8.2.2 - Risk Based Capital.
A. Adjusted surplus for each Insurance Subsidiary
(list separately) $___________
B. Company Action Level for each Insurance Subsidiary
(list separately) $___________
[Item A for any Insurance Subsidiary is not permitted to be less than 175%
of Item B for such Insurance Subsidiary as of the end of each Fiscal Year.
Item A for the Life Subsidiaries on a Combined basis is not permitted to be
less than 250% of Item B for the Life Subsidiaries as of the end of each
Fiscal Year. Item A for the P/C Subsidiaries on a Combined basis is not
permitted to be less than 250% of Item B for the P/C Subsidiaries as of the
end of each Fiscal Year.]
III. Section 8.2.3 - Interest Coverage Ratio.
A. Combined dividends permitted to be paid by the
Insurance Subsidiaries to the Borrower on the
Calculation Date under applicable law without
approval of the Department $___________
B. Future Interest Expense for the next four Fiscal
Quarters:
C. Ratio of Item A to Item B ____________
[Item C is not permitted to be less than 4.0 to 1.0 at any Fiscal Quarter
end unless the Borrower has applied to the applicable Department within 20
days of such Fiscal Quarter end for permission to pay a special dividend in
an amount that when added to the amount set forth in clause (a) of the
definition of Interest Coverage Ratio, would cause such ratio to be
complied with, and such permission is granted within 45 days of such Fiscal
Quarter end.]
There have been no changes in the Executive Officers or Directors of the
Borrower since the last Compliance Certificate [except as described below.]
The undersigned officer further certifies that, to the best of his/her
knowledge, no Default had occurred and was continuing as of the Calculation
Date.
HORACE MANN EDUCATORS
CORPORATION
By ______________________________
**
Title ___________________________
** To be executed by the chief financial officer or treasurer of the Borrower.
EXHIBIT E
FORM OF OPINION OF BORROWER'S COUNSEL
May ___, 2002
To: Bank of America, N.A., as
Administrative Agent, and
the Lenders referred to below
231 South LaSalle Street
Chicago, Illinois 60697
Re: Horace Mann Educators Corporation
Ladies and Gentlemen:
I refer to that certain Credit Agreement, dated as of May ___, 2002 (the
"Credit Agreement"), between Horace Mann Educators Corporation, a Delaware
corporation (the "Borrower"), various financial institutions which are, or may
become, parties thereto (the "Lenders") and Bank of America, N.A., as
Administrative Agent for the Lenders (the "Administrative Agent"). I am the
General Counsel of the Borrower and have represented the Borrower in connection
with the preparation, execution and delivery of the Credit Agreement and the
transactions contemplated thereby.
This opinion is delivered to you pursuant to Section 9.1.4 of the Credit
Agreement. Capitalized terms not otherwise defined herein shall have the
definitions assigned to such terms in the Credit Agreement, unless the context
otherwise requires.
I have examined such matters of law and such certificates, documents and
records of public officials and of officers of the Borrower and its Subsidiaries
as I have deemed necessary for purposes of this opinion, including, but not
limited to, the Credit Agreement and the other Loan Documents. As to questions
of fact material to such opinions, I have relied on certificates of officers of
the Borrower and its Subsidiaries.
In rendering this opinion, I have made the following assumptions:
(a) All documents submitted to or reviewed by me are accurate and complete
and if not originals are true and correct copies of the originals. The
signatures on each of such documents by the parties thereto (other
than the Borrower) are genuine. Each individual who signed such
documents on behalf of any Person (other than the Borrower) had the
legal capacity to do so. All individuals who signed such documents on
behalf of a corporation (other than the Borrower) were duly authorized
to do so.
(b) The Lenders and the Administrative Agent have the corporate power and
authority to execute and deliver the Credit Agreement and other Loan
Documents to which they are parties and to perform their obligations
under the Credit Agreement and the other Loan Documents.
(c) The execution and delivery by the Administrative Agent and the Lenders
of the Credit Agreement and the other Loan Documents to which they are
parties have been duly authorized by all requisite corporate action
and such documents have been duly executed and delivered by the
Administrative Agent and the Lenders.
Based upon the foregoing and subject to the limitations, qualifications and
exceptions set forth herein, I am of opinion that:
1. Each of the Borrower and each Subsidiary (i) is a corporation duly
organized, validly existing and in good standing under the laws of its
state of incorporation, (ii) is duly qualified to do business and in
good standing in each jurisdiction where, because of the nature of its
activities or properties, such qualification is required, which
jurisdictions are set forth with respect to the Borrower and each
Subsidiary on Schedule 7.10 of the Credit Agreement , (iii) has the
requisite corporate power and authority and the right to own and
operate its properties, to lease the property it operate under lease,
and to conduct its business as now and proposed to be conducted and
(iv) has obtained all material licenses, permits, consents or
approvals from or by, and has made all filings with, and given all
notices to, all Governmental Authorities having jurisdiction, to the
extent required for such ownership, operation and conduct (including,
without limitation, the consummation of the transactions contemplated
by the Credit Agreement and the other Loan Documents) as to each of
the foregoing except where the failure to do so would not have a
Material Adverse Effect on the Borrower and its Subsidiaries taken as
a whole.
2. The execution, delivery and performance by the Borrower of the Credit
Agreement and the consummation of the transactions contemplated
thereby are within its corporate powers and have been duly authorized
by all necessary corporate action (including, without limitation,
shareholder approval, if required).
3. Each of the Borrower and its Subsidiaries has received all material
governmental and other consents and approvals (if any shall be
required) necessary for such execution, delivery and performance, and
such execution, delivery and performance do not and will not
contravene or conflict with, or create a Lien or right of termination
or acceleration under, any Requirement of Law or Contractual
Obligation binding upon the Borrower or such Subsidiaries.
4. The Credit Agreement and the other Loan Documents to which it is a
party have been executed by the Borrower and constitute the legal,
binding and enforceable obligations of Borrower enforceable against
the Borrower in accordance with their respective terms.
5. Other than Horace Mann Investors, Inc., neither the Borrower nor any
of its Subsidiaries is an "investment company" or a company
"controlled by an investment company", within the meaning of the
Investment Company Act of 1940, as amended.
6. (a) Except as set forth in Schedule 7.4 of the Credit Agreement and
(b) except for claims which are covered by Insurance Policies,
coverage for which has not been denied in writing, or which relate to
Ordinary Course Litigation, no claim, litigation (including, without
limitation, derivative actions), arbitration, governmental
investigation or proceeding or inquiry is pending or threatened
against the Borrower or any of its Subsidiaries (i) which would, if
adversely determined, have a Material Adverse Effect on the Borrower
or its Subsidiaries taken as a whole or (ii) which relates to any of
the transactions contemplated hereby, and there is no basis known to
the Borrower for any of the foregoing.
The opinions expressed herein are limited (i) to the extent that general
equitable principles limit the availability of equitable remedies, including but
not limited to the remedy of specific performance, injunctive relief, the
appointment of a receiver, and rights of acceleration; and (ii) to the extent
that the enforceability of the Credit Agreement and the other Loan Documents is
limited by applicable bankruptcy, insolvency, and other debtor relief laws of
general applicability.
This opinion is based on my knowledge of the law and facts as of the date
hereof. I assume no duty to update or supplement this opinion to reflect any
facts or circumstances which may hereafter come to my attention or to reflect
any changes in any law which may hereafter occur or become effective.
Respectfully submitted,
EXHIBIT F
FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement"), dated as of
the date set forth in Item 1 (each reference to an "Item" herein shall be deemed
to refer to such Item on Schedule I hereto), is made by the party designated as
the Assignor on the signature pages hereto (the "Assignor") to the Person
designated as the Assignee on the signature pages hereto (the "Assignee").
W I T N E S E T H:
The Assignor has entered into a Credit Agreement, dated as of May ___, 2002
(as such agreement may be amended, supplemented, amended and restated or
otherwise modified from time to time, the "Credit Agreement"), among Horace Mann
Educators Corporation, a Delaware corporation (the "Borrower"), certain
financial institutions as are or may become parties thereto, including the
Assignor (collectively, the "Lenders"), and Bank of America, N.A., as
administrative agent (the "Administrative Agent") for the Lenders, under which
the Assignor has agreed to make Loans in the amounts of up to the amount set
forth in Item 2 (such amount equals the current Commitment of the Assignor and
may have been, or may be, reduced by Section 2.1.1 of the Credit Agreement and
by other assignments by or to the Assignor, and will be reduced by the
assignment under this Agreement) and the Lenders have agreed to make Loans in
the amounts of up to the current aggregate Commitment Amount set forth in Item
3. Such Loans are sometimes hereinafter referred to as the "Advances" or each,
an "Advance". Unless otherwise defined, all terms used herein have the meanings
provided in the Credit Agreement.
In consideration of the premises and the mutual covenants contained herein,
the Assignor and the Assignee hereby covenant and agree as follows:
1. Assignment and Assumption. Subject to the terms and conditions of this
Agreement, the Assignor and the Assignee agree that:
(a) the Assignor hereby sells, transfers, assigns and delegates to
the Assignee, in consideration of the Assignee's entering into this
Agreement and the Assignee's payment to the Assignor of the amount set
forth in Item 4; and
(b) the Assignee hereby purchases, assumes and undertakes from the
Assignor, without recourse and without representation or warranty of any
kind (except as expressly provided in this Agreement),
a share (equal to the Funding Percentage set forth in Item 5 expressed as a
percentage of the aggregate Commitment Amount of the Lenders) of the Assignor's
Commitment, Advances, rights, benefits, obligations, liabilities and indemnities
under and in connection with the Credit Agreement and all of the Advances,
including without limitation the right to receive payment of principal and
interest on such percentage of the Assignor's Advances, and the obligation to
fund
all future Advances in respect of such assignment, and to indemnify the
Administrative Agent or any other party under the Credit Agreement and to pay
all other amounts payable by a Lender (in its respective percentage of the
aggregate obligations of the Lenders) under or in connection with the Credit
Agreement but not including any fees except as otherwise agreed by the Assignor
and the Assignee.
The interest of the Assignor under the Credit Agreement (including the
portion of the Assignor's Advances and all such Commitments, Advances, rights,
benefits, obligations, liabilities and indemnities) which the Assignee purchases
and assumes hereunder is hereinafter referred to as its "Assigned Share". The
day upon which the Assignee shall make the payment described in the prior
paragraph is hereinafter referred to as the "Funding Date". Upon completion of
the assignment hereunder, the Assignor will have the revised share of the total
Commitment Amount as of the Lenders and Funding Percentage set forth in Item 6.
2. Future Payments. The Assignor shall notify the Administrative Agent to
make all payments with respect to the Assigned Share after the Funding Date
directly to the Assignee. The Assignor and Assignee agree and acknowledge that
all payments of interest, commitment fees and other fees accrued up to, but not
including, the Funding Date are the property of the Assignor, and not the
Assignee. The Assignee shall, upon payment of any interest, commitment fees or
other fees, remit to the Assignor all of such interest, commitment fees and
other fees accrued up to, but not including, the Funding Date.
3. No Warranty or Recourse. The sale, transfer, assignment and delegation
of the Assigned Share is made without warranty or recourse against the Assignor
of any kind, except that the Assignor warrants that it has not sold or otherwise
transferred any other interest in the Assigned Share to any other party. The
Assignor may, however, have sold and may hereafter sell participations in, or
may have assigned or may hereafter assign, portions of its interest in the
Advances and the Credit Agreement.
4. Covenants and Warranties. To induce each other to enter into this
Agreement, each of the Assignee and the Assignor warrants and covenants with
respect to itself that:
(a) Existence and Organization. It is, in each case, the type of
institution, and duly organized under the laws of the jurisdiction, set
forth in Item 7.
(b) Authority and Authorization. It is duly authorized to execute,
deliver and perform its obligations under this Agreement and all acts and
conditions required to be done and performed and to have occurred prior to
the execution and delivery of, and performance of its obligations under,
this Agreement have been done and performed and have occurred in compliance
with all applicable laws.
(c) No Conflict. The execution and delivery of, and performance of
its obligations under, this Agreement do not conflict with any provision of
law or of the charter or by-laws (or equivalent constituent documents) of
such party, or of any agreement binding upon it; and
(d) Valid and Binding. This Agreement constitutes the legal, valid
and binding obligation of such party enforceable against such party in
accordance with its terms.
5. Covenants and Warranties by the Assignee. To induce the Assignor to
enter into this Agreement, the Assignee warrants and covenants that (a) it is
purchasing and assuming the Assigned Share in the course of making loans in the
ordinary course of its business, and (b) it has, independently and without
reliance upon the Assignor, the Administrative Agent or any other Lender, and
based upon such financial statements and other documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. The Assignee acknowledges that the Assignor, the Administrative
Agent or any other Lender have not made and do not make any representations or
warranties or assume any responsibility with respect to the validity,
genuineness, enforceability or collectibility of the Advances, the Credit
Agreement or any related instrument, document or agreement. The Assignee
warrants and covenants that it is an Eligible Assignee.
6. Payments to the Assignor. All amounts payable to the Assignor in U.S.
Dollars shall be paid by transfer of federal funds to the Assignor as set forth
in Item 9.
7. Other Transactions. The Assignee shall have no interest in any
property in the Assignor's possession or control, or in any deposit held or
other indebtedness owing by the Assignor, which may be or become collateral for
or otherwise be available for payment of the Advances by reason of the general
description of secured obligations contained in any security agreement or other
agreement or instrument held by the Assignor or by reason of the right of
set-off, counterclaim or otherwise, except that if such interest is provided for
in provisions of the Credit Agreement regarding sharing of set-off, the Assignee
shall have the same rights as any other Lender that is a party to the Credit
Agreement. The Assignor and its affiliates may accept deposits from, lend money
to, act as trustee under indentures for and generally engage in any kind of
business with the Borrower, and any person who may do business with or own
securities of the Borrower or any of its Subsidiaries. The Assignee shall have
no interest in any property taken as security for any other loan or any other
credits extended to the Borrower or any of its Subsidiaries by the Assignor.
8. Expenses. In the event of any action to enforce the provisions of this
Agreement against a party hereto, the prevailing party shall be entitled to
recover all costs and expenses incurred in connection therewith, including
without limitation, attorneys' fees and expenses.
9. Successors and Assigns. This Agreement shall inure the benefit of and
be binding upon the successors and assigns of the Assignor and the Assignee.
10. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
11. Amendments, Changes and Modifications. This Agreement may not be
amended, changed, modified, altered, or terminated except by an agreement in
writing signed by the
Assignor and the Assignee (or their permitted successors or assigns) and the
consent of the Borrower (which shall not be unreasonably withheld).
12. Withholding Taxes. The Assignee (a) represents and warrants to the
Assignor, the Administrative Agent and the Borrower that under applicable law
and treaties no tax will be required to be withheld by the Assignor with respect
to any payments to be made to the Assignee hereunder, (b) agrees to furnish (if
it is organized under the laws of any jurisdiction other than the United States
or any State thereof and if it is not otherwise prohibited or prevented by
applicable law or court order) to the Assignor, the Administrative Agent and the
Borrower upon the effectiveness of this Agreement, either U.S. Internal Revenue
Service Form W-8 BEN or U.S. Internal Revenue Service Form W-8 ECI, and agrees
to provide (if not otherwise prohibited or prevented by applicable law or court
order) new Forms W-8 BEN or W-8 ECI upon (1) the expiration or obsolescence of
any previously delivered Form W-8 BEN or Form W-8 ECI or comparable statements
in accordance with applicable U.S. law and regulations and amendments thereto,
duly executed and completed by the Assignee, and (ii) in any event, in the case
of Form W-8 BEN, on each calendar year following the Funding Date, and, in the
case of Form W-8 ECI, at the end of each three-year period following the Funding
Date, and (c) agrees to comply with all applicable U.S. laws and regulations
with regard to such withholding tax exemption.
13. Entire Agreement. This Agreement sets forth the entire understanding
of the parties (except for any side letter between the Assignor and the Assignee
with reference to fees and other items) and supersedes any and all prior
agreements, arrangements, and understandings relating to the subject matter
hereof. No representation, promise, inducement or statement of intent has been
made by any party which is not embodied in this Agreement, and no party shall be
bound by or liable for any alleged representation, promise, inducement or
statement of intention not expressly set forth herein.
14. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
executed on its behalf by its duly Authorized Officer as of the day and year
first above written.
ASSIGNOR:
By:_________________________________________
(print name)
Title: _____________________________________
Address: __________________________
ASSIGNEE:
By:_________________________________________
(print name)
Title: _____________________________________
Address: __________________________
Consented to this __ day of ________, 20__
BANK OF AMERICA, N.A.,
as Administrative Agent
By:_________________________________________
(print name)
Title: _____________________________________
Consented to this __ day of ________, 20__
HORACE MANN EDUCATORS CORPORATION
By:_________________________________________
(print name)
Title: _____________________________________
By:_________________________________________
(print name)
Title: _____________________________________
SCHEDULE I TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
Item No.
1. Date of Assignment:
2. Current Commitment Amount and Funding Percentage of Assignor prior to
Assignment:
3. Current Aggregate Commitment Amount:
4. Amount of Initial Payment to Assignor:
5. Amount of Commitment Assigned to Assignee Hereunder:
6. Assignee's Funding Percentage Hereunder:
7. Assignor's Commitment Amount and Funding Percentage after Assignment
to Assignee Hereunder:
8. Type of Institution and Jurisdiction of Organization:
(a) of Assignor:
(b) of Assignee
9. Information Regarding Payments to the Assignor:
Exhibit 10.2
HORACE MANN EDUCATORS CORPORATION
2002 Incentive Compensation Plan
HORACE MANN EDUCATORS CORPORATION
2002 Incentive Compensation Plan
Page
----
1. Purpose .............................................................. 1
2. Definitions .......................................................... 1
3. Administration ....................................................... 3
4. Stock Subject to Plan ................................................ 4
5. Eligibility; Per-Person Award Limitations ............................ 5
6. Specific Terms of Awards ............................................. 5
7. Performance Awards, Including Annual Incentive Awards ................ 8
8. Certain Provisions Applicable to Awards .............................. 10
9. Change of Control .................................................... 11
10. Additional Award Forfeiture Provisions ............................... 12
11. General Provisions ................................................... 13
HORACE MANN EDUCATORS CORPORATION
2002 Incentive Compensation Plan
1. Purpose. The purpose of this 2002 Incentive Compensation Plan (the
"Plan") is to aid Horace Mann Educators Corporation, a Delaware corporation (the
"Company"), in attracting, retaining, motivating and rewarding employees,
non-employee directors, and other persons who provide substantial services to
the Company or its subsidiaries or affiliates, to provide for equitable and
competitive compensation opportunities, to encourage long-term service, to
recognize individual contributions and reward achievement of Company goals, and
promote the creation of long-term value for shareholders by closely aligning the
interests of Participants with those of shareholders. The Plan authorizes
stock-based and cash-based incentives for Participants.
2. Definitions. In addition to the terms defined in Section 1 above and
elsewhere in the Plan, the following capitalized terms used in the Plan have the
respective meanings set forth in this Section:
(a) "Annual Incentive Award" means a type of Performance Award
granted to a Participant under Section 7(c) representing a conditional
right to receive cash, Stock or other Awards or payments, as determined by
the Committee, based on performance in a performance period of one fiscal
year or a portion thereof.
(b) "Award" means any Option, SAR, Restricted Stock, Deferred Stock,
Stock granted as a bonus or in lieu of another award, Dividend Equivalent,
Other StockBased Award, Performance Award or Annual Incentive Award,
together with any related right or interest, granted to a Participant
under the Plan.
(c) "Beneficiary" means the individual or entity designated by the
Participant to receive the benefits specified under the Participant's
Award upon such Participant's death. If no such designation is made, or if
the designated individual predeceases the Participant or the entity no
longer exists, then the Beneficiary shall be the Participant's estate.
(d) "Beneficial Owner" has the meaning specified in Rule 13d-3 under
the Exchange Act.
(e) "Board" means the Company's Board of Directors.
(f) "Change of Control" means, unless otherwise defined in an Award
Agreement, any one or more of the following:
(i) Approval by the shareholders of the Company of a merger,
reorganization, consolidation, or similar transaction, in which the
Company is not the continuing or the surviving corporation, or
pursuant to which Shares would be converted into cash, securities or
other property, other than a merger of the Company in which no Company
shareholder's ownership percentage in the surviving corporation
immediately after the merger is less than such shareholder's ownership
percentage in the Company immediately prior to such merger by ten
percent (10%) or more (unless such change results from elimination of
an odd lot that represented less than 0.1% of the outstanding of
Stock); or (2) any sale, lease exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company; or
(ii) The shareholders of the Company approve any plan or proposal
for the liquidation or dissolution of the Company which is part of a
sale of assets, merger, or reorganization of the Company or other
similar transaction; or
(iii) Any "person", as such term is defined in Sections 13(d) and
14(d) of the Exchange Act, is or becomes, directly or indirectly, the
"beneficial owner" as defined in Rule 13d-3 under the Exchange Act, of
securities of the Company that represent more than 50% of the combined
voting power of the Company's then outstanding securities entitled to
vote generally in the election of directors; or
(iv) The Incumbent Directors (determined using the Effective Date
as the baseline date) cease for any reason to constitute at least a
majority of the directors of the Company then serving.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
References to any provision of the Code or regulation (including a
proposed regulation) thereunder shall include any successor provisions and
regulations.
(h) "Committee" means a committee of two or more directors designated
by the Board to administer the Plan; provided, however, that, directors
appointed or serving as members of a Board committee designated as the
Committee shall not be employees of the Company or any subsidiary or
affiliate. In appointing members of the Committee, the Board will consider
whether a member is or will be a Qualified Member, but such members are
not required to be Qualified Members at the time of appointment or during
their term of service on the Committee. The full Board may perform any
function of the Committee hereunder, in which case the term "Committee"
shall refer to the Board. Initially, the Compensation Committee of the
Board of Directors will be designated as the "Committee" under the Plan.
(i) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 11(j).
(j) "Deferred Stock" means a right, granted to a Participant under
Section 6(e), to receive Stock or other Awards or a combination thereof at
the end of a specified deferral period.
(k) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g), to receive cash, Stock, other Awards or other property
equal in value to all or a specified portion of the dividends paid with
respect to a specified number of shares of Stock.
(l) "Effective Date" means the effective date specified in Section
11(q).
(m) "Eligible Person" has the meaning specified in Section 5.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended. References to any provision of the Exchange Act or rule
(including a proposed rule) thereunder shall include any successor
provisions and rules.
(o) "Fair Market Value" means (i) with respect to any property
other than Stock, the fair market value of such property determined by
such methods or procedures as shall be established from time to time by
the Committee, and (ii) with respect to Stock, unless otherwise determined
by the Committee,
as of any date, (A) the mean between the highest and lowest trading prices
of the Stock on such date on the New York Stock Exchange Composite
Transactions Tape (or, if no sale of Stock was reported for such date, on
the next preceding date on which a sale of Stock was reported) or (B) if
the Stock is not listed on the New York Stock Exchange, the mean of the
highest and lowest trading prices of Stock on such other national exchange
on which the Stock is principally traded or as reported by the National
Market System, or other similar organization; or (C) in the event that
there shall be no public market for the Stock, the fair market value of
the Stock as determined by the Committee.
(p) "Incentive Stock Option" or "ISO" means any Option designated
as an incentive stock option within the meaning of Code Section 422 or
any successor provision thereto and qualifying thereunder.
(q) "Incumbent Directors" means, as of any specified baseline date,
individuals then serving as members of the Board who were members of the
Board as of the date immediately preceding such baseline date; provided
that any subsequently-appointed or elected member of the Board whose
election, or nomination for election by shareholders of the Company or the
Surviving Corporation, as applicable, was approved by a vote or written
consent of a majority of the directors then comprising the Incumbent
Directors shall also thereafter be considered an Incumbent Director,
unless the initial assumption of office of such subsequently-elected or
appointed director was in connection with (i) an actual or threatened
election contest, including a consent solicitation, relating to the
election or removal of one or more members of the Board, (ii) a "tender
offer" (as such term is used in Section 14(d) of the Exchange Act), or
(iii) a proposed reorganization transaction.
(r) "Option" means a right, granted to a Participant under Section
6(b), to purchase Stock or other Awards at a specified price during
specified time periods.
(s) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(h).
(t) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(u) "Performance Award" means a conditional right, granted to a
Participant under Sections 6(i) and 7, to receive cash, Stock or other
Awards or payments, as determined by the Committee, based upon
performance criteria specified by the Committee.
(v) "Preexisting Plans" mean the Company's 2001 Stock Incentive Plan
and 1991 Stock Incentive Plan.
(w) "Qualified Member" means a member of the Committee who is a
"Non-Employee Director" within the meaning of Rule 16b-3(b)(3) and an
"outside director" within the meaning of Regulation 1.162-27 under Code
Section 162(m).
(x) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) which is subject to certain restrictions and to a risk of
forfeiture.
(y) "Rule 16b3" means Rule 16b-3, as from time to time in effect
and applicable to Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(z) "Stock" means the Company's Common Stock, and any other equity
securities of the Company that may be substituted or resubstituted for
Stock pursuant to Section 11(c).
(aa) "Stock Appreciation Rights" or "SAR" means a right granted to
a Participant under Section 6(c).
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3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee, which shall have full and final authority, in each case subject
to and consistent with the provisions of the Plan, to select Eligible
Persons to become Participants; to grant Awards; to determine the type and
number of Awards, the dates on which Awards may be exercised and on which
the risk of forfeiture or deferral period relating to Awards shall lapse
or terminate, the acceleration of any such dates, the expiration date of
any Award, whether, to what extent, and under what circumstances an Award
may be settled, or the exercise price of an Award may be paid, in cash,
Stock, other Awards, or other property, and other terms and conditions of,
and all other matters relating to, Awards; to prescribe documents
evidencing or setting terms of Awards (such Award documents need not be
identical for each Participant), amendments thereto, and rules and
regulations for the administration of the Plan and amendments thereto; to
construe and interpret the Plan and Award documents and correct defects,
supply omissions or reconcile inconsistencies therein; and to make all
other decisions and determinations as the Committee may deem necessary or
advisable for the administration of the Plan. Decisions of the Committee
with respect to the administration and interpretation of the Plan shall be
final, conclusive, and binding upon all persons interested in the Plan,
including Participants, Beneficiaries, transferees under Section 11(b) and
other persons claiming rights from or through a Participant, and
shareholders. The foregoing notwithstanding, the Board shall perform the
functions of the Committee for purposes of granting Awards under the Plan
to non-employee directors (authority with respect to other aspects of
non-employee director awards is not exclusive to the Board, however).
(b) Manner of Exercise of Committee Authority. At any time that a
member of the Committee is not a Qualified Member, (i) any action of the
Committee relating to an Award intended by the Committee to qualify as
"performance-based compensation" within the meaning of Code Section
162(m) and regulations thereunder may be taken by a subcommittee,
designated by the Committee or the Board, composed solely of two or more
Qualified Members, and (ii) any action relating to an Award granted or to
be granted to a Participant who is then subject to Section 16 of the
Exchange Act in respect of the Company may be taken either by such a
subcommittee or by the Committee but with each such member who is not a
Qualified Member abstaining or recusing himself or herself from such
action, provided that, upon such abstention or recusal, the Committee
remains composed of two or more Qualified Members. Such action,
authorized by such a subcommittee or by the Committee upon the abstention
or recusal of such non-Qualified Member(s), shall be the action of the
Committee for purposes of the Plan. The express grant of any specific
power to the Committee, and the taking of any action by the Committee,
shall not be construed as limiting any power or authority of the
Committee. The Committee may delegate to officers or managers of the
Company or any subsidiary or affiliate, or committees thereof, the
authority, subject to such terms as the Committee shall determine, to
perform such functions, including administrative functions, as the
Committee may determine, to the fullest extent permitted under Section
157 of the Delaware General Corporation Law.
(c) Limitation of Liability. The Committee and each member thereof
and any person acting pursuant to authority delegated by the Committee,
shall be entitled, in good faith, to rely or act upon any report or other
information furnished by any executive officer, other officer or employee
of the Company or a subsidiary or affiliate, the Company's independent
auditors, consultants or any other agents assisting in the administration
of the Plan. Members of the Committee, any person acting pursuant to
authority delegated by the Committee, and any officer or employee of the
Company or a subsidiary or affiliate acting at the direction or on behalf
of the Committee or a delegee shall not be personally liable for any
action or determination taken or made in good faith with respect to the
Plan, and shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action or determination.
4. Stock Subject to Plan.
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(a) Overall Number of Shares Available for Delivery. Subject to
adjustment as provided in Section 11(c), the total number of shares of
Stock reserved and available for delivery in connection with Awards under
the Plan shall be (i) three million plus (ii) the number of shares that,
immediately prior to the Effective Date, remain available for issuance
under the Preexisting Plans plus (iii) the number of shares subject to
awards under the Preexisting Plans which become available in accordance
with Section 4(b) after the Effective Date; provided, however, that the
total number of shares with respect to which ISOs may be granted shall
not exceed the number specified under clauses (i) and (ii) above; and
provided further, that the total number of shares which may be issued and
delivered in connection with Awards other than Options and SARs shall not
exceed 5% of the total number of shares reserved under the Plan. Any
shares of Stock delivered under the Plan shall consist of authorized and
unissued shares or treasury shares.
(b) Share Counting Rules. The Committee may adopt reasonable
counting procedures to ensure appropriate counting, avoid double counting
(as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs
from the number of shares previously counted in connection with an Award.
Shares subject to an Award or an award under a Preexisting Plan that is
canceled, expired, forfeited, settled in cash or otherwise terminated
without a delivery of shares to the Participant will again be available
for Awards, and shares withheld in payment of the exercise price or taxes
relating to an Award or Preexisting Plan award and shares equal to the
number surrendered in payment of any exercise price or taxes relating to
an Award or Preexisting Plan award shall be deemed to constitute shares
not delivered to the Participant and shall be deemed to again be
available for Awards under the Plan. In addition, in the case of any
Award granted in substitution for an award of a company or business
acquired by the Company or a subsidiary or affiliate, shares issued or
issuable in connection with such substitute Award shall not be counted
against the number of shares reserved under the Plan, but shall be
available under the Plan by virtue of the Company's assumption of the
plan or arrangement of the acquired company or business. This Section
4(b) shall apply to the number of shares reserved and available for ISOs
only to the extent consistent with applicable regulations relating to
ISOs under the Code.
5. Eligibility; PerPerson Award Limitations. Awards may be granted under
the Plan only to Eligible Persons. For purposes of the Plan, an "Eligible
Person" means an employee of the Company or any subsidiary or affiliate,
including any executive officer, a non-employee director of the Company, a
consultant or other person who provides substantial services to the Company or a
subsidiary or affiliate, and any person who has been offered employment by the
Company or a subsidiary or affiliate, provided that such prospective employee
may not receive any payment or exercise any right relating to an Award until
such person has commenced employment with the Company or a subsidiary or
affiliate. An employee on leave of absence, including for a disability that has
not resulted in termination of employment, may be considered as still in the
employ of the Company or a subsidiary or affiliate for purposes of eligibility
for participation in the Plan. For purposes of the Plan, a joint venture in
which the Company or a subsidiary has a substantial direct or indirect equity
investment shall be deemed an affiliate, if so determined by the Committee. In
each calendar year during any part of which the Plan is in effect, an Eligible
Person may be granted Awards intended to qualify as "performance-based
compensation" under Code Section 162(m) under Section 6 relating to up to his or
her Annual Limit. A Participant's Annual Limit, in any year during any part of
which the Participant is then eligible under the Plan, shall equal 500,000
shares plus the amount of the Participant's unused Annual Limit relating to the
same type of Award as of the close of the previous year, subject to adjustment
as provided in Section 11(c). In the case of a cash-denominated Award for which
the limitation set forth in the preceding sentence would not operate as an
effective limitation satisfying Treasury Regulation 1.162-27(e)(4) (including a
cash Performance Award under Section 7), an Eligible Person may not be granted
Awards authorizing the earning during any calendar year of an amount that
exceeds the Participant's Annual Limit, which for this purpose shall equal $2.5
million plus the amount of the Participant's unused cash Annual Limit as of the
close of the previous year (this limitation is separate and not affected by the
number of Awards granted during such calendar year
-5-
subject to the limitation in the preceding sentence). For this purpose, (i)
"earning" means satisfying performance conditions so that an amount becomes
payable, without regard to whether it is to be paid currently or on a deferred
basis or continues to be subject to any service requirement or other
non-performance condition, and (ii) a Participant's Annual Limit is used to the
extent a cash amount or number of shares may be potentially earned or paid under
an Award, regardless of whether such amount or shares are in fact earned or
paid.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to
Section 11(e)), such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee shall determine, including
terms requiring forfeiture of Awards in the event of termination of
employment or service by the Participant and terms permitting a Participant
to make elections relating to his or her Award. The Committee shall retain
full power and discretion with respect to any term or condition of an Award
that is not mandatory under the Plan. The Committee shall require the
payment of lawful consideration for an Award to the extent necessary to
satisfy the requirements of the New York Business Corporation Law, and may
otherwise require payment of consideration for an Award except as limited
by the Plan.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
purchasable under an Option (including both ISOs and non-qualified
Options) shall be determined by the Committee, provided that such
exercise price shall be not less than the Fair Market Value of a share
of Stock on the date of grant of such Option, subject to Sections 6(f)
and 8(a).
(ii) Option Term; Time and Method of Exercise. The Committee
shall determine the term of each Option, which in no event shall
exceed a period of ten years from the date of grant. The Committee
shall determine the time or times at which or the circumstances under
which an Option may be exercised in whole or in part (including based
on achievement of performance goals and/or future service
requirements), the methods by which such exercise price may be paid or
deemed to be paid and the form of such payment (subject to Section
11(k)), including, without limitation, cash, Stock, other Awards or
awards granted under other plans of the Company or any subsidiary or
affiliate, or other property (including notes and other contractual
obligations of Participants to make payment on a deferred basis, such
as through "cashless exercise" arrangements, to the extent permitted
by applicable law), and the methods by or forms in which Stock will be
delivered or deemed to be delivered in satisfaction of Options to
Participants (including deferred delivery of shares representing the
Option "profit," at the election of the Participant or as mandated by
the Committee, with such deferred shares subject to any vesting,
forfeiture or other terms as the Committee may specify).
(iii) ISOs. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Code Section 422,
including but not limited to the requirement that no ISO shall be
granted more than ten years after the Effective Date.
(c) Stock Appreciation Rights. The Committee is authorized to grant
SAR's to Participants on the following terms and conditions:
(i) Right to Payment. An SAR shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one share of Stock on the date
of exercise (or, in the case of a "Limited SAR," the Fair Market Value
determined by
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reference to the Change of Control price or value, as defined in the
applicable Award agreement) over (B) the grant price of the SAR as
determined by the Committee.
(ii) Other Terms. The Committee shall determine at the date of grant
or thereafter, the time or times at which and the circumstances under which
a SAR may be exercised in whole or in part (including based on achievement
of performance goals and/or future service requirements), the method of
exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed
to be delivered to Participants, and whether or not a SAR shall be
free-standing or in tandem or combination with any other Award. Limited
SARs that may only be exercised in connection with a Change of Control or
other event as specified by the Committee may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee may determine.
(d) Restricted Stock. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions,
if any, as the Committee may impose, which restrictions may lapse
separately or in combination at such times, under such circumstances
(including based on achievement of performance goals and/or future service
requirements), in such installments or otherwise and under such other
circumstances as the Committee may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of the Plan and
any Award document relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a shareholder, including
the right to vote the Restricted Stock and the right to receive dividends
thereon (subject to any mandatory reinvestment or other requirement imposed
by the Committee).
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service during the applicable restriction
period, Restricted Stock that is at that time subject to restrictions shall
be forfeited and reacquired by the Company; provided that the Committee may
provide, by rule or regulation or in any Award document, or may determine
in any individual case, that restrictions or forfeiture conditions relating
to Restricted Stock will lapse in whole or in part, including in the event
of terminations resulting from specified causes.
(iii) Certificates for Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of
the Participant, the Committee may require that such certificates bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock, that the Company retain physical
possession of the certificates, and that the Participant deliver a stock
power to the Company, endorsed in blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of an Award of
Restricted Stock, the Committee may require that any dividends paid on a
share of Restricted Stock shall be either (A) paid with respect to such
Restricted Stock at the dividend payment date in cash, in kind, or in a
number of shares of unrestricted Stock having a Fair Market Value equal to
the amount of such dividends, or (B) automatically reinvested in additional
Restricted Stock or held in kind, which shall be subject to the same terms
as applied to the original Restricted Stock to which it relates, or (C)
deferred as to payment, either as a cash deferral or with the amount or
value thereof automatically deemed reinvested in shares of Deferred Stock,
other Awards or other investment vehicles, subject to such terms as the
Committee shall determine or permit a Participant to elect. Unless
otherwise determined by the Committee, Stock distributed in connection with
a Stock split or Stock dividend, and other property distributed as a
dividend, shall be subject to
-7-
restrictions and a risk of forfeiture to the same extent as the Restricted
Stock with respect to which such Stock or other property has been
distributed.
(e) Deferred Stock. The Committee is authorized to grant Deferred Stock to
Participants, which are rights to receive Stock, other Awards, or a combination
thereof at the end of a specified deferral period, subject to the following
terms and conditions:
(i) Award and Restrictions. Issuance of Stock will occur upon
expiration of the deferral period specified for an Award of Deferred Stock
by the Committee (or, if permitted by the Committee, as elected by the
Participant). In addition, Deferred Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions,
if any, as the Committee may impose, which restrictions may lapse at the
expiration of the deferral period or at earlier specified times (including
based on achievement of performance goals and/or future service
requirements), separately or in combination, in installments or otherwise,
and under such other circumstances as the Committee may determine at the
date of grant or thereafter. Deferred Stock may be satisfied by delivery of
Stock, other Awards, or a combination thereof (subject to Section 11(k)),
as determined by the Committee at the date of grant or thereafter.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service during the applicable deferral period
or portion thereof to which forfeiture conditions apply (as provided in the
Award document evidencing the Deferred Stock), all Deferred Stock that is
at that time subject to such forfeiture conditions shall be forfeited;
provided that the Committee may provide, by rule or regulation or in any
Award document, or may determine in any individual case, that restrictions
or forfeiture conditions relating to Deferred Stock will lapse in whole or
in part, including in the event of terminations resulting from specified
causes.
(iii) Dividend Equivalents. Unless otherwise determined by the
Committee, Dividend Equivalents on the specified number of shares of Stock
covered by an Award of Deferred Stock shall be either (A) paid with respect
to such Deferred Stock at the dividend payment date in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such Deferred Stock, either as a
cash deferral or with the amount or value thereof automatically deemed
reinvested in additional Deferred Stock, other Awards or other investment
vehicles having a Fair Market Value equal to the amount of such dividends,
as the Committee shall determine or permit a Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of obligations of the Company or a subsidiary or affiliate to pay cash or
deliver other property under the Plan or under other plans or compensatory
arrangements, subject to such terms as shall be determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Stock,
other Awards, or other property equivalent to all or a portion of the dividends
paid with respect to a specified number of shares of Stock. Dividend Equivalents
may be awarded on a freestanding basis or in connection with another Award. The
Committee may provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional Stock,
Awards, or other investment vehicles, and subject to restrictions on
transferability, risks of forfeiture and such other terms as the Committee may
specify.
(h) Other StockBased Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock or factors that may influence
the value of Stock, including, without limitation, convertible or exchangeable
debt securities, other rights convertible or exchangeable into Stock, purchase
rights for Stock, Awards with
-8-
value and payment contingent upon performance of the Company or business
units thereof or any other factors designated by the Committee, and Awards
valued by reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries or affiliates or other
business units. The Committee shall determine the terms and conditions of
such Awards. Stock delivered pursuant to an Award in the nature of a
purchase right granted under this Section 6(h) shall be purchased for such
consideration, paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Stock, other Awards, notes, or other
property, as the Committee shall determine. Cash awards, as an element of
or supplement to any other Award under the Plan, may also be granted
pursuant to this Section 6(h).
(i) Performance Awards. Performance Awards, denominated in cash or in
Stock or other Awards, may be granted by the Committee in accordance with
Section 7.
7. Performance Awards, Including Annual Incentive Awards.
(a) Performance Awards Generally. The Committee is authorized to grant
Performance Awards on the terms and conditions specified in this Section 7.
Performance Awards may be denominated as a cash amount, number of shares of
Stock, or specified number of other Awards (or a combination) which may be
earned upon achievement or satisfaction of performance conditions specified
by the Committee. In addition, the Committee may specify that any other
Award shall constitute a Performance Award by conditioning the right of a
Participant to exercise the Award or have it settled, and the timing
thereof, upon achievement or satisfaction of such performance conditions as
may be specified by the Committee. The Committee may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion to
reduce or increase the amounts payable under any Award subject to
performance conditions, except as limited under Sections 7(b) and 7(c) in
the case of a Performance Award intended to qualify as "performance-based
compensation" under Code Section 162(m).
(b) Performance Awards Granted to Covered Employees. If the Committee
determines that a Performance Award to be granted to an Eligible Person who
is designated by the Committee as likely to be a Covered Employee should
qualify as "performance-based compensation" for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Performance Award
shall be contingent upon achievement of a preestablished performance goal
and other terms set forth in this Section 7(b).
(i) Performance Goal Generally. The performance goal for such
Performance Awards shall consist of one or more business criteria and
a targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this Section
7(b). The performance goal shall be objective and shall otherwise meet
the requirements of Code Section 162(m) and regulations thereunder
(including Regulation 1.16227 and successor regulations thereto),
including the requirement that the level or levels of performance
targeted by the Committee result in the achievement of performance
goals being "substantially uncertain." The Committee may determine
that such Performance Awards shall be granted, exercised and/or
settled upon achievement of any one performance goal or that two or
more of the performance goals must be achieved as a condition to
grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.
(ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or for
specified subsidiaries or affiliates, other business units, or lines
of business of the Company shall be used by the Committee in
establishing performance goals for such Performance Awards: (1)
insurance premiums written, contract deposits, contract charges
earned, or contracts in force; (2) operating income, before or after
taxes, and income before or after interest, depreciation,
amortization, or extraordinary or special items; (3) operating
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income per common share (basic or diluted), and operating income from
continuing operations per common share (basic or diluted); (4) return
on equity, return on assets (gross or net), return on investment, or
return on capital; (5) cash flow, free cash flow, cash flow return on
investment (discounted or otherwise), net cash provided by operations,
or cash flow in excess of cost of capital; (6) net interest margin or
interest expense after taxes; (7) accumulated value and accumulated
value persistency; (8) net investment income and realized investment
gains (including on a per share basis); (9) economic value created;
(10) operating margin or profit margin; (11) restructuring charges,
litigation charges, or expense ratios; (12) stock price or total
shareholder return; (13) dividends, including as a percentage of net
income; and (14) strategic business criteria, consisting of one or
more objectives based on meeting specified market penetration,
geographic business expansion goals, cost targets, customer
satisfaction, employee satisfaction, management of employment
practices and employee benefits, supervision of litigation and
information technology, and goals relating to acquisitions or
divestitures of subsidiaries, affiliates or joint ventures. The
targeted level or levels of performance with respect to such business
criteria may be established at such levels and in such terms as the
Committee may determine, in its discretion, including in absolute
terms, as a goal relative to performance in prior periods, or as a
goal compared to the performance of one or more comparable companies
or an index covering multiple companies.
(iii) Performance Period; Timing for Establishing Performance
Goals; Per-Person Limit. Achievement of performance goals in respect
of such Performance Awards shall be measured over a performance period
of up to one year or more than one year, as specified by the
Committee. A performance goal shall be established not later than the
earlier of (A) 90 days after the beginning of any performance period
applicable to such Performance Award or (B) the time 25% of such
performance period has elapsed. In all cases, the maximum Performance
Award of any Participant shall be subject to the limitation set forth
in Section 5.
(iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes
of measuring performance of the Company in connection with Performance
Awards. The amount of such Performance Award pool shall be based upon
the achievement of a performance goal or goals based on one or more of
the business criteria set forth in Section 7(b)(ii) during the given
performance period, as specified by the Committee in accordance with
Section 7(b)(iv). The Committee may specify the amount of the
Performance Award pool as a percentage of any of such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical
relationship to such business criteria.
(v) Settlement of Performance Awards; Other Terms. Settlement of
such Performance Awards shall be in cash, Stock, other Awards or other
property, in the discretion of the Committee. The Committee may, in
its discretion, increase or reduce the amount of a settlement
otherwise to be made in connection with such Performance Awards, but
may not exercise discretion to increase any such amount payable to a
Covered Employee in respect of a Performance Award subject to this
Section 7(b). Any settlement which changes the form of payment from
that originally specified shall be implemented in a manner such that
the Performance Award and other related Awards do not, solely for that
reason, fail to qualify as "performance-based compensation" for
purposes of Code Section 162(m). The Committee shall specify the
circumstances in which such Performance Awards shall be paid or
forfeited in the event of termination of employment by the Participant
or other event (including a Change of Control) prior to the end of a
performance period or settlement of such Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered Employees. The
Committee may grant an Annual Incentive Award to an Eligible Person who is
designated by the Committee as likely to be a Covered Employee. Such Annual
Incentive Award will be intended to qualify as "performance-
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based compensation" for purposes of Code Section 162(m), and therefore its
grant, exercise and/or settlement shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section 7(c).
(i) Grant of Annual Incentive Awards. Not later than the earlier
of 90 days after the beginning of any performance period applicable to
such Annual Incentive Award or the time 25% of such performance period
has elapsed, the Committee shall determine the Covered Employees who
will potentially receive Annual Incentive Awards, and the amount(s)
potentially payable thereunder, for that performance period. The
amount(s) potentially payable shall be based upon the achievement of a
performance goal or goals based on one or more of the business
criteria set forth in Section 7(b)(ii) in the given performance
period, as specified by the Committee. The Committee may designate an
annual incentive award pool as the means by which Annual Incentive
Awards will be measured, which pool shall conform to the provisions of
Section 7(b)(iv). In such case, the portion of the Annual Incentive
Award pool potentially payable to each Covered Employee shall be
preestablished by the Committee. In all cases, the maximum Annual
Incentive Award of any Participant shall be subject to the limitation
set forth in Section 5.
(ii) Payout of Annual Incentive Awards. After the end of each
performance period, the Committee shall determine the amount, if any,
of the Annual Incentive Award for that performance period payable to
each Participant. The Committee may, in its discretion, determine that
the amount payable to any Participant as a final Annual Incentive
Award shall be reduced from the amount of his or her potential Annual
Incentive Award, including a determination to make no final Award
whatsoever, but may not exercise discretion to increase any such
amount. The Committee shall specify the circumstances in which an
Annual Incentive Award shall be paid or forfeited in the event of
termination of employment by the Participant or other event (including
a Change of Control) prior to the end of a performance period or
settlement of such Annual Incentive Award.
(d) Written Determinations. Determinations by the Committee as to the
establishment of performance goals, the amount potentially payable in respect of
Performance Awards and Annual Incentive Awards, the level of actual achievement
of the specified performance goals relating to Performance Awards and Annual
Incentive Awards, and the amount of any final Performance Award and Annual
Incentive Award shall be recorded in writing in the case of Performance Awards
intended to qualify under Section 162(m). Specifically, the Committee shall
certify in writing, in a manner conforming to applicable regulations under
Section 162(m), prior to settlement of each such Award granted to a Covered
Employee, that the performance objective relating to the Performance Award and
other material terms of the Award upon which settlement of the Award was
conditioned have been satisfied.
8. Certain Provisions Applicable to Awards.
(a) Stand Alone, Additional, Tandem, and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution or exchange for, any other
Award or any award granted under another plan of the Company, any subsidiary or
affiliate, or any business entity to be acquired by the Company or a subsidiary
or affiliate, or any other right of a Participant to receive payment from the
Company or any subsidiary or affiliate. Awards granted in addition to or in
tandem with other Awards or awards may be granted either as of the same time as
or a different time from the grant of such other Awards or awards. Subject to
Section 11(k), the Committee may determine that, in granting a new Award, the
in-the-money value of any surrendered Award or award may be applied to reduce
the exercise price of any Option, grant price of any SAR, or purchase price of
any other Award.
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(b) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee, subject to the express
limitations set forth in Section 6(b)(ii).
(c) Form and Timing of Payment under Awards; Deferrals. Subject to
the terms of the Plan (including Section 11(k)) and any applicable Award
document, payments to be made by the Company or a subsidiary or affiliate
upon the exercise of an Option or other Award or settlement of an Award
may be made in such forms as the Committee shall determine, including,
without limitation, cash, Stock, other Awards or other property, and may
be made in a single payment or transfer, in installments, or on a
deferred basis. The settlement of any Award may be accelerated, and cash
paid in lieu of Stock in connection with such settlement, in the
discretion of the Committee or upon occurrence of one or more specified
events (subject to Section 11(k)). Installment or deferred payments may
be required by the Committee (subject to Section 11(e)) or permitted at
the election of the Participant on terms and conditions established by
the Committee. Payments may include, without limitation, provisions for
the payment or crediting of reasonable interest on installment or
deferred payments or the grant or crediting of Dividend Equivalents or
other amounts in respect of installment or deferred payments denominated
in Stock.
(d) Exemptions from Section 16(b) Liability. With respect to a
Participant who is then subject to the reporting requirements of Section
16(a) of the Exchange Act in respect of the Company, the Committee shall
implement transactions under the Plan and administer the Plan in a manner
that will ensure that each transaction with respect to such a Participant
is exempt from liability under Rule 16b-3 or otherwise not subject to
liability under Section 16(b)), except that this provision shall not
limit sales by such a Participant, and such a Participant may engage in
other non-exempt transactions under the Plan. The Committee may authorize
the Company to repurchase any Award or shares of Stock deliverable or
delivered in connection with any Award (subject to Section 11(k)) in
order to avoid a Participant who is subject to Section 16 of the Exchange
Act incurring liability under Section 16(b). Unless otherwise specified
by the Participant, equity securities or derivative securities acquired
under the Plan which are disposed of by a Participant shall be deemed to
be disposed of in the order acquired by the Participant.
(e) Loan Provisions. With the consent of the Committee, and
subject at all times to, and only to the extent, if any, permitted under
and in accordance with, laws and regulations and other binding
obligations or provisions applicable to the Company, the Company may
make, guarantee, or arrange for a loan or loans to a Participant with
respect to the exercise of any Option or other payment in connection with
any Award, including the payment by a Participant of any or all federal,
state, or local income or other taxes due in connection with any Award.
Subject to such limitations, the Committee shall have full authority to
decide whether to make a loan or loans hereunder and to determine the
amount, terms, and provisions of any such loan or loans, including the
interest rate, if any, to be charged in respect of any such loan or
loans, whether the loan or loans are to be with or without recourse
against the borrower, the terms on which the loan is to be repaid and
conditions, if any, under which the loan or loans may be forgiven.
9. Change of Control.
(a) Effect of "Change of Control" on Non-Performance Based Awards.
In the event of a "Change of Control," the provisions of this Section
9(a) shall apply to non-performance based Awards, including Awards as to
which performance conditions previously have been satisfied or are deemed
satisfied under Section 9(b) and the applicable terms of the Award
agreement, unless otherwise provided by the Committee in the Award
agreement. In such case, if a Participant has a termination of employment
or service during the period commencing immediately prior to the Change
of Control and ending on the first anniversary of the Change of Control
("Change of Control Period"), which termination is initiated by the
Company or a subsidiary other than for Cause (as defined below), then:
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(i) Any Award subject to forfeiture based on failure to
satisfy a condition requiring continued employment or service
shall thereupon become nonforfeitable;
(ii) Any Award (other than an Award the exercise of which
is within the control of the Participant without penalty,
including under subparagraph (iii) hereof) subject to deferral of
settlement shall be settled as promptly as practicable upon such
termination;
(iii) Any unexercised Option or SAR or other Award
potentially exercisable by the Participant, whether or not
exercisable by its terms on the date of such termination, shall
thereupon be fully exercisable and may be exercised, in whole or
in part for the greater of three (3) months following such
termination or such longer period as may be provided under the
applicable Option agreement (but only during the stated term of
the Option);
(b) Effect of "Change of Control" on Performance-Based Awards. In
the event of a "Change of Control," with respect to an outstanding Award
subject to achievement of performance goals and conditions, such
performance goals and conditions shall be deemed to be met or exceeded if
and to the extent so provided by the Committee in the Award document
governing such Award or other agreement with the Participant.
(c) "Cause." For purposes of this Section 9, the term "Cause"
shall mean, unless otherwise defined in an Award agreement or employment
or Change-of-Control agreement between the Company or a subsidiary and
the Participant then in effect:
(i) A Participant's conviction of any felony under federal
law or the law of the state in which the act occurred;
(ii) Dishonesty by the Participant in the course of
fulfilling his or her employment duties or service duties to the
Company or a subsidiary; or
(iii) Willful and deliberate failure on the part of the
Participant to perform his or her employment or service duties to
the Company or a subsidiary in any material respect, after
reasonable notice of the non-performance and opportunity to
correct it.
10. Additional Award Forfeiture Provisions. The Committee may condition a
Participant's right to receive a grant of an Award, to exercise the Award, to
retain Stock acquired in connection with an Award, or to retain the profit or
gain realized by a Participant in connection with an Award, including cash
received upon sale of Stock acquired in connection with an Award, upon
compliance by the Participant with specified conditions relating to
non-competition, confidentiality of information relating to the Company,
non-solicitation of customers, suppliers, and employees of the Company,
cooperation in litigation, non-disparagement of the Company and its officers,
directors and affiliates, and other requirements applicable to the Participant,
including during specified periods following termination of employment or
service to the Company.
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11. General Provisions.
(a) Compliance with Legal and Other Requirements. The Company may,
to the extent deemed necessary or advisable by the Committee, postpone
the issuance or delivery of Stock or payment of other benefits under any
Award until completion of such registration or qualification of such
Stock or other required action under any federal or state law, rule or
regulation, listing or other required action with respect to any stock
exchange or automated quotation system upon which the Stock or other
securities of the Company are listed or quoted, or compliance with any
other obligation of the Company, as the Committee may consider
appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject
to such other conditions as it may consider appropriate in connection
with the issuance or delivery of Stock or payment of other benefits in
compliance with applicable laws, rules, and regulations, listing
requirements, or other obligations. The foregoing notwithstanding, in
connection with a Change of Control, the Company shall take or cause to
be taken no action, and shall undertake or permit to arise no legal or
contractual obligation, that results or would result in any postponement
of the issuance or delivery of Stock or payment of benefits under any
Award or the imposition of any other conditions on such issuance,
delivery or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than existed
on the 90th day preceding the Change of Control.
(b) Limits on Transferability; Beneficiaries. No Award or other
right or interest of a Participant under the Plan shall be pledged,
hypothecated or otherwise encumbered or subject to any lien, obligation
or liability of such Participant to any party (other than the Company or
a subsidiary or affiliate thereof), or assigned or transferred by such
Participant otherwise than by will or the laws of descent and
distribution or to a Beneficiary upon the death of a Participant, and
such Awards or rights that may be exercisable shall be exercised during
the lifetime of the Participant only by the Participant or his or her
guardian or legal representative, except that Awards and other rights
(other than ISOs and SARs in tandem therewith) may be transferred to one
or more transferees during the lifetime of the Participant, and may be
exercised by such transferees in accordance with the terms of such Award,
but only if and to the extent such transfers are permitted by the
Committee, subject to any terms and conditions which the Committee may
impose thereon (including limitations the Committee may deem appropriate
in order that offers and sales under the Plan will meet applicable
requirements of registration forms under the Securities Act of 1933
specified by the Securities and Exchange Commission). A Beneficiary,
transferee, or other person claiming any rights under the Plan from or
through any Participant shall be subject to all terms and conditions of
the Plan and any Award document applicable to such Participant, except as
otherwise determined by the Committee, and to any additional terms and
conditions deemed necessary or appropriate by the Committee.
(c) Adjustments. In the event that any large, special and
non-recurring dividend or other distribution (whether in the form of cash
or property other than Stock), recapitalization, forward or reverse
split, Stock dividend, reorganization, merger, consolidation, spinoff,
combination, repurchase, share exchange, liquidation, dissolution or
other similar corporate transaction or event affects the Stock such that
an adjustment is determined by the Committee to be appropriate under the
Plan, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of (i) the number and kind of shares of Stock which may
be delivered in connection with Awards granted thereafter, (ii) the
number and kind of shares of Stock by which annual per person Award
limitations are measured under Section 5, (iii) the number and kind of
shares of Stock subject to or deliverable in respect of outstanding
Awards and (iv) the exercise price, grant price or purchase price
relating to any Award or, if deemed appropriate, the Committee may make
provision for a payment of cash or property to the holder of an
outstanding Option (subject to Section 11(k)). In addition, the Committee
is authorized to make adjustments in the terms and conditions of, and the
criteria included in, Awards (including Performance Awards and
performance goals and any hypothetical funding pool relating thereto) in
recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence, as well as
acquisitions and dispositions of businesses and assets) affecting the
Company, any subsidiary or affiliate or other business unit, or the
financial statements of the Company
-14-
or any subsidiary or affiliate, or in response to changes in applicable
laws, regulations, accounting principles, tax rates and regulations or
business conditions or in view of the Committee's assessment of the
business strategy of the Company, any subsidiary or affiliate or business
unit thereof, performance of comparable organizations, economic and
business conditions, personal performance of a Participant, and any other
circumstances deemed relevant; provided that no such adjustment shall be
authorized or made if and to the extent that the existence of such
authority (i) would cause Options, SARs, or Performance Awards granted
under Section 8 to Participants designated by the Committee as Covered
Employees and intended to qualify as "performance-based compensation"
under Code Section 162(m) and regulations thereunder to otherwise fail to
qualify as "performance-based compensation" under Code Section 162(m) and
regulations thereunder, or (ii) would cause the Committee to be deemed to
have authority to change the targets, within the meaning of Treasury
Regulation 1.162-27(e)(4)(vi), under the performance goals relating to
Options or SARs granted to Covered Employees and intended to qualify as
"performance-based compensation" under Code Section 162(m) and
regulations thereunder.
(d) Tax Provisions.
(i) Withholding. The Company and any subsidiary or affiliate
is authorized to withhold from any Award granted, any payment
relating to an Award under the Plan, including from a distribution
of Stock, or any payroll or other payment to a Participant,
amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take
such other action as the Committee may deem advisable to enable
the Company and Participants to satisfy obligations for the
payment of withholding taxes and other tax obligations relating to
any Award. This authority shall include authority to withhold or
receive Stock or other property and to make cash payments in
respect thereof in satisfaction of a Participant's withholding
obligations, either on a mandatory or elective basis in the
discretion of the Committee. Other provisions of the Plan
notwithstanding, only the minimum amount of Stock deliverable in
connection with an Award necessary to satisfy statutory
withholding requirements will be withheld.
(ii) Required Consent to and Notification of Code Section
83(b) Election. No election under Section 83(b) of the Code (to
include in gross income in the year of transfer the amounts
specified in Code Section 83(b)) or under a similar provision of
the laws of a jurisdiction outside the United States may be made
unless expressly permitted by the terms of the Award document or
by action of the Committee in writing prior to the making of such
election. In any case in which a Participant is permitted to make
such an election in connection with an Award, the Participant
shall notify the Company of such election within ten days of
filing notice of the election with the Internal Revenue Service or
other governmental authority, in addition to any filing and
notification required pursuant to regulations issued under Code
Section 83(b) or other applicable provision.
(iii) Requirement of Notification Upon Disqualifying
Disposition Under Code Section 421(b). If any Participant shall
make any disposition of shares of Stock delivered pursuant to the
exercise of an Incentive Stock Option under the circumstances
described in Code Section 421(b) (relating to certain
disqualifying dispositions), such Participant shall notify the
Company of such disposition within ten days thereof.
(e) Changes to the Plan. The Board may amend, suspend or terminate
the Plan or the Committee's authority to grant Awards under the Plan
without the consent of shareholders or Participants; provided, however,
that any amendment to the Plan shall be submitted to the Company's
shareholders for approval not later than the earliest annual meeting for
which the record date is after the date of such Board action if the Board
determines that such shareholder approval is required by any federal or
state law or regulation or the rules of any stock exchange or automated
quotation system on which the Stock may then be listed or quoted, and the
Board may otherwise, in its
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discretion, determine to submit other amendments to the Plan to
shareholders for approval; and provided further, that, without the
consent of an affected Participant, no such Board action may materially
and adversely affect the rights of such Participant under any outstanding
Award. Without the approval of shareholders, the Committee will not amend
or replace previously granted Options in a transaction that constitutes a
"repricing," as such term is used in Instruction 3 to Item 402(b)(2)(iv)
of Regulation S-K, as promulgated by the Securities and Exchange
Commission. With regard to other terms of Awards, the Committee shall
have no authority to waive or modify any such Award term after the Award
has been granted to the extent the waived or modified term would be
mandatory under the Plan for any Award newly granted at the date of the
waiver or modification.
(f) Right of Setoff. The Company or any subsidiary or affiliate
may, to the extent permitted by applicable law, deduct from and set off
against any amounts the Company or a subsidiary or affiliate may owe to
the Participant from time to time, including amounts payable in
connection with any Award, owed as wages, fringe benefits, or other
compensation owed to the Participant, such amounts as may be owed by the
Participant to the Company, including but not limited to amounts owed
under Section 10, although the Participant shall remain liable for any
part of the Participant's payment obligation not satisfied through such
deduction and setoff. By accepting any Award granted hereunder, the
Participant agrees to any deduction or setoff under this Section 11(f).
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
or obligation to deliver Stock pursuant to an Award, nothing contained in
the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company; provided that
the Committee may authorize the creation of trusts and deposit therein
cash, Stock, other Awards or other property, or make other arrangements
to meet the Company's obligations under the Plan. Such trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan
unless the Committee otherwise determines with the consent of each
affected Participant.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan
by the Board nor its submission to the shareholders of the Company for
approval shall be construed as creating any limitations on the power of
the Board or a committee thereof to adopt such other incentive
arrangements, apart from the Plan, as it may deem desirable, including
incentive arrangements and awards which do not qualify under Code Section
162(m), and such other arrangements may be either applicable generally or
only in specific cases.
(i) Payments in the Event of Forfeitures; Fractional Shares.
Unless otherwise determined by the Committee, in the event of a
forfeiture of an Award with respect to which a Participant paid cash
consideration, the Participant shall be repaid the amount of such cash
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether
cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
(j) Compliance with Code Section 162(m). It is the intent of the
Company that Options and SARs granted to Covered Employees and other
Awards designated as Awards to Covered Employees subject to Section 7
shall constitute qualified "performance-based compensation" within the
meaning of Code Section 162(m) and regulations thereunder, unless
otherwise determined by the Committee at the time of allocation of an
Award. Accordingly, the terms of Sections 7(b), (c), and (d), including
the definitions of Covered Employee and other terms used therein, shall
be interpreted in a manner
-16-
consistent with Code Section 162(m) and regulations thereunder. The
foregoing notwithstanding, because the Committee cannot determine with
certainty whether a given Participant will be a Covered Employee with
respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by
the Committee as likely to be a Covered Employee with respect to a
specified fiscal year. If any provision of the Plan or any Award document
relating to a Performance Award that is designated as intended to comply
with Code Section 162(m) does not comply or is inconsistent with the
requirements of Code Section 162(m) or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements, and no provision shall be deemed to confer
upon the Committee or any other person discretion to increase the amount
of compensation otherwise payable in connection with any such Award upon
attainment of the applicable performance objectives.
(k) Certain Limitations Relating to Accounting Treatment of
Awards. The Company intends that stock-denominated Awards (other than
SARs) will qualify for fixed accounting under Accounting Principles Board
Opinion 25 ("APB 25"), with the compensation measurement date for
accounting purposes to occur at the date of grant or the date performance
conditions are met if an Award is fully contingent on achievement of
performance goals, unless the Committee specifically determines
otherwise. Therefore, other provisions of the Plan notwithstanding, in
order to preserve this fundamental objective of the Plan, if any
authority granted to the Committee hereunder or any provision of the Plan
or an Award agreement would result, under APB 25, in "variable"
accounting or a measurement date other than the date of grant or the date
such performance conditions are met, if the Committee was not
specifically aware of such accounting consequence at the time such Award
was granted or provision otherwise became effective, such authority shall
be limited and such provision shall be automatically modified and
reformed to the extent necessary to preserve the accounting treatment of
the award intended by the Committee, subject to Section 11(e) of the
Plan.
(l) Governing Law. The validity, construction, and effect of the
Plan, any rules and regulations relating to the Plan and any Award
document shall be determined in accordance with the laws of the State of
New York, without giving effect to principles of conflicts of laws, and
applicable provisions of federal law.
(m) Awards to Participants Outside the United States. The
Committee may modify the terms of any Award under the Plan made to or
held by a Participant who is then resident or primarily employed outside
of the United States in any manner deemed by the Committee to be
necessary or appropriate in order that such Award shall conform to laws,
regulations, and customs of the country in which the Participant is then
resident or primarily employed, or so that the value and other benefits
of the Award to the Participant, as affected by foreign tax laws and
other restrictions applicable as a result of the Participant's residence
or employment abroad shall be comparable to the value of such an Award to
a Participant who is resident or primarily employed in the United States.
An Award may be modified under this Section 11(m) in a manner that is
inconsistent with the express terms of the Plan, so long as such
modifications will not contravene any applicable law or regulation or
result in actual liability under Section 16(b) for the Participant whose
Award is modified.
(n) Limitation on Rights Conferred under Plan. Neither the Plan
nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible
Person or Participant or in the employ or service of the Company or a
subsidiary or affiliate, (ii) interfering in any way with the right of
the Company or a subsidiary or affiliate to terminate any Eligible
Person's or Participant's employment or service at any time, (iii) giving
an Eligible Person or Participant any claim to be granted any Award under
the Plan or to be treated uniformly with other Participants and
employees, or (iv) conferring on a Participant any of the rights of a
shareholder of the
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Company unless and until the Participant is duly issued or transferred
shares of Stock in accordance with the terms of an Award or an Option is
duly exercised. Except as expressly provided in the Plan and an Award
document, neither the Plan nor any Award document shall confer on any
person other than the Company and the Participant any rights or remedies
thereunder.
(o) Severability; Entire Agreement. If any of the provisions of
this Plan or any Award document is finally held to be invalid, illegal or
unenforceable (whether in whole or in part), such provision shall be
deemed modified to the extent, but only to the extent, of such
invalidity, illegality or unenforceability, and the remaining provisions
shall not be affected thereby; provided, that, if any of such provisions
is finally held to be invalid, illegal, or unenforceable because it
exceeds the maximum scope determined to be acceptable to permit such
provision to be enforceable, such provision shall be deemed to be
modified to the minimum extent necessary to modify such scope in order to
make such provision enforceable hereunder. The Plan and any Award
documents contain the entire agreement of the parties with respect to the
subject matter thereof and supersede all prior agreements, promises,
covenants, arrangements, communications, representations and warranties
between them, whether written or oral with respect to the subject matter
thereof.
(p) Preexisting Plans. Upon shareholder approval of the Plan as
provided under Section 11(q), no further grants of Awards will be made
under any Preexisting Plan.
(q) Plan Effective Date and Termination. The Plan shall become
effective at March 6, 2002, provided, however, that the Plan shall be
subject to the approval of the Company's stockholders within one year
thereafter by the affirmative vote of the holders of a majority of the
voting securities of the Company present, or represented, and entitled to
vote on the subject matter at a duly held meeting of shareholders. Any
Award authorized or granted prior to such shareholder approval shall be
canceled or forfeited if, upon submission to shareholders, the Plan is
disapproved, and not amounts may be paid out under any such Award prior
to the requisite shareholder approval. Unless earlier terminated by
action of the Board of Directors, the Plan will remain in effect until
such time as no Stock remains available for delivery under the Plan and
the Company has no further rights or obligations under the Plan with
respect to outstanding Awards under the Plan.
-18-
Exhibit 10.2(a)
Form of Employee Option Agreement
- Performance Accelerated ISO --
Under 2002 Incentive Compensation Plan
HORACE MANN EDUCATORS CORPORATION
2002 Incentive Compensation Plan
Stock Option Agreement
This Stock Option Agreement (the "Agreement") confirms the grant on
_________ __, ____ (the "Grant Date") by HORACE MANN EDUCATORS CORPORATION, a
Delaware corporation (the "Company"), to _______________ ("Employee") of an
incentive stock option (the "Option") to purchase shares of Common Stock, par
value $.001 per share (the "Shares"), as follows:
Shares purchasable: ________________ Shares
Exercise Price: $______________ per Share
Option vests and becomes exercisable: As to all of the Shares on
__________, ____; provided that portions of the Option will vest and
become cumulatively exercisable ("Accelerated Vesting") if and to the
extent that the performance goals set forth under the Company's
Long-Term Incentive Plan have been achieved for the specified
performance year. As specified on Attachment A hereto, for each year in
the period ____ - ____, a level of achievement of performance targets,
based __% on_________________ and __% on ____________________, will be
determined by the Committee. This level of achievement (the
"Achievement Level") will be expressed as a percentage of target level
performance (blending ____ and ____ performance), ranging from __% if
the "threshold" level of performance is achieved to ____% if the
"target" level of performance is achieved to ___% if the "maximum"
level is achieved or exceeded. If the calculated Achievement Level for
any year would be less than __%, the Achievement Level will be deemed
to be __, and no Accelerated Vesting will result for that year.
Straight-line interpolation will apply if the level of achievement of
________ or _______ is less than "target," based on the "threshold" and
"target" datapoints, or between "target" and "maximum" based on those
datapoints. The Committee will determine the Achievement Level
following the completion of the audit of the Company's financial
statements for the performance year, with any resulting Accelerated
Vesting effective at the date of such determination. Committee
determinations of the Achievement Level under the Long-Term Incentive
Plan and all other matters hereunder will be final. The portion of the
Option, expressed as a percentage of the total number of Shares
purchasable under the Option, subject to Accelerated Vesting in each
year will be as follows:
Portion of Option Subject
Performance Year to Accelerated Vesting
---------------- ----------------------
____ __% times the Achievement Level
____ __% times the Achievement Level
____ __% times the Achievement Level
provided, however, that the portion of the Option subject to
Accelerated Vesting in ____ in no event will exceed the then remaining
unvested portion of the Option. In addition to possible Accelerated
Vesting, the Option will become immediately vested and exercisable upon
the occurrence of certain events relating to Termination of Employment,
in accordance with Section 4 hereof. (Note: If the portion of this
Option and any previously granted incentive stock option which vests in
any one year has an aggregate exercise price in excess of $100,000,
that portion of this Option in excess of that $100,000 aggregate
vesting limit will not qualify as an incentive stock option but will be
treated as a vested non-qualified stock option.)
Expiration Date: _______ __, ____ (the "Stated Expiration Date") or,
in the event Employee's employment by the Company and its subsidiaries
terminates earlier, the date the Option ceases to
1
be exercisable under Section 4 hereof.
The Option is subject to the terms and conditions of the 2002 Incentive
Compensation Plan (the "Plan") and this Agreement, including the Terms and
Conditions of Option Grant attached hereto and deemed a part hereof. The number
and kind of shares purchasable, the Exercise Price, and other terms and
conditions are subject to adjustment in accordance with Section 11(c) of the
Plan.
Employee acknowledges and agrees that (i) the Option is
nontransferable, except as provided in Section 6 hereof and Section 11(b) of the
Plan, (ii) the Option is subject to forfeiture in the event of Employee's
termination of employment in certain circumstances, as specified in Section 4
hereof, and (iii) sales of Shares will be subject to the Company's policies
regulating trading by employees.
IN WITNESS WHEREOF, HORACE MANN EDUCATORS CORPORATION has caused this
Agreement to be executed by its officer thereunto duly authorized.
HORACE MANN EDUCATORS
CORPORATION
By:_____________________
[Name]
[Title]
2
TERMS AND CONDITIONS OF OPTION GRANT
The following Terms and Conditions apply to the Option granted to
Employee by HORACE MANN EDUCATORS CORPORATION (the "Company"), as specified on
the preceding page. Certain specific terms of the Option, including the number
of shares purchasable, vesting and Expiration Date, and Exercise Price, are set
forth on the preceding page.
1. General. The Option is granted to Employee under the Company's 2002
Incentive Compensation Plan (the "Plan"), which has been previously delivered to
Employee and/or is available upon request to the Corporate Benefits Department.
All of the applicable terms, conditions and other provisions of the Plan are
incorporated by reference herein. Capitalized terms used in this Agreement but
not defined herein shall have the same meanings as in the Plan. If there is any
conflict between the provisions of this document and mandatory provisions of the
Plan, the provisions of the Plan govern. By accepting the grant of the Option,
Employee agrees to be bound by all of the terms and provisions of the Plan (as
presently in effect or later amended), the rules and regulations under the Plan
adopted from time to time, and the decisions and determinations of the
Compensation Committee of the Company's Board of Directors (the "Committee")
made from time to time. The Option is an incentive stock option as defined under
Section 422 of the Internal Revenue Code of 1986, as amended, to the maximum
extent possible, and any portion that does not so qualify is a non-qualified
stock option.
2. Right to Exercise Option. Subject to all applicable laws, rules,
regulations and the terms of the Plan and this Agreement, Employee may exercise
the Option only after the time and to the extent the Option has become vested
and exercisable and prior to the Expiration Date of the Option.
3. Method of Exercise. To exercise the Option, Employee must (a) give
written notice to the Vice President, Corporate Benefits of the Company, which
notice shall specifically refer to this Agreement, state the number of Shares as
to which the Option is being exercised, the name in which he or she wishes the
Shares to be issued, and be signed by Employee, and (b) pay in full to the
Company the Exercise Price of the Option for the number of Shares being
purchased either (i) in cash (including by check), payable in United States
dollars, (ii), by delivery of Shares already owned by Employee (which Shares
must have been held for at least six months if they were acquired under a
Company plan and are not considered to be "mature" shares for accounting
purposes) having a fair market value, determined as of the date the Option is
exercised, equal to all or the part of the aggregate Exercise Price being paid
in this way, or (iii) in any other manner then permitted by the Committee. Once
Employee gives notice of exercise, such notice may not be revoked. When Employee
exercises the Option, or part thereof, the Company will transfer Shares (or make
a non-certificated credit) to Employee's brokerage account at a designated
securities brokerage firm or otherwise deliver Shares to Employee. No Employee
or Beneficiary shall have at any time any rights with respect to Shares covered
by this Agreement prior to the valid exercise and full payment for the Shares as
specified herein, and no adjustment shall be made for dividends or other rights
for which the record date is prior to such valid exercise and payment.
4. Termination Provisions. The following provisions will govern the
vesting, exercisability and expiration of the Option in the event of termination
of Employee's employment, unless the Committee determines to provide more
favorable terms; provided, however, that the vesting, exercisability and
expiration of the Option provided under Section 9(a)(iii) of the Plan, relating
to certain Terminations following a Change of Control, shall apply to the extent
that the provisions of Section 9(a)(iii) would be more favorable to Employee,
except as limited under Subsection (h) below:
(a) Death. In the event of Employee's Termination of
Employment due to death, the Option, to the extent then outstanding,
will vest and become immediately exercisable in full, and will remain
exercisable, in accordance with Section 11(b) of the Plan, until the
earlier of one year after such death or the Stated Expiration Date.
(Note: Exercise of the option more than three months after Termination
would not qualify for favorable incentive stock option tax treatment.)
(b) Disability. In the event of Employee's Termination of
Employment due to Disability (as defined below), the Option, to the
extent then outstanding, will vest and become immediately exercisable
in full, and will remain exercisable until the earlier of one year
after such Termination of Employment or the Stated Expiration Date.
(Note: Certain Disabilities under the Plan may not
3
qualify as a "disability" under incentive stock option tax rules, so that
exercise of the option more than three months after Termination would not
qualify for favorable incentive stock option tax treatment.)
(c) Retirement. In the event of Employee's Termination of Employment
due to Retirement (as defined below), the Option, to the extent then
outstanding, will vest and become immediately exercisable in full, and will
remain exercisable until the earlier of five years after such Termination
of Employment or the Stated Expiration Date. (Note: Exercise of the option
more than three months after Termination would not qualify for favorable
incentive stock option tax treatment.)
(d) Termination by the Company Without Cause. In the event of
Employee's Termination of Employment by the Company without Cause, the
portion of the then-outstanding Option not vested and exercisable at the
date of termination will be forfeited, and any portion of the
then-outstanding Option that is vested and exercisable at the date of
termination will expire at the earlier of three months after Termination of
Employment or the Stated Expiration Date.
(e) Termination by the Company for Cause. In the event of Employee's
Termination of Employment by the Company for Cause (as defined below), the
Option, whether or not then vested and exercisable, immediately will be
forfeited and will expire.
(f) Termination by the Employee Voluntarily. In the event of
Employee's voluntary Termination of Employment, the portion of the
then-outstanding Option not vested and exercisable at the date of
termination will be forfeited, and any vested portion of the
then-outstanding Option will expire immediately at the date of Termination
of Employment.
(g) Certain Definitions. The following definitions apply for purposes
of this Agreement:
(i) "Cause" means (A) the willful and continued failure by
Employee to perform substantially his duties with the Company (other
than any such failure resulting from Employee's incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to Employee which specifically identifies the
manner in which Employee has not substantially performed his duties,
(B) the willful engagement by Employee in conduct which is not
authorized by the Board of Directors of the Company or within the
normal course of Employee's business decisions and is known by
Employee to be materially detrimental to the best interests of the
Company or any of its subsidiaries, or (C) the willful engagement by
Employee in illegal conduct or any act of serious dishonesty which
adversely affects, or, in the reasonable estimation of the Board of
Directors of the Company, could in the future adversely affect, the
value, reliability or performance of Employee to the Company in a
material manner. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board of Directors
of the Company or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by
Employee in good faith and in the best interests of the Company. The
foregoing notwithstanding, in any case governed by Section 9 of the
Plan (following a Change of Control), the definition set forth in
Section 9(c) of the Plan shall govern.
(ii) "Disability" means a disability entitling the Employee to
long-term disability benefits under the Company's long-term disability
policy as in effect at the date of Employee's Termination of
Employment.
(iii) "Retirement" means retirement from active employment with
the Company or a subsidiary pursuant to the early or normal retirement
provisions of the Company's or the subsidiary's qualified retirement
plan.
(iv) "Termination of Employment" means the earliest time at
which Employee is not employed by the Company or a subsidiary of the
Company and is not serving as a
4
non-employee director of the Company or a subsidiary of the Company.
(h) Limitation on Acceleration of Certain Options Upon Termination
Following a Change of Control. In the event of a Termination of
Employment of Employee following a Change of Control, if Section
9(a)(iii) of the Plan or any other provision (an "Enhancement Provision")
would apply so as to accelerate vesting of the Option or otherwise
enhance the rights of Employee with respect to the exercise or expiration
of the Option, and if Employee will be subject to a golden parachute
excise tax under Section 4999 of the Internal Revenue Code (regardless of
any rights to a gross-up payment from the Company or any other party),
and if the amount of "parachute payments" resulting from the Enhancement
Provision exceeds the intrinsic value of the Option (i.e., the "spread")
at the date parachute payments would be measured for purposes of Section
4999, then the Enhancement Provision shall not apply to the Option except
to the extent (if any) possible without Employee becoming subject to the
golden parachute excise tax under Section 4999.
5. Employee Representations and Warranties Upon Exercise. As a condition
to the exercise of the Option, the Company may require Employee to make any
representation or warranty to the Company as may be required under any
applicable law or regulation.
6. Nontransferability. Employee may not transfer the Option or any
rights thereunder to any third party other than by will or the laws of descent
and distribution, and, during Employee's lifetime, only Employee or his or her
duly appointed guardian or legal representative may exercise the Option, except
for transfers to a Beneficiary in the event of death or as otherwise permitted
and subject to the conditions under Section 11(b) of the Plan (note: these
exceptions do not apply to portions of the Option that are incentive stock
options).
7. Miscellaneous.
(a) Binding Agreement; Written Amendments. This Agreement shall be
binding upon the heirs, executors, administrators and successors of the
parties. This Agreement constitutes the entire agreement between the
parties with respect to the Option, and supersedes any prior agreements
or documents with respect to the Option. No amendment or alteration of
this Agreement which may impose any additional obligation upon the
Company shall be valid unless expressed in a written instrument duly
executed in the name of the Company, and no amendment, alteration,
suspension or termination of this Agreement which may materially impair
the rights of Employee with respect to the Option shall be valid unless
expressed in a written instrument executed by Employee.
(b) No Promise of Employment. The Option and the granting thereof
shall not constitute or be evidence of any agreement or understanding,
express or implied, that Employee has a right to continue as an officer
or employee of the Company for any period of time, or at any particular
rate of compensation.
(c) Governing Law. The validity, construction, and effect of this
agreement shall be determined in accordance with the laws (including
those governing contracts) of the state of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal law.
(d) Notices. Any notice to be given the Company under this Agreement
shall be addressed to the Company at its principal executive offices, in
care of the Vice President, Corporate Benefits, and any notice to the
Employee shall be addressed to the Employee at Employee's address as then
appearing in the records of the Company.
5
Attachment A
CORPORATE PERFORMANCE MEASURES
FOR THE LONG TERM INCENTIVE PLAN
Note: Threshold payout is at __%. Target payout is at ___%. Maximum is at____%.
6
Exhibit 10.2(b)
Form of Regular Employee Option
Agreement - ISO w/ standard vesting
-- Under 2002 Incentive Compensation Plan
HORACE MANN EDUCATORS CORPORATION
2002 Incentive Compensation Plan
Stock Option Agreement
This Stock Option Agreement (the "Agreement") confirms the grant on
_________ __, ____ (the "Grant Date") by HORACE MANN EDUCATORS CORPORATION, a
Delaware corporation (the "Company"), to ____________ ("Employee") of an
incentive stock option (the "Option") to purchase shares of Common Stock, par
value $.001 per share (the "Shares"), as follows:
Shares purchasable: _____________ Shares
Exercise Price: $____________ per Share
Option vests and becomes exercisable: As to __% of the Shares on the
Grant Date and thereafter as to __% of the Shares, cumulatively, on
each of the first, second, and third anniversaries of the Grant Date
(rounded to the nearest whole share). In addition, the Option will
become immediately vested and exercisable upon the occurrence of
certain events relating to Termination of Employment, in accordance
with Section 4 hereof. (Note: If the portion of this Option and any
previously granted incentive stock option which vests in any one year
has an aggregate exercise price in excess of $100,000, that portion of
this Option in excess of that $100,000 aggregate vesting limit will not
qualify as an incentive stock option but will be treated as a vested
non-qualified stock option.)
Expiration Date: _______ __, ___ (the "Stated Expiration Date") or, in
the event Employee's employment by the Company and its subsidiaries
terminates earlier, the date the Option ceases to be exercisable under
Section 4 hereof.
The Option is subject to the terms and conditions of the 2002 Incentive
Compensation Plan (the "Plan") and this Agreement, including the Terms and
Conditions of Option Grant attached hereto and deemed a part hereof. The number
and kind of shares purchasable, the Exercise Price, and other terms and
conditions are subject to adjustment in accordance with Section 11(c) of the
Plan.
Employee acknowledges and agrees that (i) the Option is
nontransferable, except as provided in Section 6 hereof and Section 11(b) of the
Plan, (ii) the Option is subject to forfeiture in the event of Employee's
termination of employment in certain circumstances, as specified in Section 4
hereof, and (iii) sales of Shares will be subject to the Company's policies
regulating trading by employees.
IN WITNESS WHEREOF, HORACE MANN EDUCATORS CORPORATION has caused this
Agreement to be executed by its officer thereunto duly authorized.
HORACE MANN EDUCATORS CORPORATION
By:_______________________________
[Name]
[Title]
TERMS AND CONDITIONS OF OPTION GRANT
The following Terms and Conditions apply to the Option granted to
Employee by HORACE MANN EDUCATORS CORPORATION (the "Company"), as specified on
the preceding page. Certain specific terms of the Option, including the number
of shares purchasable, vesting and Expiration Date, and Exercise Price, are set
forth on the preceding page.
1. General. The Option is granted to Employee under the Company's 2002
Incentive Compensation Plan (the "Plan"), which has been previously delivered to
Employee and/or is available upon request to the Corporate Benefits Department.
All of the applicable terms, conditions and other provisions of the Plan are
incorporated by reference herein. Capitalized terms used in this Agreement but
not defined herein shall have the same meanings as in the Plan. If there is any
conflict between the provisions of this document and mandatory provisions of the
Plan, the provisions of the Plan govern. By accepting the grant of the Option,
Employee agrees to be bound by all of the terms and provisions of the Plan (as
presently in effect or later amended), the rules and regulations under the Plan
adopted from time to time, and the decisions and determinations of the
Compensation Committee of the Company's Board of Directors (the "Committee")
made from time to time. The Option is an incentive stock option as defined under
Section 422 of the Internal Revenue Code of 1986, as amended, to the maximum
extent possible, and any portion that does not so qualify is a non-qualified
stock option.
2. Right to Exercise Option. Subject to all applicable laws, rules,
regulations and the terms of the Plan and this Agreement, Employee may exercise
the Option only after the time and to the extent the Option has become vested
and exercisable and prior to the Expiration Date of the Option.
3. Method of Exercise. To exercise the Option, Employee must (a) give
written notice to the Vice President, Corporate Benefits of the Company, which
notice shall specifically refer to this Agreement, state the number of Shares as
to which the Option is being exercised, the name in which he or she wishes the
Shares to be issued, and be signed by Employee, and (b) pay in full to the
Company the Exercise Price of the Option for the number of Shares being
purchased either (i) in cash (including by check), payable in United States
dollars, (ii), by delivery of Shares already owned by Employee (which Shares
must have been held for at least six months if they were acquired under a
Company plan and are not considered to be "mature" shares for accounting
purposes) having a fair market value, determined as of the date the Option is
exercised, equal to all or the part of the aggregate Exercise Price being paid
in this way, or (iii) in any other manner then permitted by the Committee. Once
Employee gives notice of exercise, such notice may not be revoked. When Employee
exercises the Option, or part thereof, the Company will transfer Shares (or make
a non-certificated credit) to Employee's brokerage account at a designated
securities brokerage firm or otherwise deliver Shares to Employee. No Employee
or Beneficiary shall have at any time any rights with respect to Shares covered
by this Agreement prior to the valid exercise and full payment for the Shares as
specified herein, and no adjustment shall be made for dividends or other rights
for which the record date is prior to such valid exercise and payment.
4. Termination Provisions. The following provisions will govern the
vesting, exercisability and expiration of the Option in the event of termination
of Employee's employment, unless the Committee determines to provide more
favorable terms; provided, however, that the vesting, exercisability and
expiration of the Option provided under Section 9(a)(iii) of the Plan, relating
to certain Terminations following a Change of Control, shall apply to the extent
that the provisions of Section 9(a)(iii) would be more favorable to Employee,
except as limited under Subsection (h) below:
(a) Death. In the event of Employee's Termination of Employment due
to death, the Option, to the extent then outstanding, will vest and
become immediately exercisable in full, and will remain exercisable, in
accordance with Section 11(b) of the Plan, until the earlier of one
year after such death or the Stated Expiration Date. (Note: Exercise of
the option more than three months after Termination would not qualify
for favorable incentive stock option tax treatment.)
(b) Disability. In the event of Employee's Termination of Employment
due to Disability (as defined below), the Option, to the extent then
outstanding[, will vest and become immediately exercisable in full, and
will remain exercisable until the earlier of one year after such
Termination
2
of Employment or the Stated Expiration Date. (Note: Certain
Disabilities under the Plan may not qualify as a "disability" under
incentive stock option tax rules, so that exercise of the option more
than three months after Termination would not qualify for favorable
incentive stock option tax treatment.)
(c) Retirement. In the event of Employee's Termination of Employment
due to Retirement (as defined below), the Option, to the extent then
outstanding, will not be forfeited, but will remain outstanding until
the date that is the earlier of two years after such Termination of
Employment or the Stated Expiration Date. Any portion of the Option
that had not become exercisable as of the date of Termination of
Employment will become exercisable one year after the date of
Termination of Employment (without regard to any intervening vesting
date specified on the cover page of this Agreement). (Note: Exercise of
any portion of the option more than three months after Termination
would not qualify for favorable incentive stock option tax treatment.)
(d) Termination by the Company Without Cause. In the event of
Employee's Termination of Employment by the Company without Cause, the
portion of the then-outstanding Option not vested and exercisable at
the date of termination will be forfeited, and any portion of the
then-outstanding Option that is vested and exercisable at the date of
termination will expire at the earlier of three months after
Termination of Employment or the Stated Expiration Date.
(e) Termination by the Company for Cause. In the event of Employee's
Termination of Employment by the Company for Cause (as defined below),
the Option, whether or not then vested and exercisable, immediately
will be forfeited and will expire.
(f) Termination by the Employee Voluntarily. In the event of
Employee's voluntary Termination of Employment, the portion of the
then-outstanding Option not vested and exercisable at the date of
termination will be forfeited, and any vested portion of the
then-outstanding Option will expire immediately at the date of
Termination of Employment.
(g) Certain Definitions. The following definitions apply for
purposes of this Agreement:
(i) "Cause" means (A) the willful and continued failure by
Employee to perform substantially his duties with the Company (other
than any such failure resulting from Employee's incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to Employee which specifically identifies
the manner in which Employee has not substantially performed his
duties, (B) the willful engagement by Employee in conduct which is
not authorized by the Board of Directors of the Company or within
the normal course of Employee's business decisions and is known by
Employee to be materially detrimental to the best interests of the
Company or any of its subsidiaries, or (C) the willful engagement by
Employee in illegal conduct or any act of serious dishonesty which
adversely affects, or, in the reasonable estimation of the Board of
Directors of the Company, could in the future adversely affect, the
value, reliability or performance of Employee to the Company in a
material manner. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board of
Directors of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be
done, by Employee in good faith and in the best interests of the
Company. The foregoing notwithstanding, in any case governed by
Section 9 of the Plan (following a Change of Control), the
definition set forth in Section 9(c) of the Plan shall govern.
(ii) "Disability" means a disability entitling the Employee to
long-term disability benefits under the Company's long-term
disability policy as in effect at the date of Employee's Termination
of Employment.
3
(iii) "Retirement" means retirement from active employment with
the Company or a subsidiary pursuant to the early or normal
retirement provisions of the Company's or the subsidiary's qualified
retirement plan.
(iv) "Termination of Employment" means the earliest time at
which Employee is not employed by the Company or a subsidiary of the
Company and is not serving as a non-employee director of the Company
or a subsidiary of the Company.
(h) Limitation on Acceleration of Certain Options Upon Termination
Following a Change of Control. In the event of a Termination of
Employment of Employee following a Change of Control, if Section
9(a)(iii) of the Plan or any other provision (an "Enhancement
Provision") would apply so as to accelerate vesting of the Option or
otherwise enhance the rights of Employee with respect to the exercise
or expiration of the Option, and if Employee will be subject to a
golden parachute excise tax under Section 4999 of the Internal Revenue
Code (regardless of any rights to a gross-up payment from the Company
or any other party), and if the amount of "parachute payments"
resulting from the Enhancement Provision exceeds the intrinsic value of
the Option (i.e., the "spread") at the date parachute payments would be
measured for purposes of Section 4999, then the Enhancement Provision
shall not apply to the Option except to the extent (if any) possible
without Employee becoming subject to the golden parachute excise tax
under Section 4999.
5. Employee Representations and Warranties Upon Exercise. As a
condition to the exercise of the Option, the Company may require Employee to
make any representation or warranty to the Company as may be required under any
applicable law or regulation.
6. Nontransferability. Employee may not transfer the Option or any
rights thereunder to any third party other than by will or the laws of descent
and distribution, and, during Employee's lifetime, only Employee or his or her
duly appointed guardian or legal representative may exercise the Option, except
for transfers to a Beneficiary in the event of death or as otherwise permitted
and subject to the conditions under Section 11(b) of the Plan (note: these
exceptions do not apply to portions of the Option that are incentive stock
options).
7. Miscellaneous.
(a) Binding Agreement; Written Amendments. This Agreement shall be
binding upon the heirs, executors, administrators and successors of the
parties. This Agreement constitutes the entire agreement between the
parties with respect to the Option, and supersedes any prior agreements
or documents with respect to the Option. No amendment or alteration of
this Agreement which may impose any additional obligation upon the
Company shall be valid unless expressed in a written instrument duly
executed in the name of the Company, and no amendment, alteration,
suspension or termination of this Agreement which may materially impair
the rights of Employee with respect to the Option shall be valid unless
expressed in a written instrument executed by Employee.
(b) No Promise of Employment. The Option and the granting thereof
shall not constitute or be evidence of any agreement or understanding,
express or implied, that Employee has a right to continue as an officer
or employee of the Company for any period of time, or at any particular
rate of compensation.
(c) Governing Law. The validity, construction, and effect of this
agreement shall be determined in accordance with the laws (including
those governing contracts) of the state of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal law.
(d) Notices. Any notice to be given the Company under this Agreement
shall be addressed to the Company at its principal executive offices,
in care of the Vice President, Corporate Benefits, and any notice to
the Employee shall be addressed to the Employee at Employee's address
as then appearing in the records of the Company.
4
Exhibit 10.2(c)
Form of Director Option Agreement
- Performance Accelerated NQSO
-- Under 2002 Incentive Compensation Plan
HORACE MANN EDUCATORS CORPORATION
2002 Incentive Compensation Plan
Stock Option Agreement -- Non-Employee Director
This Stock Option Agreement (the "Agreement") confirms the grant on
_________ __, ____ (the "Grant Date") by HORACE MANN EDUCATORS CORPORATION, a
Delaware corporation (the "Company"), to _______________ ("Optionee") of a
non-qualified stock option (the "Option") to purchase shares of Common Stock,
par value $.001 per share (the "Shares"), as follows:
Shares purchasable: ________________ Shares
Exercise Price: $_______________ per Share
Option vests and becomes exercisable: As to all of the Shares on
__________,_____; provided that portions of the Option will vest and
become cumulatively exercisable ("Accelerated Vesting") if and to the
extent that the performance goals set forth under the Company's
Long-Term Incentive Plan have been achieved for the specified
performance year. As specified on Attachment A hereto, for each year in
the period _____ - _____, a level of achievement of performance
targets, based __% on _____________ and __% on ________________, will
be determined by the Committee. This level of achievement (the
"Achievement Level") will be expressed as a percentage of target level
performance (blending _____and ______performance), ranging from __% if
the "threshold" level of performance is achieved to ___% if the
"target" level of performance is achieved to ___% if the "maximum"
level is achieved or exceeded. If the calculated Achievement Level for
any year would be less than __%, the Achievement Level will be deemed
to be _%, and no Accelerated Vesting will result for that year.
Straight-line interpolation will apply if the level of achievement of
_______ or ________is less than "target," based on the "threshold" and
"target" datapoints, or between "target" and "maximum" based on those
datapoints. The Committee will determine the Achievement Level
following the completion of the audit of the Company's financial
statements for the performance year, with any resulting Accelerated
Vesting effective at the date of such determination. Committee
determinations of the Achievement Level under the Long-Term Incentive
Plan and all other matters hereunder will be final. The portion of the
Option, expressed as a percentage of the total number of Shares
purchasable under the Option, subject to Accelerated Vesting in each
year will be as follows:
Portion of Option Subject
Performance Year to Accelerated Vesting
---------------- ----------------------
____ __% times the Achievement Level
____ __% times the Achievement Level
____ __% times the Achievement Level
provided, however, that the portion of the Option subject to
Accelerated Vesting in ____ in no event will exceed the then remaining
unvested portion of the Option. In addition to possible Accelerated
Vesting, the Option will become immediately vested and exercisable upon
the occurrence of certain events relating to termination of service as
a director, in accordance with Section 4 hereof.
Expiration Date: _______ __, ____ (the "Stated Expiration Date").
The Option is subject to the terms and conditions of the 2002 Incentive
Compensation Plan (the "Plan") and this Agreement, including the Terms and
Conditions of Option Grant attached hereto and deemed a part hereof. The number
and kind of shares purchasable, the Exercise Price, and other terms and
conditions are subject to adjustment in accordance with Section 11(c) of the
Plan.
Optionee acknowledges and agrees that (i) the Option is
nontransferable, except as provided in Section 6 hereof and Section 11(b) of the
Plan, and (ii) sales of Shares will be subject to any Company policy regulating
trading by employees and directors.
IN WITNESS WHEREOF, HORACE MANN EDUCATORS CORPORATION has caused this
Agreement to be executed by its officer thereunto duly authorized.
HORACE MANN EDUCATORS CORPORATION
By:______________________________
[Name]
[Title]
TERMS AND CONDITIONS OF OPTION GRANT
The following Terms and Conditions apply to the Option granted to
Optionee by HORACE MANN EDUCATORS CORPORATION (the "Company"), as specified on
the preceding page. Certain specific terms of the Option, including the number
of shares purchasable, vesting and Expiration Date, and Exercise Price, are set
forth on the preceding page.
1. General. The Option is granted to Optionee under the Company's 2002
Incentive Compensation Plan (the "Plan"), which has been previously delivered to
Optionee and/or is available upon request to the Corporate Benefits Department.
All of the applicable terms, conditions and other provisions of the Plan are
incorporated by reference herein. Capitalized terms used in this Agreement but
not defined herein shall have the same meanings as in the Plan. If there is any
conflict between the provisions of this document and mandatory provisions of the
Plan, the provisions of the Plan govern. By accepting the grant of the Option,
Optionee agrees to be bound by all of the terms and provisions of the Plan (as
presently in effect or later amended), the rules and regulations under the Plan
adopted from time to time, and the decisions and determinations of the
Compensation Committee of the Company's Board of Directors (the "Committee")
made from time to time. The Option is a non-qualified stock option and not an
incentive stock option under Section 422 of the Internal Revenue Code of 1986,
as amended.
2. Right to Exercise Option. Subject to all applicable laws, rules,
regulations and the terms of the Plan and this Agreement, Optionee may exercise
the Option only after the time and to the extent the Option has become vested
and exercisable and prior to the Expiration Date of the Option.
3. Method of Exercise. To exercise the Option, Optionee must (a) give
written notice to the Vice President, Corporate Benefits of the Company, which
notice shall specifically refer to this Agreement, state the number of Shares as
to which the Option is being exercised, the name in which he or she wishes the
Shares to be issued, and be signed by Optionee, and (b) pay in full to the
Company the Exercise Price of the Option for the number of Shares being
purchased either (i) in cash (including by check), payable in United States
dollars, (ii), by delivery of Shares already owned by Optionee (which Shares
must have been held for at least six months if they were acquired under a
Company plan and are not considered to be "mature" shares for accounting
purposes) having a fair market value, determined as of the date the Option is
exercised, equal to all or the part of the aggregate Exercise Price being paid
in this way, or (iii) in any other manner then permitted by the Committee. Once
Optionee gives notice of exercise, such notice may not be revoked. When Optionee
exercises the Option, or part thereof, the Company will transfer Shares (or make
a non-certificated credit) to Optionee's brokerage account at a designated
securities brokerage firm or otherwise deliver Shares to Optionee. No Optionee
or Beneficiary shall have at any time any rights with respect to Shares covered
by this Agreement prior to the valid exercise and full payment for the Shares as
specified herein, and no adjustment shall be made for dividends or other rights
for which the record date is prior to such valid exercise and payment.
4. Termination Provisions. In the event of Optionee's termination of
service as a director of the Company for any reason (including due to death),
the Option, to the extent then outstanding, will vest and become immediately
exercisable in full, and will remain exercisable until the Stated Expiration
Date.
5. Optionee Representations and Warranties Upon Exercise. As a
condition to the exercise of the Option, the Company may require Optionee to
make any representation or warranty to the Company as may be required under any
applicable law or regulation.
6. Nontransferability. The Option is not transferable except to: (a)
the Optionee's spouse, sibling, parent, child or grandchild (including adoptive
relationships), (b) a trust primarily for the benefit of Optionee or the persons
described in (a), and (c) a corporation or other entity exclusively owned by
Optionee or by persons described in (a). In addition, the Option may be
transferred to a Beneficiary in the event of death or as otherwise permitted and
subject to the conditions under Section 11(b) of the Plan.
3
7. Miscellaneous.
(a) Binding Agreement; Written Amendments. This Agreement shall be
binding upon the heirs, executors, administrators and successors of the
parties. This Agreement constitutes the entire agreement between the
parties with respect to the Option, and supersedes any prior agreements
or documents with respect to the Option. No amendment or alteration of
this Agreement which may impose any additional obligation upon the
Company shall be valid unless expressed in a written instrument duly
executed in the name of the Company, and no amendment, alteration,
suspension or termination of this Agreement which may materially impair
the rights of Optionee with respect to the Option shall be valid unless
expressed in a written instrument executed by Optionee.
(b) No Promise of Service. The Option and the granting thereof
shall not constitute or be evidence of any agreement or understanding,
express or implied, that Optionee has a right to continue as a director
of the Company for any period of time, or at any particular rate of
compensation.
(c) Governing Law. The validity, construction, and effect of this
agreement shall be determined in accordance with the laws (including
those governing contracts) of the state of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal law.
(d) Notices. Any notice to be given the Company under this
Agreement shall be addressed to the Company at its principal executive
offices, in care of the Vice President, Corporate Benefits, and any
notice to the Optionee shall be addressed to the Optionee at Optionee's
address as then appearing in the records of the Company.
4
Attachment A
CORPORATE PERFORMANCE MEASURES
FOR THE LONG TERM INCENTIVE PLAN
Note: Threshold payout is at __%. Target payout is at ___%. Maximum is at ___%.
5
Exhibit 11
Horace Mann Educators Corporation
Computation of Net Income per Share
For the Three and Six Months Ended June 30, 2002 and 2001
(Amounts in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Basic - assumes no dilution:
Net income (loss) for the period $ (19,287) $ (4,926) $ (3,716) $ 11,772
---------- ---------- ---------- ----------
Weighted average number of common
shares outstanding during the period 40,838 40,554 40,809 40,539
---------- ---------- ---------- ----------
Net income (loss) per share - basic $ (0.47) $ (0.12) $ (0.09) $ 0.29
========== ========== ========== ==========
Diluted - assumes full dilution:
Net income (loss) for the period $ (19,287) $ (4,926) $ (3,716) $ 11,772
---------- ---------- ---------- ----------
Weighted average number of common
shares outstanding during the period 40,838 40,554 40,809 40,539
Weighted average number of common
equivalent shares to reflect the dilutive
effect of common stock equivalent securities:
Stock options 292 189 299 130
Common stock units related to Deferred
Equity Compensation Plan for Directors 134 117 134 117
Common stock units related to Deferred
Compensation Plan for Employees 30 14 30 14
---------- ---------- ---------- ----------
Total common and common equivalent
shares adjusted to calculate diluted
earnings per share 41,294 40,874 41,272 40,800
---------- ---------- ---------- ----------
Net income (loss) per share - diluted $ (0.47) $ (0.12) $ (0.09) $ 0.29
========== ========== ========== ==========
Percentage of dilution compared
to basic net income per share 0.0% 0.0% 0.0% 0.0%
[SEAL]
Exhibit 15
Horace Mann Educators Corporation
Springfield, Illinois
Re: Registration Statement on Forms S-8
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated August 5, 2002, related to our
review of interim financial information.
Pursuant to Rule 436 under the Securities Act of 1933 (the "Act"), such report
is not considered part of a registration statement prepared or certified by an
accountant, or a report prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Act.
/s/ KPMG LLP
KPMG LLP
Chicago, Illinois
August 13, 2002
[SEAL]
Exhibit 99.1
HORACE MANN EDUCATORS CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Horace Mann Educators Corporation
(the "Company") on Form 10-Q for the period ended June 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Louis G. Lower II, Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Louis G. Lower II
-----------------------------
Louis G. Lower II
Chief Executive Officer
August 13, 2002
[SEAL]
Exhibit 99.2
HORACE MANN EDUCATORS CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Horace Mann Educators Corporation
(the "Company") on Form 10-Q for the period ended June 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Peter H. Heckman, Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Peter H. Heckman
-----------------------------
Peter H. Heckman
Chief Financial Officer
August 13, 2002
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