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Section 1: S-1/A (AMENDMENT NO. 1 TO FORM S-1)

Amendment No. 1 to Form S-1
Table of Contents

As filed with the Securities and Exchange Commission on September 10, 2018

Registration No. 333-226778

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Conifer Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Michigan   6331   27-1298795

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

550 West Merrill Street, Suite 200

Birmingham, Michigan 48009

(248) 559-0840

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Richard J. Fiato

Corporate Counsel

Conifer Holdings, Inc.

550 West Merrill Street, Suite 200

Birmingham, Michigan 48009

(248) 559-0840

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Donald J. Kunz

Honigman Miller Schwartz and Cohn LLP

2290 First National Building

660 Woodward Avenue
Detroit, Michigan 48226

(313) 465-7454

 

Thomas L. Hanley, Esq.

Stradley Ronon Stevens & Young, LLP

2005 Market Street, Suite 2600

Philadelphia, PA 19103-7018

(215) 564-8000

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement is declared effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☒

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities To Be Registered

  Proposed
Maximum
Offering Price(1)
 

Amount of

Registration Fee

Senior Unsecured Notes Due

 

$23,000,000

  $2,863.50(2)

 

 

(1)

Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(o) under the Securities Act, as amended. Also includes the offering price of additional Notes that the underwriters have the option to purchase.

(2)

Of this amount, $2,147.63 was previously paid.

 

 

Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. The Notes may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell the Notes, nor does it seek an offer to buy the Notes in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, dated September 10, 2018

PRELIMINARY PROSPECTUS

$20,000,000

 

 

LOGO

    % Senior Unsecured Notes due

Conifer Holdings, Inc. (“Conifer”) is offering $         in aggregate principal amount of     % Senior Unsecured Notes due (the “Notes”). The Notes will bear interest at the rate of     % per year, and interest on the Notes will be payable quarterly in arrears on                 ,                 ,                  and                  of each year, beginning on                 . The Notes will mature on                 ,                 . Conifer may redeem the Notes, in whole or in part at any time or from time to time on or after                 , 2020, at the redemption price of 100% aggregate principal amount, plus any accrued and unpaid interest, as discussed under “Description of the Notes — Optional Redemption” in this prospectus. The Notes will be issued in minimum denominations of $25 and integral multiples of $25 in excess thereof or in units, each representing $25.

The Notes will be unsecured obligations of Conifer only and will not be obligations of or guaranteed by any of its subsidiaries. The Notes will rank senior in right of payment to any of Conifer’s existing and future indebtedness that is by its terms expressly subordinated or junior in right of payment to the Notes. The Notes will rank equally in right of payment to all of Conifer’s existing and future senior indebtedness, but will be effectively subordinated to any secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. In addition, the Notes will be structurally subordinated to the indebtedness and other obligations of Conifer’s subsidiaries. The Notes will not be subject to repayment at the option of the holder at any time prior to maturity and will not be entitled to any sinking fund.

Conifer has applied to list the Notes on the Nasdaq Global Market under the symbol “CNFRL.” No assurance can be given as to the approval of the Notes for listing or, if listed, the continued listing for the term of the Notes, or the liquidity or trading market for the Notes. We are not required to maintain a listing on the Nasdaq Global Market or any other exchange. If the listing is approved, trading of the Notes on the Nasdaq Global Market is expected to commence within 30 days after the initial delivery of the Notes. Currently, there is no public market for the Notes.

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary – Implications of Being an Emerging Growth Company” in this prospectus.

 

     Per Note     Total  

Public offering price(1)

                    $                

Underwriting discounts and commissions(2)

                    $    

Proceeds to us, before expenses(3)

                    $    

 

(1)

Plus accrued interest, if any, from                 , 2018.

(2)

See “Underwriting.”

(3)

Before deducting expenses of the offering.

We have granted the underwriters an option, exercisable within 30 days of the date of this prospectus, to purchase up to an additional $         in principal amount of Notes, less the underwriting discounts and commissions, to cover over-allotments of Notes, if any. If the underwriters exercise the over-allotment option in full, then the total underwriting discounts and commissions payable by us will be $         and the total proceeds to us, before expenses, will be $        .

Investing in the Notes involves certain risks. See the information under “Risk Factors” beginning on page 14 of this prospectus and in Conifer’s Annual Report on Form 10-K/A for the year ended December 31, 2017 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, as well as the information included or incorporated by reference in this prospectus for a description of the factors you should consider before deciding to invest in the Notes.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the Notes in book-entry form only through the facilities of The Depository Trust Company (“DTC”) on or about                 , 2018. Beneficial interests in the Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its participants.

Boenning & Scattergood, Inc.

Lead Book-Running Manager

American Capital Partners, LLC

Co-Manager

The date of this prospectus is                 , 2018


Table of Contents

TABLE OF CONTENTS

 

     Page
No.
 
PROSPECTUS SUMMARY      1  
RISK FACTORS      14  
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA      19  
USE OF PROCEEDS      21  
CAPITALIZATION      22  
DESCRIPTION OF THE NOTES      23  
DESCRIPTION OF OTHER INDEBTEDNESS      37  
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES      38  
UNDERWRITING      43  
LEGAL MATTERS      46  
EXPERTS      46  
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE      46  
WHERE YOU CAN FIND MORE INFORMATION      47  

We have not, and the underwriters have not, authorized any person to give any information or to make any representations in connection with this offering other than those contained or incorporated or deemed to be incorporated by reference in this prospectus and any free writing prospectus, and if given or made, such information or representations must not be relied upon as having been so authorized. This preliminary prospectus does not constitute an offer to sell or a solicitation of an offer to buy by anyone in any jurisdiction in which such offer or solicitation is not authorized, or in which the person is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this preliminary prospectus nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in our affairs since the date hereof or thereof, that the information contained herein or therein is correct as of any time subsequent to its date, or that any information incorporated or deemed to be incorporated by reference herein or therein is correct as of any time subsequent to its date.

This prospectus incorporates important business and financial information about Conifer and its subsidiaries that is not included in or delivered with this prospectus. This information is available without charge upon request. See “Incorporation of Certain Information By Reference” and “Where You Can Find More Information” in this prospectus.

Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market share, is based on information from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. Assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2017 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018. These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Special Note Regarding Forward-Looking Statements and Industry Data” in this prospectus.

“Conifer Insurance Company,” “White Pine Insurance Company” and our green Conifer logo are the subject to a trademark in the United States. Other brands, names and trademarks contained in this prospectus are the property of their respective owners. Solely for convenience, trademarks and tradenames referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trademarks and tradenames.

 

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in the Notes. For a more complete understanding of this offering of Notes, you should read this entire prospectus and the documents incorporated by reference herein, including the financial statements and the notes thereto. Please read “Where You Can Find Additional Information” on page 47 of this prospectus. Please also read “Risk Factors” beginning on page 14 of this prospectus and the Risk Factors included in our Annual Report on Form 10-K/A for the year ended December 31, 2017 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which are incorporated by reference into this prospectus, for more information about important factors that you should consider before investing in the Notes. As used in this prospectus, unless the context otherwise requires, references to “Conifer,” the “Company, “we,” “us,” and “our” refer to Conifer Holdings, Inc., a Michigan corporation, and, where appropriate, its subsidiaries. References to any year herein refer to the 12 months ended December 31 of the year indicated.

Conifer Holdings, Inc.

Business Overview

Our Company

We are a Michigan-based insurance holding company formed in 2009. Through Conifer Insurance Company (“CIC”), Red Cedar Insurance Company (“RCIC”) and White Pine Insurance Company (“WPIC”, and together with CIC and RCIC, the “Insurance Company Subsidiaries”), we offer insurance coverage in both specialty commercial and specialty personal product lines. Currently, we are authorized to write insurance as an excess and surplus lines (“E&S”) carrier in 44 states, including the District of Columbia. We are also licensed to write insurance in 42 states, including the District of Columbia, as an admitted carrier and we offer our insurance products in all 50 states. In addition to marketing to individual agents, we formed Sycamore Insurance Agency (“SIA”) to review specific opportunities to write select business on a direct basis. SIA also owns 50% of a small insurance agency that places small commercial risks, mainly for alarm and security guard markets.

Our revenues are primarily derived from premiums earned from our insurance operations. We also generate other revenues through investment income and other income which mainly consists of installment fees and policy issuance fees generally related to the policies we write and commission income from SIA’s 50% owned agency.

Many of our products are targeted to traditionally profitable classes of policyholders that we believe are underserved by other insurers. We market and sell these insurance products through a growing network of over 6,700 independent agents that distribute our policies through approximately 2,200 sales offices. We are focused on growing our business in non-commoditized property and casualty insurance markets, while maintaining underwriting discipline and a conservative investment strategy.

We have substantial expertise in serving the unique commercial insurance needs of owner-operated businesses in the following markets:

 

   

Hospitality, such as restaurants, bars, taverns and bowling centers (that require, among other lines, liquor liability insurance), as well as small grocery and convenience stores;

 

   

Artisan contractors, such as plumbers, painters, carpenters, electricians and other independent contractors; and

 

   

Security service providers, such as companies that provide security guard services, security alarm products and services, and private investigative services.



 

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In our commercial lines business, we seek to differentiate ourselves and provide value to small business owner-operators by bundling different insurance products that meet a significant portion of their insurance needs. For example, in the hospitality market we offer property, casualty, and liquor liability, as well as, in some jurisdictions, workers’ compensation coverage. The breadth of our specialty commercial insurance products enables our agents and their small business clients to avoid the administrative costs and time required to seek coverage for each of these items from separate insurers. As such, we compete for commercial lines business based on our flexible product offerings and customer service, rather than on pricing alone. Our target commercial lines customer has an average account size of $4,800 in annual premium.

We also have substantial expertise in providing specialty homeowners insurance products to targeted customers that are often underserved by other homeowners insurance carriers. Our personal lines products primarily include low-value dwelling insurance tailored for owners of lower valued homes, which we currently offer in Illinois, Indiana, Louisiana and Texas. Additionally, we provide wind-exposed catastrophe coverage, including hurricane and wind coverage, to under-served homeowners in Hawaii, Texas and Florida.

In our personal lines business, we target homeowners in need of specific catastrophe coverage or dwelling insurance that are currently underserved by the insurance market, due to the modest value of their homes or the exposure to natural catastrophes in their geographic area. Because these homeowners are underserved, this portion of the market is typically subject to less pricing pressure from larger nationwide insurers that offer a more commoditized product. We believe our underwriting expertise enables us to compete effectively in these markets by evaluating and appropriately pricing risk. In addition, we believe our willingness to meet these underserved segments of the personal lines insurance market fosters deeper relationships with, and increased loyalty from, the agents who distribute our products. Our target personal lines customer has an average account size of $1,200 in annual premiums.

Overall, we structure the multi-line distribution of our premium between commercial and personal lines to better diversify our business and mitigate the potential cyclical nature of either market. In serving these markets, we write business on both an “admitted” and “E&S” basis. During the six months ended June 30, 2018, approximately 49% of our gross written premiums were admitted, and approximately 51% were E&S. Insurance companies writing on an admitted basis are licensed by the states in which they sell policies and are required to offer policies using premium rates and forms that are typically filed with state insurance regulators. Non-admitted carriers writing in the E&S market are not bound by most of the rate and form regulations imposed on standard market companies, allowing them the flexibility to change the coverage offered and the rate charged without the time constraints and financial costs associated with the filing process. Our corporate structure allows us to offer both admitted and E&S products in select markets through either Conifer Insurance Company (“CIC”) or White Pine Insurance Company (“WPIC”). Our experience with specialty insurance products enables us to react to new market opportunities and underwrite multiple specialty lines.

Mix of Business

Over the past several years, we have increased our focus on core lines of business. As part of this business strategy, we have deemphasized our Florida homeowners business and other wind-exposed business in Texas and Hawaii. We plan to continue to shift focus to low-value dwelling lines of business in order to bring personal lines premium levels back up and to maintain a strategic balance of commercial and personal lines of business.

While we pursue top line premium growth, we do not do so at the expense of losing underwriting discipline. Our underwriters have the experience and institutional flexibility to recognize when to exit certain products in



 

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favor of more profitable opportunities as insurance market conditions dictate. The following tables summarize our gross written premiums by segment and state for the years indicated therein (dollars in thousands):

 

     Gross Written Premium by Segment  
     Six
months
ended
June 30,
2018
     %     Year
ended

Dec 31,
2017
     %     Year
ended

Dec 31,
2016
     %     Year
ended
Dec 31,

2015
     %  

Commercial

   $ 46,796        93   $ 92,112        81   $ 88,242        77   $ 68,197        73

Personal

     3,503        7     22,172        19     26,681        23     25,553        27
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 50,299        100   $ 114,284        100   $ 114,923        100   $ 93,750        100
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
     Gross Written Premiums by State  
     Six
months
ended
June 30,
2018
     %     Year
ended

Dec 31,
2017
     %     Year
ended

Dec 31,
2016
     %     Year
ended

Dec 31,
2015
     %  

Florida

   $ 13,698        27.2   $ 26,562        23.1   $ 23,910        20.8   $ 23,048        24.7

Michigan

     9,626        19.1     21,099        18.5     17,572        15.4     16,074        17.2

Texas

     3,314        6.6     12,910        11.3     12,993        11.3     10,381        11.1

Pennsylvania

     3,176        6.3     8,859        7.8     10,718        9.3     12,931        13.8

Ohio

     2,190        4.4     3,850        3.4     3,556        3.1     3,693        3.9

Indiana

     2,008        4.0     4,356        3.8     4,582        4.0     6,068        6.5

California

     1,934        3.8     2,218        1.9     —          —       676        0.7

New Jersey

     1,646        3.3     3,960        3.5     978        0.9     980        1.0

Colorado

     1,512        3.0     2,998        2.6     2,544        2.2     1,249        1.3

Montana

     1,295        2.6     2,409        2.1     3,041        2.6     2,945        3.1

Illinois

     940        1.9     2,139        1.9     1,768        1.5     2,453        2.6

All Other States

     8,960        17.8     22,924        20.1     33,261        28.9     13,252        14.1
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 50,299        100.0   $ 114,284        100.0   $ 114,923        100.0   $ 93,750        100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

The Conifer Approach

We have built our business in a manner that is designed to adapt to changing market conditions and deliver predictable results over time. The following highlights key aspects of our model that contribute to our balanced approach:

 

   

Focus on under-served markets. We focus on providing specialty insurance products to targeted policyholders in under-served markets. We believe that most of our small business customers, many of which are owner-operated, value the efficiency of dealing with a single insurer for multiple products. By targeting small- to medium-sized accounts, we add value to the business owner directly without competing solely on price.

 

   

Strong relationships with our agents. We develop strong relationships with our independent agents providing them with responsive service, attractive commissions and competitive products to offer policyholders. We believe our agents understand that we view them as key partners in risk selection and understand that their partnership is instrumental in helping us serve our ultimate client — the insured. We focus on working directly with retail agents. We believe this gives us a competitive advantage over other insurers that rely heavily on Managing General Agents and wholesalers, because we are closer to the policyholders.



 

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Deep understanding of the business and regulatory landscapes of our markets. The competition for insurance business and the regulatory operating environment vary significantly from state to state. We focus on tailoring our business to concentrate on the geographic markets and regulatory environments with the greatest opportunities for growth and profitability. Our business plan centers on identification of market opportunities in jurisdictions where our insurance products can profitably suit the needs of our potential customers.

 

   

Emphasis on flexibility. We offer coverage to our insureds both on an E&S and admitted basis. We believe this flexibility enables us to pivot effectively between E&S and admitted policies as customer needs and regulatory conditions dictate.

 

   

Conservative risk management with an emphasis on lowering volatility. We focus on the risk/reward of insurance underwriting, while maintaining a prudent investment policy. We employ conservative risk management practices and opportunistically purchase reinsurance to minimize our exposure to liability for individual risks. In addition, we seek to maintain a diversified liquid investment portfolio to reduce overall balance sheet volatility. As of December 31, 2017, our investments primarily consisted of fixed income investments with an average credit rating of “AA” and an average duration of 3.2 years.

Our Competitive Strengths

We believe the following competitive strengths have allowed us to grow our business and will continue to support our strategic growth initiatives:

 

   

Talented underwriters with broad expertise. Our underwriters have significant experience managing account profitability across market cycles. With an average of over 27 years of experience, our senior underwriters possess the required expertise to respond appropriately to market forces.

 

   

Controlled and disciplined underwriting. We underwrite substantially all policies to our specific guidelines with our experienced, in-house underwriting team. We customize the coverages we offer, and continually monitor our markets and respond to changes in our markets by adjusting our pricing, product structures and underwriting guidelines. By tailoring the terms and conditions of our policies, we align our actual underwriting risk with the profit of each insurance account that we write.

 

   

Proactive claims handling. We employ a proactive claims handling philosophy that utilizes an internal team of experienced in-house attorneys to manage and supervise our claims from inception to resolution. We pay what we owe, contest what we don’t owe, and make sound judgment for those claims that fall in between. Our proactive handling of claims reinforces our relationships with our customers and agents by demonstrating our willingness to defend our insureds aggressively and help them mitigate losses.

 

   

Proven management team. Our senior management team has an average of over 23 years of experience in the insurance industry. Our senior management team has successfully created, managed and grown numerous insurance companies and books of business, and has longstanding relationships with many independent agents and policyholders in our targeted markets.

 

   

Ability to leverage technology to drive efficiency. We utilize a web-based information technology system that creates greater organizational efficiency in our Company. Leveraging the infrastructure of programmers and support staff of third-party vendors allows our in-house business analysts to focus on new product development and roll-out. We believe this capability reduces our time to market for new products, enhances services for insureds, increases our ability to capture data, and reduces cost.



 

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Marketing and Distribution

Independent agents are our main distribution source. The selection of an insurance company by a business or individual is strongly influenced by the business or individual’s agent. We seek to maintain favorable relationships with our select group of agents. Our distribution philosophy is to treat our agents as partners, and we provide them with competitive products, personal service and attractive commissions. We believe these factors contribute to our positive agency retention.

In 2017, our top six independent agencies accounted for approximately 33% of our gross written premiums in our commercial lines, and our top four independent agencies, accounted for approximately 41% of our gross written premiums in our personal lines. We have long term relationships with each of these agencies. We anticipate our concentration in these agencies will decrease in future periods as we establish relationships with additional agencies, as part of our strategic growth plan. Our Insurance Company Subsidiaries market and distribute their products mainly through an independent agency network, however we utilize Managing General Agents and certain key wholesalers when appropriate.

We recruit our producers through referrals from our existing network of agents, word-of-mouth, advertisement, as well as direct contacts initiated by potential agents. Our marketing efforts are directed through our offices in Michigan, Florida, Pennsylvania and Tennessee. We view our agents as key partners in risk selection. We actively solicit their input regarding potential improvements to our business methods and consult with them in developing new products and entering new customer markets. At the same time, we take careful measure to appropriately control and monitor our agents’ operations. Controls include frequent review of the quality of business, loss experience and other mechanisms. We retain sole binding authority on the majority of our business. Binding authority is only granted to select long-term agents. When binding authority is granted, we restrict this authority to a specific set of guidelines that are provided to each agent. Moreover, our experienced underwriters review each risk to ensure the guidelines are followed.



 

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Our Structure

The chart below displays our corporate structure as it pertains to our holding company and significant operating subsidiaries.

 

 

LOGO

The entities set forth above serve the following functions:

Conifer Holdings, Inc. is a holding company that provides management and related operational support for each of our subsidiaries.

Conifer Insurance Company is a property and casualty insurance company that generally writes policies on an E&S basis.

White Pine Insurance Company is a property and casualty insurance company that generally writes policies on an admitted basis.

American Colonial Insurance Services is a managing general agency that processes our Florida homeowners business.

Sycamore Insurance Agency, Inc. is an insurance agency that primarily acts as a broker for policies written through Conifer with retail agents and as an insurance agency for policies Conifer and WPIC may write directly with insureds.

Red Cedar Insurance Company is a pure captive insurance company, which we define as an insurance company that only writes insurance exclusively for our operating insurance companies and does not place or write any insurance business on behalf of third parties.

Venture Agency Holdings, Inc. is an insurance agency that is 50% owned by SIA. It specializes in placing small commercial risks, mainly for alarm and security guard markets.



 

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Insurance Company Subsidiaries

We conduct our business operations primarily through our Insurance Company Subsidiaries. Our ability to service debt, and pay administrative expenses is primarily reliant upon our intercompany service fees paid by the Insurance Company Subsidiaries to the holding company for management, administrative, and information technology services provided to the Insurance Company Subsidiaries by the holding company. Secondarily, the holding company may receive dividends from the Insurance Company Subsidiaries; however, this is not the primary means by which the holding company supports its funding as state insurance laws restrict the ability of our Insurance Company Subsidiaries to declare and pay dividends to the holding company under certain circumstances. Generally, the limitations are based on the greater of statutory net income for the preceding year or 10% of statutory surplus at the end of the preceding year. There were no dividends paid from our Insurance Company Subsidiaries during the year ended December 31, 2017. There were $5.5 million and $3.1 million of dividends paid from our Insurance Company Subsidiaries to the holding company during the years ended December 31, 2016 and 2015, respectively.

In addition to potential dividends, Conifer generates revenues from administrative services agreements with our Insurance Company Subsidiaries which have been fully approved by the insurance regulators. Under these agreements, Conifer provides accounting consulting services, information technology services, legal consulting, human resource consulting and premium collection services. Conifer receives a fee equal to 12.5% of gross written premiums from our Insurance Company Subsidiaries. Other services and costs that Conifer incurs on behalf of the Insurance Company Subsidiaries are reimbursed dollar-for-dollar as well. Conifer has similar agreements with its non-regulated agency subsidiaries which also provide revenue to Conifer. Conifer also receives commission income for performing agency services. The primary operating expenses of Conifer are salaries and related costs of personnel, information technology, administrative expenses, and professional fees. The income received from the administrative services is used to cover operating costs, meet debt service requirements and cover other holding company obligations. Funds to service debt obligations are also available from our non-regulated agency subsidiaries either via their intercompany service agreements with Conifer, direct expense reimbursements or dividends. Management fees from subsidiaries to Conifer totaled $7.1 million for the six months ended June 30, 2018 and $15.9 million for the year ended December 31, 2017. There were $9.9 million and $8.0 million of management fees paid from subsidiaries to Conifer during the years ended December 31, 2016 and 2015, respectively.

Regulatory and Rating Issues

The National Association of Insurance Commissioners (“NAIC) has a Risk-Based Capital (“RBC”) formula to be applied to all property and casualty insurance companies. The formula measures required capital and surplus based on an insurance company’s products and investment portfolio and is used as a tool to evaluate the capital adequacy of regulated companies. The RBC formula is used by state insurance regulators to monitor trends in statutory capital and surplus for the purpose of initiating regulatory action. In general, an insurance company must submit a calculation of its RBC formula to the insurance department of its state of domicile as of the end of the previous calendar year. These laws require increasing degrees of regulatory oversight and intervention as an insurance company’s RBC declines. At June 30, 2018, our Insurance Company Subsidiaries were in excess of any minimum threshold at which corrective action would be required.

The NAIC’s Insurance Regulatory Information System (“IRIS”) was developed to assist state insurance departments in executing their statutory mandates to oversee the financial condition of insurance companies operating in their respective states. IRIS identifies thirteen industry ratios and specifies “usual values” for each ratio. State insurance regulators review the IRIS ratio results to determine if an insurer is in need of further regulatory scrutiny or action. While the ratios, individually and collectively, are useful tools for identifying companies that may be experiencing financial difficulty, they are only a guide for regulators and should not be



 

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considered an absolute indicator of a company’s financial condition. While inquiries from regulators are not uncommon, our Insurance Company Subsidiaries have not experienced any regulatory actions due to their IRIS ratio results or otherwise.

Corporate Information

We were incorporated in October 2009 as Conifer Holdings, Inc., a Michigan corporation. We are headquartered in Birmingham, Michigan. Our principal executive offices are located at 550 W. Merrill Street, Suite 200, Birmingham, Michigan 48009. Our telephone number is (248) 559-0840. Our corporate website address is www.cnfrh.com. The information contained in, or that can be accessed through, our website is not part of, and shall not be deemed to be a part of, this prospectus.

Implications of Being an Emerging Growth Company

We are an “emerging growth company,” as defined in the JOBS Act. We will remain an emerging growth company until the earliest of (i) December 31, 2020, the last day of the fiscal year following the fifth anniversary of the closing of our initial public offering; (ii) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a “large accelerated filer” under applicable SEC rules.

For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure requirements that are applicable to other public companies that are not emerging growth companies.

These exemptions include:

 

   

not being required to comply with the requirement of auditor attestation of our internal control over financial reporting,

 

   

not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements,

 

   

reduced disclosure obligations regarding executive compensation, and

 

   

not being required to hold a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

For as long as we continue to be an emerging growth company, we expect that we will take advantage of the reduced disclosure obligations available to us as a result of that classification. We have taken advantage of certain of those reduced reporting burdens in this prospectus. Accordingly, the information contained or incorporated by reference herein may be different than the information you receive from other public companies in which you hold equity interests. An emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. However, we have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We are also a “smaller reporting company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and have elected to take advantage of certain of the scaled disclosure requirements available for smaller reporting companies.



 

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Recent Developments

Potential Refinancing of Loan Agreement

On September 29, 2017, Conifer entered into a note purchase agreement, as amended by the First Amendment dated as of June 21, 2018 (collectively, the “Loan Agreement”), with Elanus Capital Investments Master SP Series 3 (“Elanus”). Pursuant to the Loan Agreement, Conifer issued $30.0 million aggregate principal amount of its 8% subordinated notes due 2032, in a private placement. On the fifth and tenth anniversary of the subordinated notes, the interest rate resets to 1,250 basis points and 1,500 basis points, respectively, above the 5-year mid-swap rate. The subordinated notes include an issuer call option at par from July 31, 2018, through October 31, 2018, and at 105% of par any time after September 29, 2020.

On September 10, 2018, we entered into a Waiver Letter with Elanus whereby Elanus agreed (i) that Conifer may use any amount of proceeds raised under this offering to redeem the subordinated notes, in whole or in part, (ii) that any restrictions under the Loan Agreement regarding the Company’s ability to incur additional debt are waived with respect to this offering, and (iii) to negotiate with Conifer in good faith to refinance any amount of indebtedness remaining under the Loan Agreement following the completion of this offering. The closing of this offering of Notes is not conditioned on the refinancing of the Loan Agreement, and we cannot assure you that such debt will be refinanced on an unsecured basis and on other acceptable terms or at all.



 

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The Offering

 

Issuer

Conifer Holdings, Inc.

 

Securities Offered

$         aggregate principal amount of     % Senior Unsecured Senior Notes due 20     .

 

Maturity Date

                , 20     , unless previously redeemed.

 

Interest Rate

    % per annum, computed on the basis of a 360-day year of twelve 30-day months, from         , 20     .

 

Interest Payment Dates

                ,                 ,                  and                  of each year, commencing on                 , 20    .

 

Price to Public

    % of the principal amount, plus accrued interest, if any, from         , 20     .

 

Ranking

The Notes will be unsecured obligations of Conifer only and will not be obligations of or guaranteed by any of its subsidiaries. The Notes will rank senior in right of payment to any of Conifer’s existing and future indebtedness that is by its terms expressly subordinated or junior in right of payment to the Notes. The Notes will rank equally in right of payment to all of Conifer’s existing and future senior indebtedness, but will be effectively subordinated to any secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. In addition, the Notes will be structurally subordinated to the obligations of Conifer’s subsidiaries.

 

  As of June 30, 2018, Conifer had (i) $30.0 million in outstanding indebtedness in private placement subordinated notes governed by that certain note purchase agreement, by and between the Company and Elanus Capital Investments Master SP Series 3, (“Elanus”) dated September 29, 2017, as amended by the First Amendment dated as of June 21, 2018 (collectively, the “Loan Agreement”), and (ii) revolving credit availability of $10.0 million under that certain secured Credit Agreement dated as of June 21, 2018 (the “Senior Credit Facility”) with The Huntington National Bank. No amounts are currently outstanding under the Senior Credit Facility.

 

Use of Proceeds

We estimate that the net proceeds of this offering will be approximately $         million, after deducting underwriting discounts and commissions and other estimated offering expenses. We intend to use $         million of the net proceeds from this offering to fund the redemption of a portion of the existing subordinated notes under the Loan Agreement, and the balance of the net proceeds to pay fees and expenses associated with the foregoing. Following the completion of this offering, we intend to refinance the remaining outstanding indebtedness under the Loan Agreement with Elanus on an unsecured basis. See “Use of Proceeds.”


 

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Events of Default

The Notes will contain events of default, the occurrence of which may result in the acceleration of Conifer’s obligations under the Notes in certain circumstances. See “Description of the Notes — Events of Default; Waiver.”

 

Certain Covenants

The Notes will be issued under an indenture and supplemental indenture (collectively, the “Indenture”) to be dated as of the issuance date between Conifer and Wilmington Trust, National Association, as Trustee. The Indenture contains covenants that, among other things, limit: (i) the ability of Conifer to merge or consolidate, or lease, sell, assign or transfer all or substantially all of its assets; (ii) the ability of Conifer to sell or otherwise dispose of the equity securities of certain of its subsidiaries; and (iii) the ability of Conifer to permit certain of its subsidiaries to merge or consolidate, or lease, sell, assign or transfer all or substantially all of their respective assets. These covenants are subject to a number of important exceptions, qualifications and limitations. See “Description of the Notes —Merger, Consolidation, Sale, Lease or Conveyance” and “— Certain Covenants.”

 

Form

The Notes will be evidenced by global notes deposited with the Trustee, as custodian for DTC. Beneficial interests in the global notes will be shown on, and transfers of those beneficial interests can only be made through, records maintained by DTC and its participants.

 

Denominations

The Notes will be issued only in minimum denominations of $25 and integral multiples of $25 in excess thereof or in units, each representing $25.

 

Currency

Principal and interest on the Notes will be payable in U.S. dollars.

 

Further Issuances

Conifer may, from time to time, without notice to or consent of the holders of the Notes, increase the aggregate principal amount of the notes outstanding by issuing additional notes in the future with the same terms as the Notes, except for the issue date and offering price. Such additional notes will be consolidated with the Notes issued in this offering and form a single series.

 

Listing

Conifer has applied to list the Notes on the Nasdaq Global Market. If the listing is approved, trading of the Notes on the Nasdaq Global Market is expected to commence within 30 days after the initial delivery of the Notes. Currently, there is no public market for the Notes.

 

Trustee

Wilmington Trust, National Association

 

Governing Law

The Indenture and the Notes will be governed by the laws of the State of New York. The Indenture will be subject to the provisions of the Trust Indenture Act of 1939, as amended.


 

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Tax Considerations

You should consult your tax advisors concerning the U.S. federal income tax consequences of owning the Notes in light of your own specific situation, as well as consequences arising under the laws of any other taxing jurisdiction. See “Material U.S. Federal Income Tax Consequences.”

 

Risk Factors

An investment in the Notes involves certain risks. Before making an investment decision, you should carefully consider the risks described under “Risk Factors” beginning on page 14 of this prospectus and in Conifer’s Annual Report on Form 10-K/A for the year ended December 31, 2017 and Conifer’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which are incorporated by reference into this prospectus.


 

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Summary Consolidated Financial Data

The summary historical financial data set forth below should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and the notes to those financial statements contained in our Annual Report on Form 10-K/A for the year ended December 31, 2017 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, both of which are incorporated by reference into this prospectus.

We have derived the summary historical consolidated financial data from:

 

   

The audited consolidated financial statements for the year ended December 31, 2017; and

 

   

The unaudited consolidated interim financial information for the six months ended June 30, 2018 and June 30, 2017.

Historical results are not necessarily indicative of results of future operations, and results for any interim period are not necessarily indicative of the results that may be expected for a full year.

 

     Six Months
Ended

June 30,
    Six Months
Ended

June 30,
    Year ended December 31,  
     2018     2017     2017     2016     2015  
     (Dollars in thousands)  

Gross written premiums

     50,299       53,455       114,284       114,923       93,750  

Gross earned premiums

     55,581       56,602       114,737       104,713       89,216  

Ceded earned premiums

     (7,842     (7,965     (23,008     (15,086     (22,451
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earned premiums

     47,739       48,637       91,729       89,627       66,765  

Net investment income

     1,639       1,240       2,728       2,173       1,902  

Net realized investment gains (losses) income

     173       (8     70       1,365       285  

Change in fair value of equity securities

     (268     —         —         —         —    

Other gains (losses)

     —         750       750       (400     104  

Other income

     807       726       1,560       1,118       1,667  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     50,090       51,345       96,837       93,883       70,723  

Loss and loss adjustment expenses, net

     28,396       32,407       73,917       59,003       38,882  

Policy acquisition costs

     12,985       12,900       26,245       25,280       16,183  

Operating expenses

     8,489       8,900       17,367       17,596       14,806  

Income (loss) from operating activities, before tax

     315       (3,604     (21,512     (8,961     463  

Interest expense

     1,236       443       1,362       647       769  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     51,106       54,650       118,891       102,526       70,640  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income before tax

     (1,016     (3,305     (22,054     (8,643     83  

Equity earnings (losses) from affiliate, net of tax

     144       164       65       129       (52

Income tax (benefit) expense

     28       (275     (447     (77     48  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (900     (2,866     (21,542     (8,437     (17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Key Financial Ratios:

          

Loss ratio

     58.5     65.7     79.2     65.0     56.8

Policy acquisition costs

     26.7     26.2     28.2     27.8     23.7

Operating expenses

     17.5     18.0     18.6     19.4     21.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expense ratio

     44.2     44.2     46.8     47.2     45.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined Ratio

     102.7     109.9     126.0     112.2     102.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss per common share, diluted

   $ (0.11   $ (0.38   $ (2.74   $ (1.11   $ (0.09

Book value per common share

   $ 5.89     $ 8.64     $ 6.20     $ 8.88     $ 10.11  


 

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RISK FACTORS

An investment in the Notes involves various material risks. Before making an investment in the Notes offered hereby, you should carefully consider the risk factors discussed below and in our Annual Report on Form 10-K/A for the fiscal year ended December 31 2017, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, together with all of the other information included in, or incorporated by reference into, this prospectus. Any of these risks could cause our actual results to vary materially from recent results or from anticipated future results or could materially and adversely affect our business, financial condition and results of operations. The occurrence of any of these risks might cause you to lose all or part of your investment. Some statements in this prospectus, including such statements in the following risk factors, constitute forward-looking statements. See the section of this prospectus entitled “Special Note Regarding Forward-Looking Statements and Industry Data.”

Risks Related to the Notes

There are limited covenants in the Indenture.

In addition to our currently outstanding indebtedness and other liabilities and any Notes issued pursuant to this offering, the Indenture does not restrict us or our subsidiaries from incurring additional debt or other liabilities, including additional senior debt or secured debt under our secured credit facilities. If we incur additional debt or liabilities, our ability to pay the obligations on the Notes could be adversely affected.

Our indebtedness, including the indebtedness we or our subsidiaries may incur in the future, could have important consequences for the holders of the Notes, including:

 

   

limiting our ability to satisfy our obligations with respect to the Notes;

 

   

increasing our vulnerability to general adverse economic and industry conditions;

 

   

limiting our ability to obtain additional financing to fund future working capital, capital expenditures, and other general corporate requirements;

 

   

requiring a substantial portion of our cash flow from operations for the payment of principal of, and interest on, our indebtedness and thereby reducing our ability to use our cash flow to fund working capital, capital expenditures and general corporate requirements; and

 

   

limiting our flexibility in planning for, or reacting to, changes in our business and the industry; and putting us at a disadvantage compared to competitors with less indebtedness.

In addition, we are not restricted under the Indenture from granting security interests in our assets, except to the extent described under “Description of the Notes — Merger, Consolidation, Sale, Lease or Conveyance” and “— Certain Covenants” in this prospectus, or from paying dividends or issuing or repurchasing securities.

Moreover, the Indenture does not require us to maintain any financial ratios or specific levels of net worth, revenues, income, cash flow or liquidity and, accordingly, does not protect holders of the Notes in the event that we experience material adverse changes in our financial condition or results of operations. Holders of the Notes are also not protected under the Indenture in the event of a highly leveraged transaction, reorganization, default under our existing indebtedness, restructuring, merger or similar transaction, except to the extent described under “Description of the Notes — Merger, Consolidation, Sale, Lease or Conveyance” and “— Certain Covenants” in this prospectus.

For these reasons, you should not consider the covenants in the Indenture a significant factor in evaluating whether to invest in the Notes.

The Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

The Notes are obligations exclusively of Conifer Holdings, Inc. and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiary we

 

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may acquire or create in the future. Any assets of our subsidiaries will not be directly available to satisfy the claims of our creditors, including holders of the Notes. Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, the Notes will be structurally subordinated to all indebtedness and other liabilities of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish. Our subsidiaries may incur substantial indebtedness in the future, all of which would be structurally senior to the Notes.

Servicing our indebtedness will require a significant amount of cash. Our ability to generate sufficient cash depends on many factors, some of which are not within our control.

Our ability to make payments on our indebtedness (including the Notes) will depend on our ability to generate cash in the future. To a certain extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we are unable to generate sufficient cash flow to service our debt and meet our other commitments, we may need to restructure or refinance all or a portion of our debt, sell material assets or operations or raise additional debt or equity capital. We may not be able to effect any of these actions on a timely basis, on commercially reasonable terms or at all, and these actions may not be sufficient to meet our capital requirements. In addition, the terms of our existing or future debt arrangements may restrict us from effecting any of these alternatives.

Redemption of the subordinated notes in full is dependent on obtaining additional financing.

On September 29, 2017, Conifer entered into a note purchase agreement, as amended by the First Amendment dated as of June 21, 2018 (collectively, the “Loan Agreement”), with Elanus Capital Investments Master SP Series 3 (“Elanus”). Pursuant to the Loan Agreement, Conifer issued $30.0 million aggregate principal amount of its 8% subordinated notes due 2032, in a private placement. The subordinated notes have a maturity date of September 29, 2032, and bear interest, payable quarterly at a fixed annual rate of 8.0%. On the fifth and tenth anniversary of the subordinated notes, the interest rate resets to 1,250 basis points and 1,500 basis points, respectively, above the 5-year mid-swap rate. The subordinated notes include an issuer call option for all of the subordinated notes at par from July 31, 2018, through October 31, 2018, and at 105% of par any time after September 29, 2020.

Elanus and Conifer have entered into a Waiver Letter permitting Conifer to use any amount of the proceeds of this offering to redeem the subordinated notes, in whole or part, however, Conifer cannot redeem the subordinated notes under the Loan Agreement in full without financing in addition to the proceeds from this offering. While Conifer intends to refinance the remaining balance under the Loan Agreement with Elanus on an unsecured basis following the completion of this offering, and Elanus has agreed to negotiate with Conifer in good faith to refinance such remaining balance prior to October 31, 2018, Conifer has no letter of intent or loan commitment with Elanus regarding such refinancing. There can be no assurance that these refinancing arrangements can be concluded on an unsecured basis or on other acceptable terms, in time to redeem the subordinated notes before the at-par issuer call option ends on October 31, 2018, or at all. The closing of the offering of the Notes is not conditioned on the refinancing.

Our ability to meet our obligations on our outstanding debt obligations, including making principal and interest payments on the Notes, may be limited by our holding company structure and regulatory constraints restricting dividends or other distributions by our Insurance Company Subsidiaries.

We are a holding company that transacts the majority of our business through our Insurance Company Subsidiaries and, as a result, our principal sources of funds are dividends and other payments from our Insurance

 

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Company Subsidiaries, including intercompany service fees. Our ability to meet our obligations on our outstanding debt obligations, including making principal and interest payments on the Notes, depends on continuing to receive sufficient funds from our Insurance Company Subsidiaries. We have met, and expect to continue to meet our outstanding debt obligations, including making principal and interest payments on the Notes, primarily through intercompany service fees we receive. We also may use dividends paid to us by our Insurance Company Subsidiaries to meet part or all of our debt obligations, including making principal and interest payments on the Notes. State insurance laws, however, limit the ability of our Insurance Company Subsidiaries to pay dividends and require them to maintain specified minimum levels of statutory capital and surplus. The aggregate maximum amount of dividends permitted by law to be paid by an insurance company does not necessarily define an insurance company’s actual ability to pay dividends. The actual ability to pay dividends may be further constrained by business and regulatory considerations, such as the impact of dividends on surplus, by our competitive position and by the amount of premiums that we can write. As a result, our ability to use dividends as a source of funds to meet part or all of our debt obligations, including making principal and interest payments on the Notes, may be significantly limited. Any significant reduction in the intercompany service fees we receive, and any regulatory and other limitations on the payment of dividends to us by our Insurance Company Subsidiaries, may adversely affect our ability to pay interest on the Notes as it comes due and the principal of the Notes at their maturity.

We may be able to incur substantially more debt.

Conifer may be able to incur substantial indebtedness in the future and such debt may be secured debt or debt of its subsidiaries. The terms of the Indenture governing the notes will not prohibit Conifer or its subsidiaries from incurring unsecured debt and the limitation on incurring secured debt is subject to important limitations, qualifications and exceptions. If Conifer incurs any secured debt (including secured revolving loans under our Senior Credit Facility) or any of its subsidiaries incur any debt, all such debt will be effectively senior to the Notes either to the extent of the value of the collateral securing such debt or structurally, and if Conifer incurs any additional indebtedness that ranks equally with the Notes, the holders of that debt will be entitled to share ratably with the holders of the Notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of Conifer. If new debt is added to Conifer’s current debt levels, or Conifer’s subsidiaries incur additional debt, the related risks Conifer faces will increase.

No market currently exists for the Notes and an active trading market may not develop.

The Notes are a new issue of securities with no established trading market. We have applied for listing of the Notes on the Nasdaq Global Market, but no assurance can be given as to the approval of the Notes for listing or, if listed, the continued listing for the term of the Notes, or the liquidity or trading market for the Notes. There can be no assurance that a secondary market for the Notes will develop. We are not required to maintain a listing on the Nasdaq Global Market or any other exchange. Even if the listing of the Notes on the Nasdaq Global Market is approved, we cannot assure you that a market will develop, or continue, or that you will be able to sell your Notes easily.

The liquidity of any market for the Notes will depend upon various factors, including:

 

   

the number of holders of the Notes;

 

   

the interest of securities dealers in making a market for the Notes;

 

   

the overall market for debt securities;

 

   

our financial performance and prospects; and

 

   

the prospects for companies in our industry generally.

 

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Accordingly, we cannot assure you that an active trading market will develop, or continue, for the Notes. If the Notes are traded after their initial issuance, they may trade at a discount from their initial offering price, depending upon prevailing interest rates and other factors, including those listed above. See “— The price at which holders will be able to sell their Notes prior to maturity will depend on a number of factors and may be substantially less than the amount originally invested” below.

Volatility in the market price and trading volume of our common stock could adversely impact the trading price of the Notes.

The stock market in recent years has experienced significant price and volume fluctuations that have often been unrelated to the operating performance of companies. In addition, the market price of our common stock historically has been volatile. The market price of our common stock could fluctuate significantly for many reasons, including in response to the risks described in this section or in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2017, or our subsequently filed quarterly reports on Form 10-Q or elsewhere in this prospectus for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors or suppliers regarding their own performance, as well as industry conditions and general financial, economic and political instability. A decrease in the market price of our common stock would likely adversely impact the trading price of the Notes. The market price of our common stock could also be affected by possible sales of our common stock by investors who view the Notes as a more attractive means of equity participation in us and by hedging or arbitrage trading activity that may develop involving our common stock. This trading activity could, in turn, affect the trading price of the Notes. This volatility in the market price of our common stock may affect the price at which you could sell the shares of our common stock you receive upon conversion of your Notes, if any, and the sale of substantial amounts of our common stock could adversely affect the price of our common stock and the value of your Notes.

If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.

Any default under the agreements governing our indebtedness, including other indebtedness to which we may be a party that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under any other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders under other debt that we may incur in the future to avoid being in default. If we breach our covenants under other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under other debt, the lenders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations could proceed against the collateral securing the debt. See “Description of the Notes” in this prospectus.

 

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The price at which holders will be able to sell their Notes prior to maturity will depend on a number of factors and may be substantially less than the amount originally invested.

We believe that the value of the Notes in any secondary market will be affected by the supply and demand of the Notes, the interest rate, their ranking and a number of other factors. The following factors, among others, may have an impact on the market value of the Notes:

 

   

United States interest rates. We expect that the market value of the Notes will be affected by actual or anticipated changes in interest rates in the United States. In general, if U.S. interest rates increase, the market value of the Notes may decrease.

 

   

Our credit ratings, financial condition and results. Actual or anticipated changes in our A.M. Best ratings, other credit ratings, financial condition or results of operations may affect the market value of the Notes.

 

   

Our other existing and future liabilities. Existing and any future indebtedness and other obligations of our, or of our subsidiaries, may affect the market value of the Notes.

 

   

General economic conditions. General economic conditions may affect the market value of the Notes.

 

   

Market for similar securities. The market for similar securities may affect the market value of the Notes.

Some of these factors are interrelated in complex ways. As a result, the effect of any one factor, such as an increase in United States interest rates, may be offset or magnified by the effect of one or more other factors.

We may redeem the Notes before maturity, and holders of the redeemed Notes may be unable to reinvest the proceeds at the same or a higher rate of return.

We may redeem all or a portion of the Notes as described under “Description of the Notes — Optional Redemption.” If redemption does occur, holders of the redeemed Notes may be unable to reinvest the money received in the redemption at a rate that is equal to or higher than the rate of return on the Notes.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This prospectus, including the sections titled “Summary,” “Risk Factors,” and the documents incorporated by reference herein contain forward-looking statements. All statements contained in this prospectus, including the sections titled “Summary,” “Risk Factors,” and the documents incorporated by reference, other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. Forward-looking statements convey our current expectations or forecasts of future events. You can identify forward-looking statements by terminology such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “predicts,” “potential,” “seeks,” “should,” “will,” or “would,” or the negative of these terms, or similar expressions.

Unless otherwise indicated, information contained in this prospectus, and the documents incorporated by reference concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity, and market share, is based on information from various sources (including industry publications, surveys and forecasts, and our internal research), on assumptions that we have made, which we believe are reasonable, based on those data and other similar sources and on our knowledge of the markets for our services. While we believe the market position, market opportunity, and market share information included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions, and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates included in this prospectus.

There are a number of important factors that could cause our actual results to differ materially from the results anticipated by these forward-looking statements. These important factors include, but are not limited to:

 

   

the occurrence of severe weather conditions and other catastrophes;

 

   

the cyclical nature of the insurance industry, resulting in periods during which we may experience excess underwriting capacity and unfavorable premium rates;

 

   

our ability to obtain reinsurance coverage at reasonable prices or on terms that adequately protect us;

 

   

a decline in our financial strength rating resulting in a reduction of new or renewal business;

 

   

our ability to manage our growth effectively;

 

   

exposure to credit risk, interest rate risk and other market risk in our investment portfolio;

 

   

competition within the property and casualty insurance industry;

 

   

the inherent uncertainty of estimating reserves and the possibility that incurred losses may be greater than our loss and loss adjustment expense reserves;

 

   

inaccurate estimates and judgments in our risk management may expose us to greater risks than intended;

 

   

the potential loss of key members of our management team or key employees and our ability to attract and retain personnel;

 

   

potential effects on our business of emerging claim and coverage issues;

 

   

losses in our investment portfolio;

 

   

additional government or market regulation;

 

   

a forced sale of investments to meet our liquidity needs;

 

   

our underwriters and other associates could take excessive risks;

 

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losses resulting from reinsurance counterparties failing to pay us on reinsurance claims;

 

   

the potential impact of internal or external fraud, operational errors, systems malfunctions or cybersecurity incidents;

 

   

an adverse outcome in a legal action that we are or may become subject to in the course of our insurance operations;

 

   

failure to maintain effective internal controls in accordance with the Sarbanes-Oxley Act of 2002; and

 

   

other factors that we discuss in the section titled “Risk Factors” in this prospectus, or in any of the documents incorporated by reference herein.

You should read these factors and the other cautionary statements made in this prospectus, and the documents incorporated by reference as being applicable to all related forward-looking statements wherever they appear in this prospectus or incorporated documents. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. The forward-looking statements contained in this prospectus are excluded from the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act which does not extend to initial public offerings. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Any forward-looking statement made by us speaks only as of the date on which we make it, and is expressly qualified in its entirety by the foregoing cautionary statements.

 

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USE OF PROCEEDS

We will receive net proceeds from this offering of approximately $         million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in full, the net proceeds to us will be approximately $         million.

We intend to use $         million of the net proceeds from this offering to redeem a portion of the existing subordinated notes under the Loan Agreement, and the balance of the net proceeds to pay fees and expenses associated with the foregoing.

Under the Loan Agreement, Conifer issued an aggregate amount of $30.0 million in subordinated notes in a private placement. The subordinated notes have a maturity date of September 29, 2032, and bear interest, payable quarterly at a fixed annual rate of 8.0%, and allow for up to four quarterly interest deferrals. On the fifth and tenth anniversary of the subordinated notes, the interest rate resets to 1,250 basis points and 1,500 basis points, respectively, above the 5-year mid-swap rate. The subordinated notes include an issuer call option at par from July 31, 2018, through October 31, 2018, and at 105% of par any time after September 29, 2020. Elanus and Conifer have entered into a Waiver Letter permitting Conifer to use any amount of the proceeds of this offering to redeem the subordinated notes, in whole or part. The carrying value of the subordinated notes was $29.1 million at June 30, 2018, which reflects an offset by $940,000 of debt issuance costs that will be amortized through interest expense over the life of the loan.

Following the completion of this offering but prior to October 31, 2018, Conifer intends to refinance the remainder of the outstanding debt incurred under the Loan Agreement with Elanus on an unsecured basis, in order to redeem the remainder of the subordinated notes.

This offering is not conditioned on such refinancing, and although Elanus has agreed to negotiate with Conifer in good faith to refinance the remainder of the outstanding debt, we do not have any letter of intent or loan commitment with Elanus regarding such refinancing. We can give no assurances of the terms of any new financing agreement or that we will be able to refinance the remainder of the outstanding debt incurred under Loan Agreement on an unsecured basis and on other acceptable terms, or at all.

 

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CAPITALIZATION

The following table sets forth our unaudited cash and cash equivalents and capitalization as of June 30, 2018:

 

   

on an actual basis;

 

   

on an as adjusted basis to reflect issuance of the Notes and the anticipated application of the proceeds from this offering to redeem a portion of the existing subordinated notes under the Loan Agreement (assuming no exercise of the underwriters’ option to purchase additional Notes and the application of the net proceeds therefrom as described in “Use of Proceeds.”)

This table is unaudited and should be read in conjunction with the sections “Use of Proceeds” and our consolidated financial statements and the notes thereto in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2017 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which are incorporated by reference into this prospectus.

 

     June 30, 2018  
     Actual      As Adjusted  
     (dollars in thousands)  

Cash and cash equivalents

     21,380     
  

 

 

    

 

 

 

Debt

     

Subordinated notes(1)(2)

     29,060     

Revolver

     —          —    

Notes offered hereby

     —       
  

 

 

    

 

 

 

Total debt

     29,060     

Shareholders’ equity

     

Common stock

     86,659        86,659  

Accumulated deficit

     (33,431   

Accumulated other comprehensive income (loss)

     (3,060      (3,060
  

 

 

    

 

 

 

Total shareholders’ equity

     50,168     
  

 

 

    

 

 

 

Total capitalization

     79,228     
  

 

 

    

 

 

 

 

(1)

Conifer intends to use $         of the proceeds from this offering to redeem              of the subordinated notes.

(2)

Includes $         of debt issuance costs that will be immediately expensed through interest expense upon redemption of the subordinated notes.

 

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DESCRIPTION OF THE NOTES

Conifer will issue the                 Senior Unsecured Notes due 20     (the “Notes”) under an indenture, to be dated as of                 , 2018, as amended and supplemented by a supplemental indenture, to be dated as of                 , 2018, between Conifer and Wilmington Trust, National Association, as trustee. The form of the indenture has been filed as an exhibit to the registration statement. Throughout this summary, we refer to both the indenture and supplemental indenture for the Notes together as the “Indenture”. The terms of the Notes include those provisions contained in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the “TIA”). The following description of the Notes and the Indenture may not be complete and is subject to and qualified in its entirety by reference to all of the provisions of the Notes and the Indenture. Wherever we refer to particular sections or defined terms of the Indenture, it is our intent that those sections or defined terms will be incorporated by reference in this prospectus. We urge you to read these documents because they, and not this description, define your rights as a holder of the Notes.

General

The Notes will be general unsecured senior obligations of Conifer, and will be issued in an initial aggregate principal amount of $         and will mature on                  (referred to herein as the “maturity date”), unless redeemed earlier as described below. The Notes will be issued only in fully registered book-entry form without coupons and in minimum denominations of $25 and integral multiples of $25 in excess thereof or in units, each representing $25. The Notes will be issued pursuant to the Indenture. The Notes will not be guaranteed by any of Conifer’s subsidiaries.

We may, without the consent of any of the holders of the Notes, create and issue additional senior unsecured debt securities so that those additional senior unsecured debt securities would form a single series with the Notes (referred to herein as “same-series debt securities”) or that would form a new series of senior unsecured debt securities. Such same-series debt securities would have the same terms as the Notes in all respects, except for the issue date, the issue price and the initial interest payment date. The Notes offered by this prospectus and any same-series debt securities would rank equally and ratably and would be treated as a single series of senior unsecured debt securities for all purposes under the Indenture.

The Notes will bear interest at the rate of     % per year, accruing from                 . Interest on the Notes will be payable quarterly in arrears on                 ,                 ,                  and                  of each year (each referred to herein as an “interest payment date”), commencing                 , to the persons in whose names the Notes are registered at the close of business on the preceding                 ,                 ,                  and                 , respectively. Interest on the Notes will be computed on the basis of a 360-day year of twelve 30-day months.

If any interest payment date, redemption date or the maturity date of the Notes is not a business day, then payment of the principal and interest may be made on the next business day. In that case, no interest will accrue on the amount payable for the period from and after the applicable interest payment date, redemption date or maturity date, as the case may be.

The registered holder of a Note will be treated as the owner of the Note for all purposes. Only registered holders have rights under the Indenture. Payment of the principal of, and interest on, the Notes represented by a global note registered in the name of or held by DTC or its nominee will be made in immediately available funds to DTC or its nominee, as the case may be, as the registered owner and holder of such global note. See “Book-Entry, Delivery and Form of Notes” below for more information.

The Indenture contains no covenants or restrictions restricting the incurrence of debt by the Company or its subsidiaries except to the extent describe under the heading “— Certain Covenants” below. The Indenture contains no financial covenants and does not restrict Conifer from paying dividends or issuing or repurchasing other securities, and does not contain any provision that would provide protection to the holders of the Notes against a sudden and dramatic decline in credit quality resulting from a merger, takeover, recapitalization or

 

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similar restructuring or any other event involving the Company or its subsidiaries that may adversely affect our credit quality, except to the extent described under the headings “— Merger, Consolidation, Sale, Lease or Conveyance” and “— Certain Covenants” below.

The Notes will not be subject to, or entitled to the benefits of, a sinking fund or repurchase by Conifer at the option of the holders. In addition, the Notes will not be convertible into, or exchangeable for, any other securities. We may from time to time purchase the Notes in the open market or otherwise.

Interest

Interest on the Notes will accrue at the rate of     % per annum, accruing from             . Interest on the Notes will be payable quarterly in arrears on             ,             ,             and             of each year, commencing             , to the persons in whose names the Notes are registered at the close of business on the preceding             ,             ,             and             , respectively. Interest on the Notes will be computed on the basis of a 360-day year of twelve 30-day months.

If an interest payment date, redemption date or the maturity date falls on a day that is not a business day, the related payment of interest and principal will be made on the next day that is a business day, and no interest on the Notes or such payment will accrue for the period from and after such interest payment date, redemption date or maturity date, as the case may be, to the date payment is made. A “business day” means any day other than a Saturday, a Sunday or a day on which banking institutions in the City of New York or the place for payment are authorized by law, regulation or executive order to remain closed.

Methods of Receiving Payments on the Notes

The Notes will be payable as to principal and interest at the office or agency of the paying agent (which may be Conifer) or, at our option, payment of interest may be made by check mailed to the holders of the Notes at their addresses set forth in the register of holders; provided, however, that with respect to all payments of principal and interest with respect to a Note owned by a Person who owns at least $5,000,000 aggregate principal amount of Notes, the Company will provide at least 10 business days prior written notice of any payment by wire transfer to such Person.

Optional Redemption

Beginning on             , 20     and prior to the maturity date, we may, at our option, redeem the Notes in whole at any time or in part from time to time, on not less than 30 days and not more than 60 days’ prior notice mailed to the holders of the Notes. The Notes will be redeemable at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to, but not including, the date of redemption.

On and after any redemption date, interest will cease to accrue on the Notes called for redemption. On or prior to 11:00 AM New York City time on any redemption date, we are required to deposit with the paying agent money sufficient to pay the redemption price of and accrued interest on the Notes to be redeemed on such date.

Selection and Notice

If less than all of the Notes are to be redeemed at any time, the Notes will be redeemed according to DTC’s applicable procedures or, in the case of definitive notes, by lot, pro rata or by such other method as the Trustee will deem fair and appropriate. Notes and portions of Notes selected shall be in minimum amounts of $25 or whole multiples of $25 in excess thereof, except that, if all of the Notes of a holder are to be redeemed, the entire outstanding amount of Notes held by such holder, shall be redeemed.

 

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Notice of redemption will be given to each holder of Notes to be redeemed at least 30 days and not more than 60 days before the applicable redemption date.

If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount of that Note that is to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the holder of any Note being redeemed in part upon surrender for cancellation of the original Note. Notes called for redemption become due and payable on the date fixed for redemption.

Listing

We have applied to list the Notes on the Nasdaq Global Market. If the listing is approved, we expect trading in the Notes to begin within 30 days of             , the original issue date.

Events of Default; Waiver

An “event of default,” when used in the Indenture, means any of the following:

 

   

default in the payment of any installment of interest on the Notes as and when due and payable, and continuance of such default for a period of 30 days;

 

   

default in the payment of the principal on the Notes as and when due and payable either at maturity, upon redemption, by declaration of acceleration or otherwise;

 

   

failure to duly observe or perform any of the covenants, warranties or agreements on the part of Conifer in respect of the Notes in the Indenture (other than a covenant, warranty or agreement, a default in whose performance or whose breach is specifically dealt with in the section of the Indenture governing events of default) and the continuance of such default or breach for a period of 90 days after the date on which written notice of such failure, specifying such failure and requiring the same to be remedied, shall have been given to Conifer by the Trustee, by registered mail, or to Conifer and the Trustee by the holders of at least 25% in aggregate principal amount of the Notes;

 

   

if any event of default as defined in any mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness of Conifer, whether such indebtedness now exists or is hereafter created or incurred, happens and consists of default in the payment of more than $15 million in principal amount of such indebtedness at the maturity thereof, after giving effect to any applicable grace period, or results in such indebtedness in principal amount in excess of $15 million becoming or being declared due and payable prior to the date on which it would otherwise become due and payable, and such default is not cured or such acceleration is not rescinded or annulled within a period of 30 days after the date on which written notice of such failure, specifying such failure and requiring the same to be remedied, shall have been given to Conifer by the Trustee, by registered mail, or to Conifer and the Trustee by the holders of at least 25% in aggregate principal amount of the Notes;

 

   

the failure by Conifer within 60 days to pay, bond or otherwise discharge any uninsured judgment or court order for the payment of money in excess of $15 million, which is not stayed on appeal or is not otherwise being appropriately contested in good faith;

 

   

a decree or order by a court having jurisdiction in the premises shall have been entered adjudging Conifer bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of Conifer under the Federal bankruptcy laws or any other similar applicable Federal or state law, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee or other similar official in bankruptcy or insolvency of Conifer or of all

 

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or substantially all of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or

 

   

Conifer shall institute proceedings to be adjudicated voluntarily bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking an arrangement or a reorganization under the Federal bankruptcy laws or any other similar applicable Federal or state law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee or other similar official in bankruptcy or insolvency of it or of all or substantially all of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due.

If an event of default occurs and continues, the Trustee by notice to Conifer, or the holders of at least 25% in aggregate principal amount of the outstanding Notes by notice to Conifer (with a copy to the Trustee), may declare the entire principal of and all accrued but unpaid interest on all the Notes to be due and payable immediately. Subject to certain conditions, but before a judgment or decree for payment of the money due has been obtained, such declaration and its consequences may be rescinded and annulled by the holders of a majority in principal amount of the outstanding Notes. The Indenture also provides that the holders of a majority in principal amount of the Notes may waive any existing default with respect to the Notes and its consequences, except a default in the payment of the principal of and interest on the Notes.

The holders of a majority in principal amount of the Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may decline to follow any such direction if the Trustee determines upon advice of counsel that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith determines that the action or proceeding so directed would involve the Trustee in personal liability or if the Trustee in good faith determines that the actions or forbearances specified in or pursuant to such direction would be unduly prejudicial to the interests of holders of the Notes not joining in the giving of such directions. In addition, the Trustee may take any other action deemed proper by the Trustee not inconsistent with such direction received from the holders of the Notes. The Trustee shall not be obligated to take any action at the direction of holders unless such holders have provided to the Trustee security or indemnity satisfactory to the Trustee.

In case an event of default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any holders of Notes unless such holders have offered to the Trustee indemnification satisfactory to the Trustee. Except to enforce the right to receive payment of principal, premium, if any, or interest, when due, no holder of a Note may pursue any remedy with respect to the Indenture or such Note unless:

 

   

such holder has previously given the Trustee written notice of the occurrence of an event of default and the continuance thereof;

 

   

holders of not less than 25% in aggregate principal amount of the outstanding Notes have made a written request to the Trustee to pursue the remedy;

 

   

such holders provide to the Trustee such reasonable indemnity as the Trustee may require against any loss, liability or expense;

 

   

the Trustee has not complied with such request within 60 days after receipt of the request and the provision of security or indemnity reasonably acceptable to the Trustee; and

 

   

the holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction inconsistent with the request within such 60-day period.

 

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Except in the case of a default or event of default in payment of principal of and interest on any Note, the Trustee will be protected in withholding notice of a default or event of default if and so long as the Trustee in good faith determines that withholding the notice is in the interests of the holders of the Notes. Conifer is required to deliver to the Trustee annually a statement from its applicable officers regarding whether or not they have knowledge of any default or event of default. For purposes of this paragraph, “default” means any event which is, or after notice or lapse of time or both would become, an event of default under the Indenture with respect to the Notes.

Ranking

The Notes will be senior unsecured indebtedness of Conifer Holdings, Inc. only and will not be obligations of or guaranteed by any of its subsidiaries. As such, the Notes will:

 

   

rank senior in right of payment to any of Conifer existing and future indebtedness and other obligations that are, by their terms, expressly subordinated or junior in right of payment to the Notes;

 

   

rank equally in right of payment to all of Conifer existing and future unsecured indebtedness and other obligations that are not, by their terms, expressly subordinated or junior in right of payment to the Notes;

 

   

be effectively subordinated to all of Conifer existing and future secured indebtedness and other obligations to the extent of the value of the collateral securing such secured indebtedness and other obligations; and

 

   

be structurally subordinated to the indebtedness and other obligations of all of Conifer subsidiaries.

Merger, Consolidation, Sale, Lease or Conveyance

The terms of the Indenture and the Notes do not prevent any consolidation or merger of Conifer with or into any other person, or successive consolidations or mergers in which Conifer or its successor or successors is a party or parties, or prevent any sale, conveyance or lease of all or substantially all of the property of Conifer to any other person authorized to acquire and operate the same. However, the terms of the Indenture and the Notes require that any such consolidation, merger, sale, conveyance or lease be upon the condition that:

 

   

immediately after such consolidation, merger, sale, conveyance or lease, the person formed by or surviving any such consolidation or merger, or to which such sale, conveyance or lease is made, is not in default in the performance or observance of any of the terms, covenants and conditions of the Indenture to be kept or performed by Conifer; and

 

   

the due and punctual payment of the principal of and premium, if any, and interest on the Notes, and the due and punctual performance and observance of all of the covenants and conditions of the Indenture to be performed or observed by Conifer, are expressly assumed by the person (if other than Conifer) formed by such consolidation, or into which Conifer is merged, or by the person which shall have acquired or leased such property.

Upon any such consolidation or merger, sale, lease or conveyance, the successor corporation formed, or into which Conifer is merged or to which such sale, conveyance or transfer is made, shall succeed to, and be substituted for, Conifer under the Indenture with the same effect as if it had been an original party to the Indenture. As a result, Conifer will be released from all its liabilities and obligations under the Indenture and under the Notes.

Although there is a limited body of case law interpreting the phrase “substantially all” and similar phrases, there is no precisely established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve “substantially all” the property or assets of a person.

 

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Certain Covenants

Subject to certain exceptions, the Indenture:

 

   

prohibits Conifer from, directly or indirectly, selling, assigning, pledging, transferring or otherwise disposing, and Conifer cannot permit any of its subsidiaries to, directly or indirectly, sell, pledge, assign, transfer or otherwise dispose of, shares of voting capital stock, or securities convertible into voting capital stock, or options, warrants or rights to subscribe for or purchase capital stock of a Material Subsidiary (as defined below); and

 

   

prohibits Conifer from permitting a Material Subsidiary to issue, sell or otherwise dispose of any shares of its voting capital stock or securities convertible into its voting capital stock or options, warrants or rights to subscribe for or purchase its voting capital stock, unless Conifer will own, directly or indirectly, at least 90% of the issued and outstanding voting stock of the Material Subsidiary after giving effect to that transaction. The covenant described in the preceding sentence does not apply to any transaction of the type described above under “— Merger, Consolidation, Sale, Lease or Conveyance.”

Furthermore, under the Indenture, Conifer may not permit a Material Subsidiary to:

 

   

merge or consolidate with or into any corporation or other person, unless such Material Subsidiary is the surviving corporation or person, or unless Conifer will own, directly or indirectly, at least 90% of the surviving corporation’s issued and outstanding voting stock;

 

   

lease, sell, assign or transfer all or substantially all of its properties and assets to any corporation or other person (other than us), unless Conifer will own, directly or indirectly, at least 90% of the issued and outstanding voting stock of that corporation or other person; or

 

   

pay any dividend in a Material Subsidiary’s voting capital stock or make any other distribution in its voting capital stock, other than to Conifer or its other subsidiaries, unless the Material Subsidiary to which the transaction relates, after obtaining any necessary regulatory approvals, unconditionally guarantees payment of the principal and any premium and interest on the Notes.

A Material Subsidiary means a direct or indirect subsidiary of Conifer that is an insurance company with statutory surplus of at least $10 million for the most recently completed fiscal quarter.

However, Conifer may agree to any such merger or consolidation or sale, lease, assignment, pledge or transfer of securities, properties or assets if: (i) required by law and such lease, sale, assignment or transfer of securities is made to any person for the purpose of the qualification of such person to serve as a director; (ii) such lease, sale, assignment or transfer of securities is made by Conifer or any of its subsidiaries acting in a fiduciary capacity for any person other than Conifer or any of its subsidiaries; (iii) made in connection with the consolidation of Conifer with or the sale, lease or conveyance of all or substantially all of the assets of Conifer to, or merger of Conifer with or into, any other person (as to which the covenant described above under the heading “— Merger, Consolidation, Sale, Lease or Conveyance” shall apply); or (iv) it is required as a condition imposed by any law or any rule, regulation or order of any governmental agency or authority to the acquisition by Conifer of another entity; provided that in the case of (iv) only, after giving effect to such acquisition, (y) at least 90% of the issued and outstanding voting stock of such entity will be owned, directly or indirectly, by Conifer and (z) Conifer’s consolidated assets will be at least equal to 70% of its consolidated assets prior to the acquisition. These covenants will not prohibit Conifer or a Material Subsidiary from pledging any assets to secure borrowings incurred in the ordinary course of business.

Furthermore, for so long as the Notes are outstanding, Conifer may not under the Indenture, nor may it permit any of its subsidiaries to, incur debt for borrowed money, commitments for the extension of debt for borrowed money or other obligations in excess of the greater of (i) $10 million and (ii) 10% of shareholders’ equity as reported in the most recent consolidated financial statements filed with the Securities and Exchange

 

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Commission, in each case in the aggregate, which is secured by any shares of voting stock of a Material Subsidiary (or securities convertible into, or options, warrants or rights to subscribe for or purchase shares of that voting stock) without making effective provision for securing the Notes equally and ratably with that secured debt. However, this covenant will not apply (A) to any of the indebtedness described in the section “Description of Other Indebtedness”; or (B) to the extent that Conifer continues to own, directly or indirectly, at least 90% of the issued and outstanding voting stock of each Material Subsidiary (treating that encumbrance as a transfer of those shares to the secured party). The foregoing restriction does not apply to any:

 

   

pledge, encumbrance or lien to secure Conifer’s indebtedness or the indebtedness of a subsidiary as part of the purchase price of such shares of voting stock, or incurred prior to, at the time of or within 120 days after acquisition thereof for the purpose of financing all or any part of the purchase price thereof;

 

   

lien for taxes, assessments or other government charges or levies (i) which are not yet due or payable without penalty, (ii) which Conifer is contesting in good faith by appropriate proceedings so long as Conifer has set aside on its books such reserves as shall be required in respect thereof in conformity with generally accepted accounting principles or (iii) which secure obligations of less than $500,000 in amount; or

 

   

lien of any judgment, if that judgment (i) is discharged, or stayed on appeal or otherwise, within 90 days, (ii) is currently being contested in good faith by appropriate proceedings so long as Conifer has set aside on its books such reserves as shall be required in respect thereof in conformity with generally accepted accounting principles or (iii) involves claims of less than $500,000.

The holders of not less than a majority in aggregate principal amount of the Notes may waive compliance in a particular instance by Conifer with any provision of the Indenture or the Notes, including the foregoing covenants, except as otherwise stated below under “— Modification of the Indenture.”

Satisfaction and Discharge

The Indenture will be discharged and will cease to be of further effect as to all Notes (except for certain surviving rights of the Trustee and Conifer’s obligations with respect thereto), when:

(1) either: (a) all Notes that have been authenticated and delivered, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for which payment has been deposited in trust or segregated and held in trust by Conifer and thereafter repaid to Conifer, have been delivered to the Trustee for cancellation; or (b) all Notes that have not been delivered to the Trustee for cancellation (i) have become due and payable at their stated maturity, (ii) shall become due and payable within one year or (iii) if redeemable at Conifer’s option, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of Conifer and Conifer has irrevocably deposited with the Trustee or the paying agent, in trust, for the benefit of the holders of the Notes, cash in United States dollars and/or non-callable government securities in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium, if any, and accrued but unpaid interest, to the date of maturity or redemption, as the case may be;

(2) Conifer has paid all sums payable by it under the Indenture with respect to the Notes;

(3) Conifer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or on the redemption date, as the case may be; and

(4) Conifer has delivered to the Trustee an officers’ certificate and an opinion of counsel stating that the conditions precedent to the satisfaction and discharge of the Notes have been satisfied.

 

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Legal Defeasance and Covenant Defeasance

Legal Defeasance

Conifer will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes on the 91st day after it has made the deposit referred to below, and the provisions of the Indenture will cease to be applicable with respect to the Notes (except for, among other matters, certain obligations to register the transfer of or exchange of the Notes, to replace stolen, lost or mutilated Notes, to maintain paying agencies and to hold funds for payment in trust) if:

(1) Conifer has irrevocably deposited with the Trustee, in trust, cash in United States dollars and/or non-callable government securities that will provide funds in amount sufficient, without reinvestment, in the opinion of a nationally recognized public accounting firm, to pay the principal of, premium, if any, and accrued interest on the Notes at the time such payments are due or on the applicable redemption date in accordance with the terms of the Indenture;

(2) Conifer has delivered to the Trustee: (i) an opinion of counsel to the effect that beneficial owners of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance and will be subject to federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such defeasance had not occurred, which opinion of counsel must be based upon a ruling of the Internal Revenue Service to the same effect or a change in applicable federal income tax law or related treasury regulations after the date of the Indenture; and (ii) an opinion of counsel to the effect that the defeasance trust does not constitute an “investment company” within the meaning of the Investment Company Act of 1940 and, after the passage of 91 days following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally;

(3) no default (as defined above) or event of default will have occurred and be continuing on the date of such deposit, or insofar as events of default due to certain events of bankruptcy, insolvency or reorganization in respect of Conifer are concerned, during the period ending on the 91st day after the date of such deposit;

(4) Conifer shall have delivered to the Trustee an officers’ certificate and an opinion of counsel, each stating that, subject to certain assumptions and exclusions, all conditions precedent provided for or relating to the defeasance have been complied with; and

(5) the Trustee shall have received such other documents, assurances and opinions of counsel as the Trustee shall have reasonably required.

Covenant Defeasance

Conifer will not need to comply with certain restrictive covenants, and the provisions of the Indenture will cease to be applicable with respect to an event of default under the Notes other than an event of default due to its failure to pay the principal of or interest on the Notes when due, upon the satisfaction of the conditions described in clauses 1, 2, 3, 4 and 5 of the preceding paragraph.

If Conifer exercises its option to omit compliance with certain provisions of the Indenture as described in the immediately preceding paragraph and the Notes are declared due and payable because of the occurrence of an event of default that remains applicable, the amount of money and/or non-callable government securities on deposit with the Trustee may not be sufficient to pay amounts due on the Notes at the time of acceleration resulting from such event of default. In such event, Conifer will remain liable for such payments.

Modification of the Indenture

With the consent of the holders of greater than 50% in aggregate principal amount of the Notes then outstanding, waivers, modifications and alterations of the terms of the Indenture may be made which affect the

 

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rights of such holders of the Notes. However, no modification or alteration may, without the consent of all holders of the Notes then outstanding affected thereby:

 

   

change the stated maturity of the principal of, or any premium or any installment of interest on, the Notes;

 

   

reduce the principal amount of, or the rate, or modify the calculation of such rate, of interest on, or any premium payable upon the redemption of, the Notes;

 

   

change the redemption provisions of the Notes;

 

   

change the place of payment or the coin or currency in which the principal of or any premium or interest on the Notes is payable;

 

   

impair the right to institute suit for the enforcement of any payment on or after the stated maturity of the Notes or, in the case of redemption, on or after the redemption date;

 

   

modify any of the provisions of the indenture relating to the offices for notices and payments, filling vacancies in the Trustee’s office, and paying agent provisions in a manner adverse to holders of the debt securities; or

 

   

reduce the percentage of Notes, the holders of which are required to:

 

   

consent to any supplemental indenture;

 

   

rescind and annul a declaration that the Notes are due and payable as a result of the occurrence of an event of default;

 

   

waive any past event of default under the Indenture and its consequences; and

 

   

waive compliance with other specified provisions of the Indenture.

In addition, as described in “— Events of Default; Waiver” set forth above, holders of greater than 50% in aggregate principal amount of the Notes then outstanding may waive past events of default with respect to the Notes in specified circumstances and may direct the trustee in enforcement of remedies.

Conifer and the Trustee may, without the consent of any holders, modify and supplement the Indenture:

 

   

to evidence the succession of another corporation to Conifer under the Indenture, or successive successions, and the assumption by the successor corporation of our covenants, agreements and obligations pursuant to the Indenture;

 

   

to add to the covenants applicable to Conifer such further covenants, restrictions, conditions or provisions as our board of directors and the Trustee shall consider to be for the protection of the holders of the Notes, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions, conditions or provisions a default or event of default with respect to such series permitting the enforcement of all or any of the several remedies provided in the Indenture; provided, however, that in respect of any such additional covenant, restriction or condition, such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default;

 

   

to cure any ambiguity or to correct or supplement any provision contained in the Indenture or in any supplemental indenture which may be defective or inconsistent with any other provision contained in the Indenture or in any supplemental indenture or any description of such provision contained in this “Description of the Notes;”

 

   

to convey, transfer, assign, mortgage or pledge any property to or with the Trustee;

 

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to make other provisions in regard to matters or questions arising under the Indenture as shall not adversely affect the interests of the holders and to make any change that would provide additional rights or benefits to the holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such holder;

 

   

to evidence and provide for the acceptance of appointment by another corporation as a successor trustee under the Indenture with respect to the Notes and to add to or change any of the provisions of the Indenture as shall be necessary to provide for or facilitate the administration of the trusts under the indenture by more than one trustee;

 

   

to modify, amend or supplement the Indenture in such a manner as to permit the qualification of any supplemental indenture under the TIA as then in effect, except that nothing contained in the Indenture shall permit or authorize the inclusion in any supplemental indenture of the provisions referred to in Section 316(a)(2) of the TIA;

 

   

to provide for the issuance under the Indenture of debt securities in coupon form (including debt securities registrable as to principal only) and to provide for exchangeability of such debt securities with debt securities of the same series issued hereunder in fully registered form and to make all appropriate changes for such purpose;

 

   

to change or eliminate any of the provisions of the Indenture; provided, however, that any such change or elimination shall become effective only when there is no debt security outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; and

 

   

to establish any additional form of debt security and to provide for the issuance of any additional series of debt securities.

Outstanding Notes; Determinations of Holders’ Actions

Notes outstanding at any time are the Notes authenticated by the Trustee except for those cancelled by it, those mutilated, destroyed, lost or stolen that have been replaced by the Trustee, those delivered to the Trustee for cancellation and those described below as not outstanding. A Note does not cease to be outstanding because Conifer or an affiliate of Conifer holds the Note; provided, that in determining whether the holders of the requisite principal amount of Notes have given or concurred in any request, demand, authorization, direction, notice, consent, amendment or waiver, Notes owned by Conifer or an affiliate of Conifer will be disregarded and deemed not to be outstanding; provided further, that for purposes of determining whether the Trustee shall be protected in relying on such request, demand, authorization, notice, consent, amendment or waiver, only Notes which a responsible officer of the Trustee actually knows are so owned shall be disregarded. If the paying agent holds on a redemption date money or securities sufficient to pay Notes payable on that date, then immediately after such redemption date such Notes will cease to be outstanding.

The Trustee may make reasonable rules for action by or a meeting of holders of the Notes. The registrar or paying agent may make reasonable rules and set reasonable requirements for its functions.

Limitation on Individual Liability

No director, officer, employee, incorporator or shareholder of Conifer, as such, will have any liability for any obligations of Conifer under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of a Note, by accepting a Note waives and releases such liability. The waiver and release are part of the consideration for the issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws.

 

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Trustee

Wilmington Trust, National Association will act as trustee for the Notes under the Indenture, as permitted by the terms thereof. At all times, the Trustee must be organized and doing business under the laws of the United States or any state thereof, and must comply with the applicable requirements under the TIA. The Trustee may resign at any time by giving Conifer written notice and may be removed as Trustee with respect to the Notes:

 

   

by notification in writing by the holders of a majority in aggregate principal amount of the outstanding Notes; or

 

   

by Conifer if the Trustee (i) fails to comply with the obligations imposed upon it under the TIA; (ii) is not organized and doing business under the laws of the United States or any state thereof; (iii) becomes incapable of acting as Trustee; or (iv) a court takes certain actions with respect to such Trustee relating to bankruptcy or insolvency.

If the Trustee resigns or is removed, or if a vacancy exists in the office of the Trustee for any reason, Conifer will promptly appoint a new Trustee. A resignation or removal of the Trustee will become effective only upon the successor Trustee’s acceptance of appointment in writing. The successor Trustee will deliver a notice of its succession to holders of the Notes.

If the Trustee acquires any conflicting interest, as defined in the TIA, with respect to the Notes, within 90 days after the Trustee has acquired a conflicting interest which has not been cured or waived, the Trustee would generally be required by the TIA to eliminate that conflicting interest or resign as Trustee with respect to the Notes issued under the Indenture. If the Trustee resigns, Conifer is required to promptly appoint a successor trustee with respect to the Indenture and the Notes.

The Trustee will be under no obligation to exercise any of the rights or powers vested in it by the Indenture at the request or direction of any of the Holders pursuant to the Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses, losses and liabilities which might be incurred by it in compliance with such request or direction.

The Trustee and/or certain of its affiliates may provide banking, investment and other services to us. A trustee under the Indenture may act as trustee under any of our other indentures.

Notices

Any notices required to be given to the holders of the Notes will be given to DTC, and DTC will communicate these notices to DTC participants in accordance with its standard procedures.

Governing Law

The Indenture and the Notes are governed by, and will be construed in accordance with, the laws of the State of New York. The Indenture will be subject to the provisions of the TIA that are required to be part of the Indenture and shall, to the extent applicable, be governed by such provisions.

Book-Entry, Delivery and Form of Notes

General

The Notes will be issued in registered, global form in minimum denominations of $25 and integral multiples of $25 in excess thereof or in units, each representing $25. The Notes will be issued on the issue date therefor only against payment in immediately available funds.

The Notes initially will be represented by one or more permanent global certificates (which may be subdivided) in definitive fully registered form without interest coupons (referred to herein as “global notes”). The

 

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global notes will be deposited with, or on behalf of, DTC and will be registered in the name of DTC or its nominee. Investors may hold their beneficial interests in a global note directly through DTC or indirectly through organizations which are participants in the DTC system.

Except as set forth in this prospectus, the global notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the global notes may not be exchanged for Notes in certificated form except in the limited circumstances described below under “—Exchange of Book Entry Notes for Certificated Notes.” Transfer of beneficial interests in the global notes will be subject to the applicable rules and procedures of DTC and its direct and indirect participants, which may change from time to time.

Depositary Procedures

The following description of the operations and procedures of DTC are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. Neither Conifer nor the Trustee takes any responsibility for these operations and procedures and urges investors to contact the systems or their participants to directly discuss these matters.

DTC has advised us that it is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participating organizations (referred to herein as “participants”), and to facilitate the clearance and settlement of transactions in those securities between participants through electronic, computerized book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include both U.S. and non-U.S. securities brokers and dealers (including the underwriters), banks, trust companies, clearing corporations and certain other organizations. Indirect access to DTC’s system is also available to banks, securities brokers, dealers, trust companies and clearing corporations that clear through or maintain a custodial relationship with a participant, either directly or indirectly (referred to herein as “indirect participants”). Persons who are not participants may beneficially own securities held by or on behalf of DTC only through participants or indirect participants. The ownership interest and transfer of ownership interest of each actual purchaser of each security held by or on behalf of DTC are recorded on the records of participants and indirect participants.

DTC has advised us that, pursuant to procedures established by it:

 

   

upon deposit of the global notes, DTC will credit the accounts of participants designated by the underwriters with portions of the principal amount of the global notes; and

 

   

ownership of interests in the global notes will be shown on, and the transfer of ownership of the global notes will be effected only through, records maintained by DTC (with respect to participants) or by participants and indirect participants (with respect to other owners of beneficial interests in the global notes).

Upon issuance, a holder may hold its interests in the global notes directly through DTC if it is a participant, or indirectly through organizations that are participants or indirect participants. The depositaries, in turn, will hold interests in the Notes in customers’ securities accounts in the depositaries’ names on the books of DTC.

All interests in a global note will be subject to the procedures and requirements of DTC. The laws of some jurisdictions require that certain persons take physical delivery in certificated form of securities that they own. Consequently, the ability to transfer beneficial interests in a global note to those persons will be limited to that extent. Because DTC can act only on behalf of participants, which in turn act on behalf of indirect participants and certain banks, the ability of a person having beneficial interests in a global note to pledge its interests to

 

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persons or entities that do not participate in the DTC system, or otherwise take actions in respect of its interests, may be affected by the lack of a physical certificate evidencing its interests. For certain other restrictions on the transferability of the Notes, see “— Exchange of Book Entry Notes for Certificated Notes.”

Except as described below, owners of interests in the global notes will not have Notes registered in their name, will not receive physical delivery of Notes in certificated form and will not be considered the registered owners or holders thereof under the Indenture for any purpose.

Payments on the global notes registered in the name of DTC, or its nominee, will be payable in immediately available funds by the Trustee (or the paying agent if other than the Trustee) to DTC or its nominee in its capacity as the registered holder under the Indenture. Conifer and the Trustee, as applicable, will treat the persons in whose names the Notes, including the global notes, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Neither the Trustee nor any agent thereof has or will have any responsibility or liability for:

 

   

any aspect of DTC’s records or any participant’s or indirect participant’s records relating to, or payments made on account of, beneficial ownership interests in the global notes, or for maintaining, supervising or reviewing any of DTC’s records or any participant’s or indirect participant’s records relating to the beneficial ownership interests in the global notes; or

 

   

any other matter relating to the actions and practices of DTC or any of its participants or indirect participants.

DTC has advised Conifer that its current practice, upon receipt of any payment in respect of securities such as the Notes (including principal and interest), is to credit the accounts of the relevant participants with the payment on the payment date, in amounts proportionate to their respective holdings in the principal amount of the relevant security as shown on the records of DTC, unless DTC has reason to believe it will not receive payment on such payment date. Payments by participants and indirect participants to the beneficial owners of Notes will be governed by standing instructions and customary practices and will be the responsibility of participants or indirect participants and will not be the responsibility of DTC, the Trustee, as applicable, or Conifer.

Neither Conifer nor the Trustee will be liable for any delay by DTC or any of its participants or indirect participants in identifying the beneficial owners of the Notes, and Conifer and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes.

Redemption notices shall be sent to DTC or its nominee.

Initial settlement for the Notes will be made in immediately available funds. Any secondary market trading activity in interests in the global notes will settle in immediately available funds, subject in all cases to the rules and procedures of DTC and its participants. Transfers between participants in DTC will be effected in accordance with DTC’s procedures, and will settle in same-day funds.

DTC has advised us that it will take any action permitted to be taken by a holder of Notes only at the direction of one or more participants who have an interest in DTC’s global notes in respect of the portion of the principal amount of the Notes as to which the participant or participants has or have given direction. However, if an event of default exists under the Indenture, DTC reserves the right to exchange the global notes for Notes in certificated form and to distribute the certificated Notes to its participants.

Conifer believes that the information in this section concerning DTC and its book-entry system has been obtained from reliable sources, but Conifer does not take responsibility for the accuracy of this information. Although DTC will agree to the procedures described in this section to facilitate transfers of interests in the global notes among participants in DTC, DTC is not obligated to perform or to continue to perform these

 

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procedures, and these procedures may be discontinued at any time by giving reasonable notice. Neither Conifer nor the Trustee will have any responsibility or liability for any aspect of the performance by DTC or its participants or indirect participants of any of their respective obligations under the rules and procedures governing their operations or for maintaining, supervising or reviewing any records relating to the global notes that are maintained by DTC or any of its participants or indirect participants.

Exchange of Book-Entry Notes for Certificated Notes

A global note is exchangeable for certificated Notes in definitive, fully registered form without interest coupons if:

 

   

DTC notifies Conifer that it is unwilling or unable to continue as depositary for the global notes and Conifer fails to appoint a successor depositary within 90 days of receipt of DTC’s notice, or DTC has ceased to be a clearing agency registered under the Exchange Act and Conifer fails to appoint a successor depositary within 90 days of becoming aware of this condition;

 

   

at Conifer’s request, DTC notifies holders of the Notes that they may utilize DTC’s procedures to cause the Notes to be issued in certificated form, and such holders request such issuance; or

 

   

an event of default, or any event which after notice or lapse of time or both would be an event of default, exists under the Indenture and a request is made by DTC or one of its participants.

In addition, beneficial interests in a global note may be exchanged by or on behalf of DTC for certificated Notes upon request by DTC, but only upon at least 20 days’ prior written notice given to the Trustee in accordance with DTC’s customary procedures. In all cases, certificated Notes delivered in exchange for any global note or beneficial interests therein will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depository in accordance with its customary procedures.

 

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DESCRIPTION OF OTHER INDEBTEDNESS

The following description is a summary of certain material provisions of the financing agreements of Conifer. The summary does not restate the terms of these agreements in their entirety, nor does it describe all of their material terms.

Loan Agreement

Pursuant to the Loan Agreement, Conifer issued $30.0 million aggregate principal amount of its 8% subordinated notes due 2032, in a private placement. The subordinated notes have a maturity date of September 29, 2032, and bear interest, payable quarterly at a fixed annual rate of 8.0%. The subordinated notes include an issuer call option for all of the subordinated notes at par from July 31, 2018, through October 31, 2018, and at 105% of par any time after September 29, 2020. Elanus and Conifer have entered into a Waiver Letter permitting Conifer to use any amount of the proceeds of this offering to redeem the subordinated notes, in whole or part.

The Loan Agreement governing the subordinated notes contains certain covenants limiting our ability and/or the ability of our direct and indirect restricted subsidiaries to, among other things, consolidate or merge with other companies, incur or guarantee additional indebtedness, enter into certain acquisitions, and enter into certain sale-leaseback transactions, except as permitted by the Loan Agreement. Failure to comply with these covenants could result in a default under the Loan Agreement unless we obtain a waiver of, or otherwise mitigate, the default. Pursuant to the Waiver Letter, Elanus agreed that any restrictions under the Loan Agreement regarding incurring additional indebtedness are waived with respect to this offering. The Loan Agreement also contains customary events of default. As of June 30, 2018, the carrying value of the subordinated notes was $29.1 million, reflecting an offset by $940,000 of debt issuance costs that will be amortized through interest expense over the life of the loan.

Conifer intends to use a portion of the proceeds from this offering to redeem a portion of the existing subordinated notes under the Loan Agreement, however, Conifer cannot redeem the subordinated notes under the Loan Agreement in full without financing in addition to the proceeds from this offering. Conifer is currently in negotiations with Elanus to refinance the remaining debt under the Loan Agreement on an unsecured basis following the completion of this offering, in order to redeem the subordinated notes in full before the at-par issuer call option ends on October 31, 2018. Pursuant to the Waiver Letter, Elanus has agreed to negotiate with Conifer in good faith to refinance the remaining debt.

Senior Credit Facility

On June 21, 2018, the Company entered that certain secured credit agreement dated as of June 21, 2018 (the “Senior Credit Facility”) with The Huntington National Bank. The $10.0 million secured Senior Credit Facility will mature on June 21, 2019, and bears interest at LIBOR plus 2.75% per annum, payable monthly.

The credit agreement governing the Senior Credit Facility contains certain covenants limiting our ability and/or the ability of our direct and indirect restricted subsidiaries to, among other things, incur or guarantee additional indebtedness, consolidate or merge with other companies, enter into certain acquisitions, create liens, make certain investments, and enter into transactions with affiliates, except as permitted by the credit agreement. Failure to comply with these covenants could result in a default under the credit agreement unless we obtain a waiver of, or otherwise mitigate, the default. The credit agreement also contains customary events of default. As of the date of this prospectus, the Company has not incurred any borrowings under the Senior Credit Facility, and there are no amounts are currently outstanding under the Senior Credit Facility.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following is a discussion of the material U.S. federal income tax consequences of the acquisition, ownership, and disposition of the Notes that we are offering. The following discussion is not exhaustive of all possible tax considerations. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury Department (the “U.S. Treasury”) regulations (including proposed and temporary regulations), rulings, current administrative interpretations and official pronouncements of the Internal Revenue Service (the “IRS”), and judicial decisions, all as currently in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No rulings have been sought or are expected to be sought from the IRS and no assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. There can be no assurance that a change in law will not alter significantly the tax considerations described in this summary discussion.

This summary is for general information only, and does not purport to discuss all aspects of U.S. federal income taxation that may be important to a particular beneficial owner (referred to in this summary as a “holder”) in light of its investment or tax circumstances or to holders subject to special tax rules, such as partnerships, subchapter S corporations or other pass-through entities (and, in each case, the owners of such pass-through entities), any government (or instrumentality or agency thereof), banks, financial institutions, tax-exempt entities, retirement plans, insurance companies, regulated investment companies, real estate investment trusts, “controlled foreign corporations” and “passive foreign investment companies” and shareholders of such corporations, trusts and estates, certain former citizens or residents of the United States, part-year non-resident aliens, holders of equity in us, dealers or traders in securities, currencies or notional principal contracts, holders who mark their securities to market for federal income tax purposes, persons holding the Notes as part of an integrated investment, including a “straddle,” “hedge,” “constructive sale,” or “conversion transaction,” persons (other than Non-U.S. Holders (as defined below)) whose functional currency for tax purposes is not the U.S. dollar, and persons subject to the alternative minimum tax provisions of the Code. This summary does not include any description of any tax treaty or the tax laws of any state or local governments, or of any foreign government, that may be applicable to a particular holder nor does it discuss any U.S. federal tax consequences other than U.S. federal income tax consequences (such as U.S. federal estate or gift tax consequences). Furthermore, this summary does not address the tax consequences to any shareholder, beneficiary or other owner of an interest in a holder of Notes.

This summary is directed solely to beneficial owners that will purchase the Notes offered in this prospectus at the price printed on the front cover of this prospectus and that will hold such Notes as capital assets within the meaning of Section 1221 of the Code, which generally means as property held for investment.

THIS SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE TAX ADVICE. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE APPLICATION OF THE TAX CONSEQUENCES DISCUSSED BELOW TO THEIR PARTICULAR SITUATIONS, POTENTIAL CHANGES IN APPLICABLE TAX LAWS AND THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, INCLUDING GIFT AND ESTATE TAX LAWS, AND ANY TAX TREATIES.

As used in this prospectus, the term “U.S. Holder” means a beneficial owner of a Note offered in this prospectus that is for U.S. federal income tax purposes:

 

   

An individual who is a citizen or resident of the United States;

 

   

a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of any state of the United States or the District of Columbia;

 

   

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

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a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a “United States person.”

If an entity or arrangement treated as a partnership (or other flow-through entity) for U.S. federal income tax purposes holds the Notes offered in this prospectus, the U.S. federal income tax treatment of a partner (or other owner of the entity or arrangement) generally will depend upon the status of the partner (or other owner) and the activities of the partnership, and accordingly, this summary does not apply to partnerships (or other flow-through entities). A partner (or other owner) of a partnership (or other flow-through entity) holding the Notes should consult its tax advisor regarding the U.S. federal income tax consequences of the acquisition, ownership and disposition by the partnership of the Notes.

U.S. Holders

Payment of Interest. Interest on a Note generally will be included in the income of a U.S. Holder as ordinary interest income at the time it is accrued or is received in accordance with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes. It is expected, and this discussion assumes, that the Notes will be issued without original issue discount for U.S. federal income tax purposes.

Pre-Issuance Accrued Interest. A portion of the price paid for the Notes issued pursuant to this offering will be allocable to interest that accrued prior to the date such Notes are purchased (“pre-issuance accrued interest”). To the extent that a portion of a U.S. Holder’s purchase price for the Notes is allocable to pre-issuance accrued interest, a portion of the first stated interest payment equal to the amount of such pre-issuance accrued interest may be treated as a nontaxable return of such pre-issuance accrued interest to the U.S. Holder. The remainder of this discussion assumes that the Notes will be so treated, and all references to interest in the remainder of this discussion exclude references to pre-issuance accrued interest.

Sale, Exchange, or Retirement of the Notes. Upon the sale, exchange, retirement, or other taxable disposition of the Notes, a U.S. Holder will recognize gain or loss equal to the difference between the amount realized upon the sale, exchange, retirement, or other taxable disposition (other than amounts attributable to accrued but unpaid interest, which will be taxed as such and excluding any amounts attributable to pre-issuance accrued interest) and the U.S. Holder’s adjusted tax basis in the Note. A U.S. Holder’s adjusted tax basis in a Note generally will be the cost of the Note to such U.S. Holder (excluding any tax basis attributable to pre-issuance accrued interest). Gain or loss realized on the sale, exchange, retirement, or other taxable disposition of the Notes generally will be capital gain or loss and will be long-term capital gain or loss if the Note has been held for more than one year. Long term capital gains of non-corporate U.S. Holders are generally subject to preferential rates of U.S. federal income taxation. The deductibility of capital losses is subject to limitations under the Code. Any amount attributable to accrued but unpaid interest will be treated as a payment of interest and taxed in the manner described above under “— Payment of Interest.”

Additional Medicare Tax on Unearned Income. A tax of 3.8% is imposed on “net investment income” (or “undistributed net investment income”, in the case of estates and trusts) received by certain individuals, trusts and estates with adjusted gross income above certain threshold amounts. “Net investment income” as defined for United States federal Medicare contribution purposes generally includes interest payments on and gain recognized from the sale or other disposition of the Notes not held in a trade or business, other than a trade or business that consists of certain passive or trading activities, reduced by permitted deductions properly allocable to the income or gain. U.S. Holders should consult their own tax advisors regarding the effect, if any, of this tax on their ownership and disposition of the Notes.

 

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Non-U.S. Holders

This discussion applies to you if you are a “Non-U.S. Holder.” A “Non-U.S. Holder” is a beneficial owner of a Note that is an individual, corporation, estate or trust (other than a grantor trust) for U.S. federal income tax purposes and that is not a U.S. Holder.

Payments of Interest. Subject to the discussions below concerning backup withholding and FATCA (as defined below), interest payments that are received from us or our agent generally will not be subject to U.S. federal income or withholding tax if:

 

   

a Non-U.S. Holder does not actually or constructively own 10% or more of our stock within the meaning of 871(h)(3) of the Code;

 

   

a Non-U.S. Holder is not a “controlled foreign corporation” for U.S. federal income tax purposes that is related to us (directly or indirectly) through ownership;

 

   

a Non-U.S. Holder is not a bank extending credit under a loan agreement in the ordinary course of its trade or business;

 

   

the Non-U.S. Holder satisfies the certification requirements described below; and

 

   

such interest is not effectively connected with the conduct of a trade or business in the United States by a Non-U.S. Holder.

A Non-U.S. Holder generally will satisfy the certification requirements if either: (1) the Non-U.S. Holder certifies to the applicable withholding agent, under penalties of perjury, that it is a non-United States person and provides its name, address and U.S. taxpayer identification number, if any (which certification may generally be made on an IRS Form W-8BEN or W-8BEN-E, or a successor form), or (2) a securities clearing organization, bank, or other financial institution that holds customer securities in the ordinary course of its trade or business (a “financial institution”) and holds the Notes certifies to the applicable withholding agent under penalties of perjury that it has received the required statement from the Non-U.S. Holder certifying that it is a non-United States person and furnishes the applicable withholding agent with a copy of the statement.

Except as described below under “— Effectively Connected Income,” a Non-U.S. Holder that does not qualify for exemption from withholding as described above generally will be subject to withholding of U.S. federal income tax at a rate of 30% on payments of interest on the Notes. Payments not meeting the requirements for the exemption set forth above and thus subject to withholding of U.S. federal income tax may nevertheless be exempt from withholding (or subject to withholding at a reduced rate) if the Non-U.S. Holder provides us with a properly executed IRS Form W-8BEN or W-8BEN-E (or successor form) claiming an exemption from, or reduction in, withholding under the benefit of a tax treaty and complies with any other applicable procedures. We will not pay any additional amounts to U.S. Holders or Non-U.S. Holders in respect of any amounts withheld under applicable law.

Sale, Exchange, or Retirement of the Notes. Subject to the discussions below concerning backup withholding and FATCA, a Non- U.S. Holder generally will not be subject to U.S. federal income or withholding tax on any capital gain realized on the sale, exchange, retirement, or other taxable disposition of the Notes unless (1) the gain is effectively connected with the conduct of a trade or business within the United States, or a permanent establishment maintained in the United States if certain tax treaties apply and (2) in the case of a Non-U.S. Holder that is an individual, the Non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the sale, exchange, or other disposition of the Notes and certain other conditions are met. An individual Non-U.S. Holder who is present in the United States for 183 days or more in the taxable year of sale, exchange, or other disposition of a Note, if certain other conditions are met, will be subject to U.S. federal income tax at a rate of 30% on the gain realized on the sale, exchange, or other taxable disposition of such Note, subject to the reduction of such gain by such Non-U.S. Holder’s capital losses from U.S. sources. Any amounts which a Non-U.S. Holder receives on a sale, exchange, retirement or other taxable disposition of a Note which

 

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are attributable to accrued but unpaid interest will be taxable as interest and subject to the rules described above under “— Payments of Interest.”

Effectively Connected Income. If a Non-U.S. Holder of a Note is engaged in the conduct of a trade or business within the United States and if interest on a Note, or gain realized on the sale, exchange, or other taxable disposition of the Note, is effectively connected with the conduct of such trade or business (or, if certain tax treaties apply, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States), the Non-U.S. Holder, although exempt from U.S. federal withholding tax (provided that the certification requirements discussed above are satisfied), generally will be subject to regular U.S. federal income tax on such interest or gain on a net income basis in the same manner as if it were a U.S. Holder (unless an applicable treaty provides otherwise). In addition, if any such Non-U.S. Holder is a foreign corporation, it may also be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable U.S. income tax treaty) of a portion of its earnings and profits for the taxable year that are effectively connected with its conduct of a trade or business in the United States, subject to certain adjustments.

Backup Withholding and Information Reporting

In general, in the case of a U.S. Holder, other than certain exempt holders, we and other payors are required to report to the IRS all payments of principal and interest on the Notes. In addition, we and other payors generally are required to report to the IRS any payment of proceeds of the sale or other disposition of a Note before maturity. Additionally, backup withholding generally will apply to any payments unless a U.S. Holder furnishes a correct taxpayer identification number (which for an individual is generally the individual’s Social Security Number) and certifies on an IRS Form W-9, under penalties of perjury, that the U.S. Holder is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules or such U.S. Holder otherwise establishes an exemption.

The amount of interest we pay to a Non-U.S. Holder on the Notes generally will be reported to the Non-U.S. Holder and to the IRS annually even if the Non-U.S. Holder is exempt from the 30% withholding tax described above. Copies of the information returns reporting those payments and the amounts withheld may also be made available to the tax authorities in the country where the Non-U.S. Holder is resident under provisions of an applicable income tax treaty or agreement. In the case of a Non-U.S. Holder, backup withholding and certain other information reporting will not apply to payments made if the Non-U.S. Holder provides the required certification that it is not a United States person, or the Non-U.S. Holder otherwise establishes an exemption, provided that the payor or withholding agent does not have actual knowledge or reason to know that the holder is a United States person, or that the conditions of any exemption are not satisfied. Information reporting and, depending on the circumstances, backup withholding generally will apply to the proceeds of a disposition of the Notes effected within the United States or through certain U.S.-related financial intermediaries by a Non-U.S. Holder, unless the Non-U.S. Holder certifies under penalties of perjury that it is not a United States person (and certain other conditions are met) or otherwise establishes an exemption from such requirements.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a holder’s U.S. federal income tax liability and may entitle the holder to a refund, provided the required information is timely furnished to the IRS. Holders should consult their tax advisors concerning the application of information reporting and backup withholding rules.

Foreign Account Tax Compliance Act

Sections 1471 through 1474 of the Code and related Treasury guidance (collectively referred to as “FATCA”) generally impose U.S. federal withholding tax at a rate of 30% on payments to certain foreign entities of (i) U.S.-source interest (including interest paid on the Notes) and (ii) the gross proceeds from the sale or other disposition after December 31, 2018 of an obligation that produces U.S.-source interest (including a disposition of the Notes), in each case, unless various information reporting, diligence and withholding requirements are

 

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satisfied. This 30% U.S. federal withholding tax would generally apply in the case of debt obligations held through intermediaries that do not satisfy such information reporting requirements. Accordingly, the entity through which a U.S. Holder or a Non-U.S. Holder holds its Notes will affect the determination of whether such withholding is required. We will not pay any additional amounts to U.S. Holders or Non-U.S. Holders in respect of any amounts withheld under FATCA. Foreign entities located in jurisdictions that have entered into an intergovernmental agreement with the U.S. governing FATCA may be subject to different rules. U.S. Holders that own their interests in a Note through a foreign entity or intermediary, and Non-U.S. Holders, are encouraged to consult their tax advisors regarding FATCA.

THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER’S PARTICULAR SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO YOU OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN U.S. FEDERAL OR OTHER TAX LAWS.

 

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UNDERWRITING

Subject to the terms and conditions set forth in the underwriting agreement, dated                 , 2018, by and among us and Boenning & Scattergood, Inc., as representative of the underwriters named below, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the respective principal amount of Notes shown opposite its name below:

 

Underwriter   

Principal

Amount Of Notes

 

Boenning & Scattergood, Inc.

  

American Capital Partners, LLC

  
  
  

 

 

 

Total

   $ 20,000,000  
  

 

 

 

The underwriting agreement provides that the obligations of the several underwriters are subject to certain conditions precedent such as the receipt by the underwriters of officers’ and trustees’ certificates and legal opinions and approval of certain legal matters by their counsel. The underwriting agreement provides that the underwriters will purchase all of the Notes if any of them are purchased. We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the Notes subject to their acceptance of the Notes from us and subject to prior sale. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Commission and Expenses

The underwriters have advised us that they propose to offer the Notes to the public initially at the public offering price set forth on the cover page of this prospectus. The underwriters may offer the Notes to selected dealers at the public offering price set forth on the cover of this prospectus less a concession not in excess of % of the principal amount per Note. After the initial offering, the underwriters may change the offering price and the other selling terms. No such reduction will change the amount of proceeds to be received by us as set forth on the cover page of this prospectus.

The following table shows the public offering price, the underwriting discounts and commissions that we are to pay the underwriters, the proceeds, before expenses, to us and the net proceeds after estimated expenses to us in connection with this offering. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional notes.

 

     Per Note      Total  
    

Without

Over-

allotment

    

With

Over-
allotment

    

Without

Over-
allotment

    

With

Over-
allotment

 

Public offering price(1)

   $                    $                    $                    $                

Underwriting discounts and commissions

   $        $        $        $    

Proceeds to us, before expenses

   $        $        $        $    

Net proceeds to us, after expenses

   $        $        $        $    

 

(1)

Plus accrued interest, if any, from                 , 2018

Certain expenses associated with the offer and the sale of the Notes, exclusive of the underwriting discount, are estimated to be approximately $         and will be paid by us.

Listing

The Notes consist of a new issue of securities with no established trading market. We have applied to list the Notes on the NASDAQ Global Market. If the listing is approved, we expect trading in the notes to begin within

 

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30 days of the initial delivery of the Notes. The underwriters have advised us that they intend to make a market in the Notes after the initial offering, although they are under no obligation to do so. The underwriters may discontinue any market making activities at any time without notice. We can give no assurance as to development, maintenance or liquidity of any trading market for the Notes.

Over-Allotment Option

We have granted the underwriters an option, exercisable within 30 days of the date of this prospectus, to purchase up to an additional $         principal amount of Notes, less the underwriting discounts and commissions, to cover over-allotments of notes, if any. If the underwriters exercise the over-allotment option in full, then the estimated net proceeds to us will be $        . The underwriters may exercise such option only to cover over-allotments in the sale of the Notes offered by this prospectus. If the underwriters exercise this option, each underwriter will be obligated, subject to specified conditions, to purchase an amount of additional Notes proportionate to that underwriter’s initial purchase commitment as indicated in the table above.

Stabilization

In connection with the offering of the Notes, the underwriters, may purchase and sell Notes in the open market. These transactions may include syndicate covering transactions and stabilizing transactions. Covering transactions involve purchases of the Notes in the open market after the distribution has been completed in order to cover short positions. Stabilizing transactions consist of certain bids or purchases of Notes made for the purpose of preventing or retarding a decline in the market price of the Notes while the offering is in progress.

The underwriters may also impose a penalty bid. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the underwriters, in covering short positions or making stabilizing purchases, repurchase Notes originally sold by the syndicate member.

Any of these activities may cause the price of the Notes to be higher than the price that otherwise would exist in the absence of such activities. These activities, if commenced, may be discontinued at any time.

Electronic Distribution

A prospectus in electronic format may be made available by e-mail or on the web sites or through online services maintained by one or more of the underwriters or their affiliates. In those cases, prospective investors may view offering terms online and may be allowed to place orders online. The underwriters may agree with us to allocate a specific amount of the Notes for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations. Other than the prospectus in electronic format, the information on the underwriters’ web sites and any information contained in any other web site maintained by any of the underwriters is not part of this prospectus, has not been approved and/or endorsed by us or the underwriters and should not be relied upon by investors.

Our Relationships with the Underwriters

The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment, management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their respective affiliates may in the future perform, various commercial and investment banking and financial advisory services for us and our affiliates, for which they may receive customary fees and expenses.

In the ordinary course of their various business activities, the underwriters and certain of their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related

 

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derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments issued by us and our affiliates. If the underwriters or their respective affiliates have a lending relationship with us, they may routinely hedge their credit exposure to us consistent with their customary risk management policies. The underwriters and their respective affiliates may hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the Notes offered hereby. Any such short positions could adversely affect future trading prices of the Notes offered hereby. The underwriters and certain of their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Other Matters

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the Notes offered by this prospectus in any jurisdiction in which action for that purpose is required. The Notes offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. We and the underwriters require that the persons into whose possession this prospectus comes inform themselves about, and observe any restrictions relating to, the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

 

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LEGAL MATTERS

The validity of the Notes offered hereby will be passed upon for us by Honigman Miller Schwartz and Cohn LLP, Detroit, Michigan. The underwriters have been represented in this offering by Stradley Ronon Stevens  & Young LLP, Philadelphia, Pennsylvania.

EXPERTS

The consolidated financial statements, and the related financial statement schedules, incorporated in this Prospectus by reference from the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2017, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is incorporated herein by reference. Such consolidated financial statements and financial statement schedules have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The SEC allows us to “incorporate by reference” information from other documents that we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus. Information in this prospectus supersedes information incorporated by reference that we filed with the SEC prior to the date of this prospectus.

We incorporate by reference into this prospectus the documents listed below as well as any future filings made by us with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, including any filings made after the date of this prospectus until we sell all of the securities under this prospectus, except that we do not incorporate any document or portion of a document that is “furnished” to the SEC, but not deemed “filed.” The following documents filed with the SEC are incorporated by reference in this prospectus:

 

  a)

our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2017 filed with the SEC on May 14, 2018;

 

  b)

our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018 and June 30, 2018, filed with the SEC on May 9, 2018 and August 8, 2018, respectively;

 

  c)

our Proxy Statement filed with the SEC on April 4, 2018; and

 

  d)

our Current Reports on Form 8-K filed with the Commission on March 19, 2018, May 21, 2018, June 25, 2018 and September 10, 2018.

In addition, all documents we subsequently file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the filing of this registration statement and prior to the filing of a post-effective amendment that indicates that all securities offered hereby have been sold or which deregisters all securities covered hereby then remaining unsold are incorporated by reference in this Registration Statement and are a part hereof from the date of filing of such documents. Notwithstanding anything herein, the Company is not incorporating by reference any information furnished under Item 2.02 or Item 7.01 of any Current Report on Form 8-K, unless, and to the extent, specified in any such Current Report on Form 8-K.

Any statement herein or contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein, or in any subsequently filed document, which also is or is deemed to be incorporated by reference herein, modifies or supersedes such prior statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute part of this Registration Statement.

 

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The section entitled “Where You Can Find More Information” below describes how you can obtain or access any documents or information that we have incorporated by reference herein. Additionally, we will provide to each person, including any beneficial owner, to whom a prospectus is delivered, a copy of any or all of the reports or documents that have been incorporated by reference in this prospectus but not delivered with this prospectus at no cost upon written or oral request. You may request a copy of these reports or documents (other than an exhibit to a report or document unless that exhibit is specifically incorporated by reference into that report or document) at no cost by writing, telephoning or e-mailing us at the following address, telephone number or e-mail address:

550 W. Merrill Street, Suite 200

Birmingham, MI 48009

(248) 559-0840

ir@cnfrh.com

Copies of these reports and documents are also available through the “Investor Relations” section of our website at www.cnfrh.com. For other ways to obtain a copy of these reports and documents, please refer to “Where You Can Find More Information” below.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the Notes offered under this prospectus. As permitted under the rules and regulations of the SEC, this prospectus does not contain all of the information in and exhibits and schedules to the registration statement. For further information with respect to us and the Notes, we refer you to the registration statement and its exhibits and schedules. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.

We file annual, quarterly and current reports, and other information with the SEC. Our SEC filings, including the registration statement of which this prospectus is a part, are available on the SEC’s website at http://www.sec.gov. You may also inspect a copy of the registration statement without charge at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, and copies of all or any part of the registration statement may be obtained from the Public Reference Room of the SEC, 100 F Street, NE, Washington, DC 20549, upon payment of fees prescribed by the SEC. The public may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330.

 

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PART II

 

Item 13.

Other Expenses of Issuance and Distribution

The table below sets forth the costs and expenses payable by Conifer in connection with the issuance and distribution of the Notes being registered. All amounts are estimated except the SEC registration fee. All costs and expenses are payable by us.

 

SEC Registration Fee

   $    

FINRA filing fee

   $    

Exchange listing fee

   $    

Legal Fees and Expenses

   $    

Accounting Fees and Expenses

   $    

Printing Fees and Expenses

   $    

Trustee Fees

   $    
  

 

 

 

Miscellaneous expenses

   $    

Total

   $                
  

 

 

 

 

Item 14.

Indemnification of Directors and Officers

We are incorporated under the laws of the State of Michigan. Under Sections 561-571 of the Michigan Business Corporation Act (as it may be amended from time to time, the “MBCA”), directors and officers of a Michigan corporation may be entitled to indemnification by the corporation against judgments, expenses, fines and amounts paid by the director or officer in settlement of claims brought against them by third persons or by or in the right of the corporation if the statutory standard (defined below) is met. In particular, Section 561 of the MBCA provides that a Michigan corporation has the power to indemnify a person who was or is a party or is threatened to be made a party to a threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal, other than an action by or in the right of the corporation, by reason of the fact that he or she is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, whether for profit or not, against expenses, including attorneys’ fees, judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit, or proceeding (provided that generally the director did not (i) receive a financial benefit to which he was not entitled, (ii) intentionally inflict harm on the corporation or its shareholders, (iii) violate Section 551 of the MBCA relating to loans, dividends and distributions, or (iv) intentionally commit a criminal act, collectively, the “statutory standard”), and with respect to a criminal action or proceeding, if the person had no reasonable cause to believe his or her conduct was unlawful. In addition, Section 562 of the MBCA provides that a Michigan corporation has the power to indemnify a person who was or is a party or is threatened to be made a party to a threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, whether for profit or not, against expenses, including attorneys’ fees, and amounts paid in settlement.

 

Item 15.

Recent Sales of Unregistered Securities

The following sets forth information regarding all unregistered securities sold by the Company in the three years preceding the date of this registration statement:

On September 29, 2017, Conifer secured commitments for approximately $5.0 million in a private offering of Conifer’s common stock at a per share price of $6.25, which resulted in an issuance of 800,000 shares of common stock. Certain members of Conifer’s management and Board of Directors, including the Chief

 

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Executive Officer, participated in the offering. The shares were issued pursuant to exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated thereunder by the Securities and Exchange Commission.

 

Item 16.

Exhibits and Financial Statement Schedules

 

Exhibit
Number

  

Description

  1.1*    Form of Underwriting Agreement
  3.1    Second Amended and Restated Articles of Incorporation of Conifer Holdings, Inc. (incorporated by reference to Exhibit  3.1 of the Company’s Current Report on Form 8-K filed on August 28, 2015)
  3.2    Amended and Restated Bylaws of Conifer Holdings, Inc. (incorporated by reference to Exhibit  3.4 of the Company’s Registration Statement Form S-1/A filed on July 30, 2015)
  4.1    Form of Common Stock Certificate (incorporated by reference to Exhibit  4.1 of the Company’s Registration Statement Form S-1/A filed on July 30, 2015)
  4.2*    Form of Indenture
  4.3*    Form of Supplemental Indenture
  4.4*    Form of Note
  5.1**    Opinion of Honigman Miller Schwartz and Cohn LLP
10.1    2015 Omnibus Incentive Plan (incorporated by reference to Exhibit  10.2 of the Company’s Registration Statement Form S-1 filed on July 2, 2015)
10.2    Employment Agreements with Nicholas J. Petcoff, James G. Petcoff, Andrew D. Petcoff and Brian J. Roney (incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K filed on March 15, 2017)
10.3    Note Purchase Agreement dated September  29, 2017 between the Company and Elanus Capital Investments Master SP Series 3 (incorporated by reference to Exhibit 10.14 of the Company’s Quarterly Report on Form 10-Q filed on November 8, 2017)
10.4    First Amendment to Note Purchase Agreement dated as of June  21, 2018 between the Company and Elanus Capital Investments Master SP Series 3 (incorporated by reference to Exhibit 10.16 of the Company’s Quarterly Report on Form 10-Q filed on August 8, 2018)
10.5    Credit Agreement dated as of June  21, 2018 between the Company and The Huntington National Bank (incorporated by reference to Exhibit 10.15 of the Company’s Quarterly Report on Form 10-Q filed on August 8, 2018)
10.6    Lease Agreement, dated September 18, 2013, as amended (incorporated by reference to Exhibit  10.3 to the Company’s S-1 filed on July 2, 2015)
10.7**    Waiver Letter dated September 10, 2018 by and between the Company and Elanus Capital Investments Master SP Series 3
21.1    List of Subsidiaries of the Company (incorporated by reference to Exhibit  21.1 of the Company’s Annual Report on Form 10-K filed on March 15, 2017)
23.1*    Consent of Deloitte & Touche LLP for Amendment No. 1 to Registration Statement on Form S-1, Independent Registered Public Accounting firm
23.2**    Consent of Honigman Miller Schwartz and Cohn LLP (included in Exhibit 5.1)
24.1    Power of Attorney (included on signature page)
25.1*    Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, by the trustee under the Indenture

 

*

Filed herewith.

**

To be filed by amendment.

 

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Item 17.

Undertakings

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes:

 

  a)

That for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

  b)

To deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information.

 

  c)

That for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

  d)

That for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in Birmingham, Michigan on September 10, 2018.

 

CONIFER HOLDINGS, INC.

 

By:

  /s/ James G. Petcoff
 

 

  James G. Petcoff
  Chairman and Chief Executive Officer
  (Principal Executive Officer)

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ James G. Petcoff

James G. Petcoff

  

Chairman and Chief Executive

Officer (Principal Executive

Officer)

  September 10, 2018

*

Harold J. Meloche

  

Chief Financial Officer and

Treasurer (Principal Accounting

and Financial Officer)

  September 10, 2018

*

Mark McCammon

  

Director

  September 10, 2018

*

Nicholas J. Petcoff

  

Director

  September 10, 2018

*

Jorge Morales

  

Director

  September 10, 2018

*

Richard J. Williams, Jr.

  

Director

  September 10, 2018

*

Joseph D. Sarafa

  

Director

  September 10, 2018

*

Isolde O’Hanlon

  

Director

  September 10, 2018

*

Jeffrey Hakala

  

Director

  September 10, 2018

 

*By

/s/ JAMES G. PETCOFF

James G. Petcoff
Attorney-in-fact

 

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Section 2: EX-1.1 (EX-1.1)

EX-1.1

Exhibit 1.1

$        

CONIFER HOLDINGS, INC.

    % Senior Unsecured Notes due                 

UNDERWRITING AGREEMENT

                    , 2018

Boenning & Scattergood, Inc.

    as Representative of the several Underwriters

    named in Schedule I hereto

4 Tower Bridge

200 Barr Harbor Drive, Suite 300

West Conshohocken, PA 19428

Ladies and Gentlemen:

Conifer Holdings, Inc., a Michigan corporation (the “Company”), confirms its agreement with the underwriters named in Schedule I hereto (collectively, the “Underwriters,” which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Boenning & Scattergood, Inc. is acting as representative (in such capacity, the “Representative”), with respect to the sale by the Company and the purchase by the Underwriters of $         principal amount of the Company’s          Senior Unsecured Notes due          (the “Notes”) (said Notes to be issued and sold by the Company being hereinafter referred to as the “Initial Securities”). The Company also proposes to grant to the Underwriters, acting severally and not jointly, an option described in Section 2(b) hereof to purchase up to and additional $         principal amount of Notes to cover overallotments, if any (the “Option Securities” and together with the Initial Securities, the “Securities”). The Securities will be issued pursuant to an indenture (the “Base Indenture”) and a supplemental indenture (the “Supplemental Indenture”), each to be dated as of                     , 2018 (together with the Base Indenture, the “Indenture”), between the Company and Wilmington Trust, N.A., as trustee (the “Trustee”).

The Company understands that the Underwriters propose to make a public offering of the Securities as soon as the Representative deems advisable after this Underwriting Agreement (the “Agreement”) has been executed and delivered.

The Company has filed with the U.S. Securities and Exchange Commission (the “Commission”) a registration statement, and an amendment or amendments thereto, on Form S-1 (File No. 333-226778), including any related prospectus or prospectuses, for the registration of the Securities under the Securities Act of 1933, as amended (the “Securities Act”), which registration statement and amendment or amendments have been prepared by the Company in all material respects in conformity with the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act (the “Securities Act Regulations”) and which contain all material statements that are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement became effective (including the preliminary prospectus included in the registration statement, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated or deemed to be incorporated by reference therein and all information deemed to be a part thereof as of the Effective Date pursuant to paragraph (b) of Rule 430A of the Securities Act Regulations (the “Rule 430A Information”)), is referred to herein as the “Registration Statement.” If the Company files any registration statement pursuant to Rule 462(b) of the Securities Act Regulations (“Rule 462(b)”), then after such filing, the term “Registration Statement” shall include such registration statement filed pursuant to Rule 462(b). Upon the execution and delivery of the Indenture by the Company and the Trustee and the filing of the related Statement of Eligibility and Qualification on Form T-1 (the “Form T-1”) with the Commission, the Indenture will be duly qualified under the Trust Indenture Act of 1939, as amended, and the rules and regulations thereunder (collectively, the “Trust Indenture Act”). The Registration Statement has been declared effective by the Commission on                      2018.


Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “Preliminary Prospectus.” The Preliminary Prospectus, subject to completion, dated                     , 2018, that was included in the Registration Statement immediately prior to the Applicable Time is hereinafter called the “Pricing Prospectus.” The final prospectus in the form first furnished by the Company to the Underwriters for use in the Offering is hereinafter called the “Prospectus.” Any reference to the “most recent Preliminary Prospectus” shall be deemed to refer to the latest Preliminary Prospectus included in the Registration Statement. For purposes of this Agreement, all references to the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus, the Prospectus, the Incorporated Documents or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”).

As used in this Agreement:

Applicable Time” means         P.M., New York City time, on                    , 2018 or such other time as agreed by the Company and the Representative.

Incorporated Documents” means the documents incorporated or deemed to be incorporated by reference in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus.

Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Securities Act Regulations (“Rule 433”), including, without limitation, any “free writing prospectus” (as defined in Rule 405 of the Securities Act Regulations (“Rule 405”)) relating to the Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Securities or of the offering of the Securities that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).

Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “bona fide electronic road show,” as defined in Rule 433 (the “Bona Fide Electronic Road Show”)), as specified in Schedule II hereto.

Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.

Pricing Disclosure Package” means any Issuer General Use Free Writing Prospectus issued prior to the Applicable Time, the most recent preliminary prospectus furnished to the Underwriters for general distribution to investors prior to the Applicable Time and the information included on Schedule II hereto, all considered together.

All references in this Agreement to financial statements and schedules and other information which is “disclosed,” “contained,” “included,” “made,” “stated” or “referred to” (or other references of like import) in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus and the Prospectus shall be deemed to include all such financial statements and schedules, exhibits and other information which are incorporated by reference in or otherwise deemed by the Securities Act Regulations to be a part of or included in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, as the case may be, prior to the execution of this Agreement; and all references in this Agreement to amendments or supplements to the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus shall be deemed to include the filing of any document under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder (the “Exchange Act Regulations”) which is incorporated by reference in or otherwise deemed by the Securities Act Regulations to be a part of or included in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, as the case may be, after the execution of this Agreement.

 

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SECTION 1. Representations and Warranties.

(a) Representations and Warranties. The Company represents and warrants to each Underwriter as of the date hereof, as of the Applicable Time, as of the Closing Time (as defined in Section 2 hereof), and as of each Date of Delivery (as defined in Section 2 hereof), if any, and agrees with each Underwriter, as follows:

(i) Compliance with Registration Requirements. Each of the Registration Statement and any post-effective amendment thereto have been prepared by the Company in conformity with the requirements of the Securities Act and the Securities Act Regulations. The sale of the Securities has been duly registered under the Securities Act pursuant to the Registration Statement. The Registration Statement has become effective under the Securities Act. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Securities Act, no notice or objection to the use of the Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) of the Securities Act Regulations has been received by the Company, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the knowledge of the Company, contemplated. The Company has complied with each request (if any) from the Commission for additional information.

Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective and at each deemed effective date with respect to the Underwriters pursuant to Rule 430B(f)(2) of the Securities Act Regulations complied and will comply in all material respects with the requirements of the Securities Act and the Securities Act Regulations at the Applicable Time, at the Closing Time and at each Date of Delivery, if any. The preliminary prospectus that is included in the Pricing Disclosure Package, at the Applicable Time, complied, and the Prospectus and each amendment or supplement thereto, as of their respective issue dates and at the Closing Time, complied and will comply, in all material respects with the Securities Act and the Securities Act Regulations. Each preliminary prospectus and the Prospectus delivered to the Underwriters for use in connection with the offering of the Securities were or will be substantially identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. The Incorporated Documents, when they became effective or at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Exchange Act and the Exchange Act Regulations.

(ii) Accurate Disclosure. Neither the Registration Statement nor any post-effective amendment thereto, at the respective times it became effective, at the Closing Time or at any Date of Delivery, contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. At the Applicable Time, at the Closing Time and at each Date of Delivery, if any, neither (A) the Pricing Disclosure Package nor (B) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the Pricing Disclosure Package, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b) of the Securities Act Regulations (“Rule 424(b)”), at the Closing Time or at any Date of Delivery, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

The Incorporated Documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the Exchange Act Regulations, and none of such documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Registration Statement, the Prospectus or the Pricing Disclosure Package, when such documents are filed with the Commission,

 

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will conform in all material respects to the requirements of the Exchange Act and the Exchange Act Regulations and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company filed the Registration Statement with the Commission before using any free writing prospectus and each free writing prospectus was preceded or accompanied by the Prospectus satisfying the requirements of Section 10 under the Securities Act.

The representations and warranties in this Section 1(a)(ii) shall not apply to statements in or omissions from the Registration Statement (or any amendment thereto), the Pricing Disclosure Package or the Prospectus (or any amendment or supplement thereto) made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representative expressly for use therein. For purposes of this Agreement, the only information so furnished consists of (i) the first paragraph appearing in the Prospectus in the section entitled “Underwriting,” (ii) the discount and concessions information appearing in the Prospectus in the section entitled Underwriting – Commissions and Expenses, (iii) the first and second paragraphs appearing in the Prospectus in the section entitled “Underwriting – Stabilization” and (iv) the second paragraph appearing in the Prospectus in the section entitled “Underwriting – Our Relationships with the Underwriters” (collectively, the “Underwriter Information”).

(iii) Issuer Free Writing Prospectuses. No Issuer Free Writing Prospectus conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, including the Incorporated Documents, or any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified. Each Issuer Free Writing Prospectus conformed or will conform in all material respects to the requirements of the Securities Act and the Securities Act Regulations on the date of first use, and the Company has complied with any filing requirements applicable to such Issuer Free Writing Prospectus pursuant to the Securities Act Regulations. The Company has not made any offer relating to the Securities that would constitute an Issuer Free Writing Prospectus without the prior written consent of the Representative; provided, that such consent is deemed to have been given with respect to each Issuer Free Writing Prospectus identified on Schedule II. The Company has retained in accordance with the Securities Act Regulations all Issuer Free Writing Prospectuses that were not required to be filed pursuant to the Securities Act Regulations. The first sentence of this Section 1(a)(iii) shall not apply to the Underwriter Information.

(iv) Not Ineligible Issuer. (A) At the time of filing the Registration Statement, (B) at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act Regulations) of the Securities, (C) at the date of this Agreement and (D) at the Applicable Time, the Company was not nor is an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.

(v) Emerging Growth Company. (A) At the time of filing the Registration Statement, (B) at the date of this Agreement and (C) at the Applicable Time, the Company was or is an “emerging growth company,” as defined in Rule 405.

(vi) Independent Accountants. Deloitte & Touche LLP, the accountants who certified the financial statements and supporting schedules included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus are, or were at the time of any such certification, independent public accountants with respect to the Company as required by the Securities Act, the Securities Act Regulations, the Exchange Act, the Exchange Act Regulations and the Public Company Accounting Oversight Board.

(vii) Financial Statements; Non-GAAP Financial Measures. The financial statements together with the related schedules and notes thereto of the Company and its consolidated subsidiaries, included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus, comply in all material respects with the applicable requirements of Regulation S-X, and present fairly the financial position of the entities purported to be shown thereby as of the dates indicated and the results of

 

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their operations and the changes in their cash flows for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles as applied in the U.S. (“GAAP”) applied on a consistent basis throughout the periods covered thereby, and the supporting schedules included in the Registration Statement present fairly the information required to be stated therein; and the selected financial data and the summary financial information included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus have been derived from the accounting records of the Company and its consolidated subsidiaries, and present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included or incorporated by reference in the Registration Statement. Except as included therein, no historical or pro forma financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package or the Prospectus under Regulation S-X, the Securities Act, the Securities Act Regulations, the Exchange Act and the Exchange Act Regulations, as applicable. All disclosures contained or incorporated by reference in the Registration Statement, the Pricing Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply in all material respects with Item 10 of Regulation S-K and Regulation G of the Commission’s rules and regulations, to the extent applicable.

(viii) No Material Adverse Change in Business. Except as otherwise stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package or the Prospectus, (A) there has been no material adverse change in or affecting the properties or assets (collectively, the “Properties”) described in the Registration Statement, the Pricing Disclosure Package or the Prospectus owned by the Company or its direct and indirect subsidiaries (each a “Subsidiary” and collectively the “Subsidiaries”) considered as a whole or in the business, condition (financial or otherwise), results of operations, shareholders’ equity, earnings, business affairs or business prospects of the Company and its Subsidiaries as one enterprise, whether or not arising in the ordinary course of business (a “Material Adverse Effect”), (B) there have been no transactions entered into by the Company or the Subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and the Subsidiaries considered as one enterprise, (C) there has been no liability or obligation, direct or contingent (including off-balance sheet obligations), which is material to the Company and the Subsidiaries considered as one enterprise, incurred by the Company or any of the Subsidiaries, except obligations incurred in the ordinary course of business, (D) there has been no distribution of any kind declared, paid or made by the Company on any class of capital stock or other form of ownership interests in the Company and (E) there has been no withdrawal or downgrade of the Company’s rating from A.M. Best Company.

(ix) Good Standing of the Company. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Michigan and has all corporate power and authority to own, lease and operate its Properties and to conduct its business as described in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus and to enter into and perform its obligations under this Agreement. The Company has been duly qualified as a foreign corporation for the transaction of business and is in good standing (where such concept is recognized) under the laws of each other jurisdiction in which such qualification is required whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing does not have, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(x) Good Standing of the Subsidiaries. Each of the Company’s subsidiaries that is listed on Exhibit 21.1 to the Company’s most recent Annual Report on Form 10-K and each other subsidiary that meets the definition of “significant subsidiary” as such term is defined in Rule 1-02 of Regulation S-X (each, a “Significant Subsidiary” and, collectively, the “Significant Subsidiaries”) has been duly organized and is validly existing in good standing under the laws of the jurisdiction of its organization, with power and authority (corporate and other) to own, lease and operate its properties and conduct its business as described in each of the Pricing Disclosure Package and the Prospectus. Each of the Significant Subsidiaries has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns, leases or operates properties or

 

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conducts any business so as to require such qualification, except where the failure to so qualify or be in good standing does not have, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; all of the issued shares of capital stock of each Significant Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable and are owned, directly or through other Subsidiaries of the Company, by the Company, free and clear of any pledge, lien, encumbrance, or claim.

(xi) Authorization and Description of the Capital Stock. All of the outstanding shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and nonassessable, and have been issued in compliance with federal and state securities laws and conform to the description thereof contained in each of the Registration Statement, Pricing Disclosure Package and the Prospectus; and no such shares of capital stock of the Company were issued in violation of the preemptive or similar rights.

(xii) Authorization and Description of Securities. The Securities have been duly authorized for issuance and sale by the Company through the Underwriters pursuant to this Agreement and, when authenticated and delivered by the Trustee in the manner provided for in the Indenture and issued and delivered by the Company against payment therefor as provided for in this Agreement, will constitute valid, legal and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforceability may be limited by (A) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws now or hereafter in effect relating to creditors’ rights generally and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). The Securities will be in the form contemplated by, and will be entitled to the benefits of, the Indenture. The issuance of the Securities is not subject to the preemptive or other similar rights. The description of the Securities contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus conforms in all material respects to the form of Global Notes and the form of Global Notes conforms in all material respects to the description thereof contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(xiii) Authorization and Description of Indenture. The Indenture has been duly authorized, executed and delivered by the Company and, assuming the due authorization, execution and delivery of the Indenture by the Trustee, the Indenture will constitute a valid, legal and binding agreement of the Company enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by (A) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws now or hereafter in effect relating to creditors’ rights generally and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). The Indenture has been, and at the Closing Time and any Time of Delivery will be, duly qualified under the Trust Indenture Act. The description of the Indenture contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus conforms in all material respects to the Indenture and the Indenture conforms in all material respects to the description thereof contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(xiv) Authorization and Description of Agreement. The Agreement has been duly authorized, executed and delivered by the Company and, assuming the due authorization, execution and delivery of the by the Representative, the Agreement will constitute a valid, legal and binding agreement of the Company enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by (A) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws now or hereafter in effect relating to creditors’ rights generally and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). The description of the Agreement contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus conforms in all material respects to the Agreement and the Agreement conforms in all material respects to the description thereof contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(xv) Capitalization; Options, Warrants and Registration Rights. The authorized, issued and outstanding capital stock and consolidated long term debt of the Company as of June 30, 2018 is as set

 

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forth in the Prospectus under “Capitalization.” Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, since June 30, 2018 there have not been any (A) subsequent issuances of capital stock of the Company (except for any issuances of common stock pursuant to exercises of stock options or other equity awards under the Company’s incentive compensation plans that were adopted or assumed prior to such date) or (B) long-term borrowings by the Company or its Subsidiaries. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (Y) there are no outstanding rights (contractual or otherwise), warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of, any shares of capital stock of or other equity interest in the Company, other than in the ordinary course of business, consistent with past practice, under the Company’s equity compensation programs and (Z) no person has the right to require the Company or any of the Subsidiaries to register any securities for sale under the Securities Act by reason of the filing of the Registration Statement with the Commission or the issuance and sale of the Securities.

(xvi) Absence of Violations, Defaults and Conflicts. None of the Company or any of the Subsidiaries are (A) in violation of its certificate or articles of incorporation, as applicable, bylaws or other organizational documents, (B) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of the Subsidiaries is a party or by which it or any of them may be bound or to which any of the Properties or any other properties or assets of the Company or any of the Subsidiaries is subject (collectively, “Agreements and Instruments”), except for such defaults that would not, singly or in the aggregate, result in a Material Adverse Effect, or (C) in violation of any law, statute, rule, regulation, judgment, order, writ or decree of any arbitrator, court, governmental body, regulatory body, administrative agency or other authority, body or agency having jurisdiction over the Company or any of the Subsidiaries or the Properties (each, a “Governmental Entity”), except for such violations that would not, singly or in the aggregate, result in a Material Adverse Effect.

(xvii) Execution of Agreement and Indenture; Issuance of Securities. The execution, delivery and performance of this Agreement by the Company, the execution, delivery and performance of the Indenture by the Company, the issuance of the Securities by the Company and the consummation of the transactions contemplated hereby and in the Indenture, the Registration Statement, the Pricing Disclosure Package and the Prospectus (including, without limitation, the application of the net proceeds from the sale of the Securities as described under the heading “Use of Proceeds” as set forth in the Pricing Disclosure Package and the Prospectus) and compliance by the Company with its obligations under this Agreement, the Indenture and the Notes, do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon the Properties or any of their respective subsidiaries pursuant to, the Agreements and Instruments (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not, singly or in the aggregate, result in a Material Adverse Effect), nor will such action result in any violation of (A) the certificate or articles of incorporation, as applicable, bylaws or other organizational documents of the Company or any of the Subsidiaries or (B) any applicable law, statute, rule, regulation, judgment, order, writ or decree of any Governmental Entity, except in the case of clause (B) only, for any such violation that would not, singly or in the aggregate, result in a Material Adverse Effect. As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of the Subsidiaries.

(xviii) Absence of Labor Dispute. No labor dispute with the employees of the Company or any of the Subsidiaries exists or, to the knowledge of the Company, is imminent, which, in any such case, would, singly or in the aggregate, result in a Material Adverse Effect.

(xix) Absence of Proceedings. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there is no action, suit, proceeding, inquiry or investigation pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any of the

 

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Subsidiaries, which is required to be disclosed in the Registration Statement, the Pricing Disclosure Package or the Prospectus (other than as disclosed therein), or with respect to those not disclosed in the Registration Statement, the Pricing Disclosure Package or the Prospectus, which would, singly or in the aggregate, result in a Material Adverse Effect, or which would materially and adversely the consummation of the transactions contemplated in this Agreement or the performance by the Company of its obligations hereunder and under the Indenture and the Notes.

(xx) Exhibits. There are no contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that have not been so described or filed as required.

(xxi) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity is necessary or required for the performance by the Company of its obligations hereunder or in connection with the offering, issuance or sale of the Securities hereunder, the consummation of the transactions contemplated by this Agreement or the application of the net proceeds from the sale of the Securities as described under the heading “Use of Proceeds” as set forth in the Pricing Disclosure Package and the Prospectus, except such as have been already obtained or as may be required under the Securities Act, the Securities Act Regulations, the rules of NASDAQ, the securities laws of any applicable U.S. state or jurisdiction or the rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”).

(xxii) Possession of Licenses and Permits. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company and the Subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Entities necessary to conduct the business now operated by them, except where the failure so to possess would not, singly or in the aggregate, result in a Material Adverse Effect. The Company and the Subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, result in a Material Adverse Effect. All of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, result in a Material Adverse Effect. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, neither the Company nor any of the Subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect.

(xxiii) Title to Property. (A) The Company, any of the Subsidiaries or any joint venture in which the Company or any of the Subsidiaries owns an interest (each such joint venture being referred to as a “Related Entity”), as the case may be, have good and marketable fee or leasehold title to the Properties, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind, other than those that (1) are described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or (2) do not, singly or in the aggregate, materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company, any of the Subsidiaries or any Related Entity, (B) except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, neither the Company, any of the Subsidiaries or any Related Entity owns any real property other than the Properties, (C) each of the ground leases, subleases and sub-subleases relating to a Property, if any, material to the business of the Company and the Subsidiaries, considered as one enterprise, are in full force and effect, with such exceptions as do not materially interfere with the use made or proposed to be made of such Property by the Company nor any of the Subsidiaries or any Related Entity, and (1) no default or event of default has occurred under any ground lease, sublease or sub-sublease with respect to such Property and none of the Company, any of the Subsidiaries or any Related Entity has received any notice of any event which, whether with or without the passage of time or the giving of notice, or both, would constitute a default under such ground lease, sublease or sub-sublease and (2) none of the Company, any of the Subsidiaries or any Related Entity has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company, any of the Subsidiaries or any Related Entity under any of the

 

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ground leases, subleases or sub-subleases mentioned above, or affecting or questioning the rights of the Company, any of the Subsidiaries or any Related Entity to the continued possession of the leased, subleased or sub-subleased premises under any such ground lease, sublease or sub-sublease, (D) all liens, charges, encumbrances, claims or restrictions on any of the Properties and the assets of the Company, any of the Subsidiaries or any Related Entity that are required to be disclosed in the Registration Statement or the Prospectus are disclosed therein, (E) no tenant under any of the leases at the Properties has a right of first refusal or an option to purchase the premises demised under such lease, (F) each of the Properties complies with all applicable codes, laws and regulations (including, without limitation, building and zoning codes, laws and regulations and laws relating to access to the Properties), except if and to the extent disclosed in the Registration Statement, the Pricing Disclosure Package or the Prospectus and except for such failures to comply that would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect, (G) the mortgages and deeds of trust that encumber certain of the Properties are not convertible into equity securities of the entity owning such Property and said mortgages and deeds of trust are not cross-defaulted or cross-collateralized with any property other than certain other Properties and (H) none of the Company, any of the Subsidiaries or any Related Entity or, to the knowledge of the Company, any lessee of any of the Properties is in default under any of the leases governing the Properties and none of the Company, any of the Subsidiaries or any Related Entity knows of any event which, whether with or without the passage of time or the giving of notice, or both, would constitute a default under any of such leases, except such defaults that would not, singly or in the aggregate, result in a Material Adverse Effect.

(xxiv) Joint Venture Agreements. Each of the partnership agreements, limited liability company agreements or other joint venture agreements to which the Company or any of the Subsidiaries is a party, if any, and which relates to one or more of the Properties, has been duly authorized, executed and delivered by the Company or the Subsidiaries, as applicable, and constitutes the legal, valid and binding agreement thereof, enforceable in accordance with its terms, except, in each case, to the extent that enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditors’ rights or remedies generally or by general equitable principles, and, with respect to equitable relief, the discretion of the court before which any proceeding therefor may be brought (regardless of whether enforcement is sought in a proceeding at law or in equity), and with respect to any indemnification provisions contained therein, except as rights under those provisions may be limited by applicable law or policies underlying such law.

(xxv) Possession of Intellectual Property. The Company and the Subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, “Intellectual Property”) reasonably necessary, if any, to conduct the business now operated by them, and neither the Company nor any of the Subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of the Subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would reasonably be expected to result in a Material Adverse Effect.

(xxvi) Environmental Laws. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus and except as would not, singly or in the aggregate, be reasonably expected to result in a Material Adverse Effect, (A) none of the Company, any of the Subsidiaries, any Related Entity nor any of the Properties is in violation of any Environmental Laws (as defined below), (B) the Company, the Subsidiaries, the Related Entities and the Properties have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no now pending or, to the knowledge of the Company, threatened, administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law or Hazardous Material (as defined below) against the Company, any of the Subsidiaries or any Related Entity or otherwise with regard to the Properties, (D) there are no events or circumstances that would reasonably be

 

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expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Properties, the Company, any of the Subsidiaries or any Related Entity relating to Hazardous Materials or any Environmental Laws and (E) none of the Properties is included or proposed for inclusion on the National Priorities List issued pursuant to CERCLA (as defined below) by the United States Environmental Protection Agency or on any similar list or inventory issued by any other federal, state or local governmental authority having or claiming jurisdiction over such properties pursuant to any other Environmental Laws. As used herein, “Hazardous Material” shall mean any flammable explosives, radioactive materials, chemicals, pollutants, contaminants, wastes, hazardous wastes, toxic substances, mold, and any hazardous material as defined by or regulated under any Environmental Law, including, without limitation, petroleum or petroleum products, and asbestos-containing materials. As used herein, “Environmental Law” shall mean any applicable foreign, federal, state or local law (including statute or common law), ordinance, rule, regulation or judicial or administrative order, consent decree or judgment relating to the protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Secs. 9601-9675 (“CERCLA”), the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Secs. 5101-5127, the Solid Waste Disposal Act, as amended, 42 U.S.C. Secs. 6901-6992k, the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Secs. 11001-11050, the Toxic Substances Control Act, 15 U.S.C. Secs. 2601-2692, the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Secs. 136-136y, the Clean Air Act, 42 U.S.C. Secs. 7401-7671q, the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. Secs. 1251-1387, and the Safe Drinking Water Act, 42 U.S.C. Secs. 300f-300j-26, as any of the above statutes may be amended from time to time, and the regulations promulgated pursuant to any of the foregoing.

(xxvii) Utilities and Access. To the knowledge of the Company, water, stormwater, sanitary sewer, electricity, and telephone service are all available at the property lines of each Property over duly dedicated streets or perpetual easements of record benefiting the applicable Property. To the knowledge of the Company, each of the Properties has legal access to public roads and all other roads necessary for the use of each of the Properties.

(xxviii) No Condemnation. The Company does not have any knowledge of any pending or threatened condemnation proceedings, zoning change or other proceeding or action that will materially affect the use or value of any of the Properties.

(xxix) Accounting Controls and Disclosure Controls. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company and the Subsidiaries maintain a system of internal control over financial reporting (as defined under Rules 13a-15 and 15d-15 of the Exchange Act Regulations) including controls sufficient to provide reasonable assurances that: (A) transactions are executed in accordance with management’s general or specific authorization, (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets, (C) access to assets is permitted only in accordance with management’s general or specific authorization and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, since the end of the Company’s most recent audited fiscal year, there has been no material weakness in the Company’s internal controls over financial reporting (whether or not remediated) and no change in the Company’s internal controls over financial reporting that has adversely affected, or is reasonably likely to adversely affect, the Company’s internal controls over financial reporting. The auditors of the Company and the Audit Committee of the Board of Directors of the Company have been advised of all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that have adversely affected, or are reasonably likely to adversely affect, the ability of the Company and the Subsidiaries to record, process, summarize and report financial information and any fraud, whether or not material, that involves management or other employees who have a significant role in the internal control over financial reporting of the Company and the Subsidiaries. The Company and the Subsidiaries have established a system of disclosure controls and procedures (as defined in Rules 13a-15

 

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and 15d-15 of the Exchange Act Regulations) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to the Company’s management, including its principal executive officer or officers and principal financial officer or officers, as appropriate, to allow timely decisions regarding disclosure.

(xxx) Compliance with the Sarbanes-Oxley Act and NASDAQ Requirements. The Company and, to the knowledge of the Company, each of the Company’s directors and officers, in their capacities as such, has been and is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations of the Commission thereunder or implementing the provisions thereof (the “Sarbanes-Oxley Act”) and the Company is in compliance in all material respects with the applicable listing qualification standards and requirements of NASDAQ.

(xxxi) Payment of Taxes. All tax returns of the Company and the Subsidiaries required by law to be filed have been filed, and all taxes shown by such returns or otherwise assessed, which are due and payable, have been paid, except assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided. The Company and the Subsidiaries have filed all other tax returns that are required to have been filed by them pursuant to applicable foreign, state, local or other law except insofar as the failure to file such returns would not, singly or in the aggregate, result in a Material Adverse Effect, and all taxes shown by such returns or otherwise assessed, which are due and payable, have been paid, except assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided and except for taxes which may be paid without interest or penalty at a later date. The charges, accruals and reserves on the books of the Company and the Subsidiaries in respect of any tax liability for any years not finally determined are adequate to meet any assessments or re-assessments for additional tax for any years not finally determined, except to the extent of any inadequacy that would not, singly or in the aggregate, result in a Material Adverse Effect.

(xxxii) ERISA. The Company and the Subsidiaries are in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”). To the knowledge of the Company, no portion of the assets of the Company constitutes “plan assets” of an employee benefit plan as defined in and subject to Title I of ERISA or a plan as defined in and subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”). No “reportable event” (as defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which the Company or any of the Subsidiaries would have any liability. Neither the Company nor any of the Subsidiaries have incurred nor expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “pension plan” or (ii) Sections 412, 403, 431, 432 or 4971 of the Code. Each “pension plan” for which the Company or any of the Subsidiaries would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred thereunder, whether by action or by failure to act, which would cause the loss of such qualification, except where the failure to be so qualified would not, singly or in the aggregate, result in a Material Adverse Effect.

(xxxiii) Business Insurance. Each of the Company and the Subsidiaries carries or is entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such risks as is generally maintained by companies of established repute engaged in the same or similar business, and all such insurance is in full force and effect. The Company has no reason to believe that it or any of the Subsidiaries will not be able to (A) renew, if desired, its existing insurance coverage as and when such policies expire or (B) obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not, singly or in the aggregate, result in a Material Adverse Effect. None of the Company or any of the Subsidiaries have been denied any insurance coverage which they have sought or for which they have applied.

(xxxv) Investment Company Act. The Company is not now required and, after giving effect to the offering and sale of the Securities and the application of the net proceeds as described in each of the Pricing Disclosure Package and the Prospectus, will not be required, to register as an “investment company” under the Investment Company Act of 1940, as amended.

 

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(xxxvi) Absence of Manipulation. Neither the Company nor any of the Subsidiaries or other Affiliates has taken or will take, directly or indirectly, any action which is designed, or would reasonably be expected, to cause or result in, or which constitutes, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.

(xxxvii) Foreign Corrupt Practices Act. Neither the Company nor any of the Subsidiaries nor, to the knowledge of Company, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company or any of the Subsidiaries, is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA. Each of the Company and the Subsidiaries and, to the knowledge of the Company, their affiliates has conducted its businesses in compliance with the FCPA and has instituted and maintains policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.

(xxxviii) Money Laundering Laws. The operations of each of the Company and the Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”). No action, suit or proceeding or, to the knowledge of the Company, inquiry or investigation by or before any Governmental Entity involving the Company, its affiliates or any of the Subsidiaries with respect to the Money Laundering Laws is pending and, to the knowledge of the Company, no such action, suit, proceeding, inquiry or investigation is threatened.

(xxxix) OFAC. None of the Company, any of the Subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company or any of the Subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”). The Company will not directly or indirectly use the proceeds of the sale of the Securities, or lend, contribute or otherwise make available such proceeds to any of the Subsidiaries, joint venture partners or other persons, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

(xl) Statistical and Market-Related Data. Any statistical and market-related data included in the Registration Statement, the Pricing Disclosure Package or the Prospectus are based on or derived from sources that the Company believes to be reliable and accurate in all material respects and, to the extent required, the Company has obtained the written consent to the use of such data from such sources.

(xli) Approval of Listing. On or prior to the date of this Agreement, the Company shall have applied to have the Securities listed on NASDAQ within 30 days following the Closing Time.

(xlii) Distributions. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, neither the Company nor any Subsidiary is prohibited, directly or indirectly, from making any distributions to the Company, whether by dividend or otherwise, from making any other distribution on any of its equity interests, or from repaying any loans or advances made by the Company or any of the Subsidiaries.

(xliii) Broker’s or Finder’s Fees. Neither the Company nor any of its Subsidiaries is a party to any contract, agreement, arrangement or understanding with any person (other than this Agreement or the

 

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Engagement Letter dated August 10, 2018) that would give rise to a claim against the Company or any of its Subsidiaries or the Underwriters for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Securities.

(xliv) Certain Relationships. No relationship, direct or indirect, exists between or among the Company or any Subsidiary, on the one hand, and the directors, officers, shareholders, partners, customers, or suppliers of the Company or any Subsidiary, on the other hand, which is required to be described in the Registration Statement, the Pricing Disclosure Package or the Prospectus which is not so described.

(xlv) Off-Balance Sheet Transactions. Except as described in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no material off-balance sheet arrangements (as defined in Item 303 of Regulation S-K) that may reasonably be expected to have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues or expenses.

(xlvi) Forward-Looking Statements. The information contained in the Registration Statement, the Pricing Disclosure Package, the Prospectus and any Issuer Free Writing Prospectus that constitutes “forward-looking” information within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act were made by the Company on a reasonable basis and reflect the Company’s good faith belief or estimate of the matters described therein.

(xlvii) Regulatory. Each of the Company and the Subsidiaries is duly licensed as an insurance brokerage company, insurance agency, insurer or reinsurer, as the case may be, under the insurance laws and the rules, regulations and interpretations of the insurance regulatory authorities thereunder (collectively, “Insurance Laws”) of each jurisdiction in which the conduct of its existing business as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus requires such licensing, except for such jurisdictions in which the failure to be so licensed would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, each of the Company and the Subsidiaries has all other necessary authorizations, approvals, orders, consents, certificates, licenses, permits, registrations and qualifications of and from all insurance regulatory authorities necessary to conduct their respective existing businesses as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus and all of the foregoing are in full force and effect, except where the failure to have such authorizations, approvals, orders, consents, certificates, permits, registrations or qualifications or their failure to be in full force and effect would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; none of the Company or the Subsidiaries has received any notification from any insurance regulatory authority or other governmental authority in the United States or elsewhere to the effect that any additional authorization, approval, order, consent, certificate, permit, registration or qualification is needed to be obtained by either the Company or its Subsidiaries to conduct its existing business as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except for any such notification received where the failure to obtain such additional authorization, approval, order, consent, certificate, permit, registration or qualification would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; except as otherwise described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, no insurance regulatory authority has issued any order or decree impairing, restricting or prohibiting the payment of dividends by the Company or any of its Subsidiaries; and except as otherwise described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, none of the Company, the Subsidiaries or any of Properties is subject to any outstanding order or is a party to any written agreement, consent agreement or memorandum of understanding with, or is subject to any order or directive by, or is a recipient of any supervisory letter from any regulatory authority that by its terms restricts in any material respect the conduct of its business or that in any manner relates to its capital adequacy, its management or its business, nor has the Company or any Subsidiary been advised by any regulatory authority that it is considering issuing or requesting any such agreement, order or letter. Each of the Company and the Subsidiaries has filed all statutory financial returns, reports, documents and other information required to be filed pursuant to the applicable Insurance Laws of the United States and the various states thereof, except where the failure, individually or in the aggregate, to file such return, report,

 

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document or information would not reasonably be expected to result in a Material Adverse Effect; and each of the Company and the Subsidiaries maintains its books and records in accordance with, and is otherwise in compliance with, the applicable Insurance Laws of the United States and the various states thereof, except where the failure to so maintain its books and records or be in compliance would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Except as disclosed in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company and its Subsidiaries have made no material change in their insurance reserving practices since December 31, 2017.

(xlviii) Reinsurance Matters. (A) All reinsurance and retrocession treaties and agreements in force as of the date of this Agreement to which the Company or any of its Subsidiaries is a ceding party, (B) any terminated or expired reinsurance or retrocession treaty or agreement of the Company or any of the Subsidiaries under which there remains any material outstanding reserves or unexpired coverage and (C) any reinsurance or retrocession treaty or agreement between the Company and/or any of the Subsidiaries on one hand, and any affiliate of the Company, on the other hand (collectively, the “Ceded Reinsurance Agreements”) are in full force and effect, and neither the Company nor any Subsidiary, as applicable, is in default in any material respect as to any provision of any Ceded Reinsurance Agreement, there is no pending or, to the Company’s knowledge, threatened dispute between the Company or any Subsidiary, on one hand, and any reinsurer under any such treaty or agreement, on the other hand, and, to the Company’s knowledge, no party to any Ceded Reinsurance Agreement is impaired such that a default thereunder would reasonably be expected.

(xlix) No Other Materials. The Company has not distributed and, prior to the later to occur of (A) the Applicable Time and (B) completion of the distribution of the Securities, will not distribute any prospectus (as such term is defined in the Securities Act and Securities Act Regulations) in connection with the offering and sale of the Securities other than the Registration Statement, the Pricing Disclosure Package and the Prospectus or other materials, if any, permitted by the Securities Act Securities Act Regulations and approved by the Representative.

(l) Reportable Transactions. Neither the Company nor any of the Subsidiaries has participated in any reportable transaction, as defined in Treasury Regulation Section 1.6011-4(b) (1).

(li) Use of Proceeds. The Company intends to apply the net proceeds from the sale of the Securities substantially in accordance with the description set forth in the Pricing Disclosure Package and the Prospectus under the heading “Use of Proceeds.”

(b) Officer’s Certificates. Any certificate signed by any officer or other representative of the Company delivered to the Representative or to counsel for the Underwriters shall be deemed a representation and warranty by the Company, as applicable, to each Underwriter as to the matters covered thereby.

SECTION 2. Sale and Delivery to Underwriters; Closing.

(a) Initial Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Company, at the purchase price of 96.0% of the aggregate principal amount thereof (the “Purchase Price”), the amount of Initial Securities set forth in Schedule I opposite such Underwriter’s name, plus any additional amount of Initial Securities which such Underwriter may become obligated to purchase pursuant to provisions of Section 10 hereof.

(b) Option Securities. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase up to the full amount of the Option Securities at the Purchase Price. Such option may be exercised in whole or in part at any time and from time to time on or before the 30th day after the date of this Agreement upon written notice by the Representative to the Company setting forth the amount of Option Securities as to which the several Underwriters are exercising the option and the settlement time and date. The amount of Option Securities to be purchased by each Underwriter shall be the same percentage of the total amount of Option Securities to be purchased by the several Underwriters as such Underwriter is purchasing of the Initial

 

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Securities, plus any additional amount of Option Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof. The time and date of delivery of any Option Securities so purchased by the Underwriters (a “Date of Delivery”) shall be determined by the Representative, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time.

(c) Payment. Payment for the Initial Securities shall be made by wire transfer of immediately available funds to the account specified by the Company to the Representative against delivery to the nominee of The Depository Trust Company (“DTC”) for the account of each Underwriter, of one or more global notes representing the Securities (collectively, the “Global Notes”), with any transfer or other taxes payable in connection with the sale of the Initial Securities duly paid by the Company. The Company will cause the Global Notes to be made available to the Representative for checking at least twenty-four hours prior to the Closing Time at the offices of Stradley Ronon Stevens & Young, LLP, 2005 Market Street, Suite 2600, Philadelphia, PA 19103 (the “Closing Location”), or at such other place as shall be agreed upon by the Representative and the Company, The closing of the sale and purchase of the Initial Securities shall take place at the Closing Location, or at such other place as shall be agreed upon by the Representative and the Company, at 10:00 A.M. (New York City time) on the second (third, if the determination of the price of the Securities occurs after 4:30 P.M. (New York City time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10 hereof), or such other time as shall be agreed upon by the Representative and the Company (such time and date of payment and delivery being hereinafter called the “Closing Time”).

In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment for the Option Securities shall be made by wire transfer of immediately available funds to the account specified by the Company to the Representative against delivery to the nominee of DTC for the account of each Underwriter, of one or more Global Notes representing the Option Securities, with any transfer or other taxes payable in connection with the sale of the Option Securities duly paid by the Company. The Company will cause the Global Notes with respect to the Option Securities to be made available to the Representative for checking at least twenty-four hours prior to the Date of Delivery at the Closing Location, or at such other place as shall be agreed upon by the Representative and the Company. The closing of the sale and purchase of the Option Securities shall take place at the Closing Location, or at such other place as shall be agreed upon by the Representative and the Company, on the Date of Delivery.

It is understood that each Underwriter has authorized the Representative, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase. The Representative, individually and not as a representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option Securities, if any, to be purchased by any Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder.

SECTION 3. Covenants of the Company. The Company covenants with each Underwriter as follows:

(a) Compliance with Securities Regulations and Commission Requests. The Company, subject to Section 3(b) hereof, will comply with the requirements of Rule 430A of the Securities Act Regulations, will prepare the Prospectus (in form approved by the Representative) and file the Prospectus pursuant to Rule 424(b) not later than the Commission’s close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) of the Securities Act Regulations, and will notify the Representative promptly, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed, (ii) of the receipt of any comments from the Commission with respect to the Registration Statement, any preliminary prospectus, the Prospectus or any Incorporated Document, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus, including any Incorporated Document, or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or the receipt by the Company of any notice of objection to the use of the Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) of the Securities Act Regulations or the issuance of any order preventing or suspending the use of any preliminary prospectus or the Prospectus, or of the

 

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suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(e) of the Securities Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the offering of the Securities. The Company will affect all filings required under Rule 424(b), in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will make reasonable efforts to prevent the issuance of any stop order, prevention order or suspension order and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment. The Company has paid or shall pay the required Commission filing fees relating to the Securities within the time required by the Securities Act Regulations.

(b) Continued Compliance with Securities Laws. The Company will comply with the Securities Act, the Securities Act Regulations, the Exchange Act, the Exchange Act Regulations and the Trust Indenture Act so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Pricing Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations (“Rule 172”), would be) required by the Securities Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) amend or supplement the Pricing Disclosure Package or the Prospectus in order that the Pricing Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the Pricing Disclosure Package or the Prospectus, as the case may be, including the documents incorporated by reference therein, in order to comply with the requirements of the Securities Act, the Securities Act Regulations, the Exchange Act or the Exchange Act Regulations, the Company will promptly (A) give the Representative notice of such event, (B) prepare, as applicable, any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the Pricing Disclosure Package or the Prospectus comply with such requirements and furnish the Representative with copies of any such amendment or supplement a reasonable amount of time prior to its proposed filing or use and (C) file with the Commission any such amendment or supplement; provided, however, that the Company shall not file or use any such amendment or supplement to which the Representative or counsel for the Underwriters shall reasonably object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company will give the Representative notice of their intention to make any filings pursuant to the Exchange Act or the Exchange Act Regulations from the Applicable Time to the Closing Time and will furnish the Representative with copies of any such documents a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representative or counsel for the Underwriters shall reasonably object.

(c) Delivery of Registration Statements. The Company has furnished or will deliver to the Representative and counsel for the Underwriters, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (without exhibits) and signed copies of all consents and certificates of experts, and will also deliver, upon request, to the Representative, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be substantially identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(d) Delivery of Prospectuses. The Company will deliver to the Underwriters prior to 10:00 A.M., Eastern Time, on the business day next succeeding the date of this Agreement, without charge, copies of the Prospectus in such quantities as the Underwriters may reasonably request. The Company hereby consents to the use of such copies of the Prospectus for purposes permitted by the Securities Act. The Company will furnish to the Underwriters, without charge, during the period when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, such number of copies

 

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of the Prospectus (as amended or supplemented) as the Underwriters may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(e) Blue Sky Qualifications. The Company will use its reasonable best efforts, in cooperation with the Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other U.S. jurisdictions as the Representative may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Securities; provided, however, that the Company shall not be obligated (i) to file any general consent to service of process, (ii) to qualify as a foreign partnership, corporation or other entity or as a dealer in securities in any jurisdiction in which it is not so qualified or (iii) to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.

(f) Rule 158. The Company will make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule I58(c) under the Securities Act Regulations), an earning statement of the Company and its Subsidiaries complying with Section 11(a) of the Securities Act and the Securities Act Regulations (including, at the option of the Company, Rule 158 thereunder).

(g) Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Registration Statement, the Pricing Disclosure Package and the Prospectus under “Use of Proceeds.”

(h) Listing. On or prior to the date of this Agreement, the Company shall have submitted an application to NASDAQ to have the Securities listed on NASDAQ no later than 30 days following the Closing Time.

(i) DTC. The Company will use its best efforts to comply with the letter of representations of the Company, including any riders thereto, provided to DTC relating to the approval by and qualification of the Notes with DTC for “book-entry” transfer.

(j) Reporting Requirements. The Company, during the period when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and the Exchange Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Securities as may be required under Rule 463 of the Securities Act Regulations.

(k) Issuer Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent of the Representative, it will not make any offer relating to the Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided, that the Representative will be deemed to have consented to the Issuer Free Writing Prospectuses listed on Schedule II hereto and any “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed and approved by the Representative. Any such free writing prospectus consented to by the Representative is hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company represents that it has treated or agrees that it will treat each such Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following the issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement, the Prospectus or any preliminary prospectus, or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representative and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission; provided, that, this sentence shall not apply to any statements in or omissions from any such Issuer Free Writing Prospectus based upon and in conformity with the Underwriter Information.

 

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(l) Absence of Manipulation. The Company will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, stabilization or manipulation of the price of the Securities to facilitate the sale or resale of the Securities.

(m) Compliance with the Sarbanes-Oxley Act. The Company will comply in all material respects with all applicable provisions of the Sarbanes-Oxley Act that are in effect.

(n) Emerging Growth Company. The Company will promptly notify the Representative if the Company ceases to be an “emerging growth company” at any time prior to completion of the distribution of the Securities.

(o) Pricing Term Sheet. The Company shall prepare a pricing term sheet reflecting the final terms of the Securities, in substantially the form attached hereto as Schedule III and otherwise in form and substance satisfactory to the Representative (the “Pricing Term Sheet”), and file such Pricing Term Sheet as an “Issuer Free Writing Prospectus” pursuant to Rule 433 prior to the close of business on the business day following the date hereof; provided that the Company shall furnish the Representative with copies of any such Pricing Term Sheet a reasonable amount of time prior to such proposed filing and will not use or file any such document to which the Representative or counsel to the Underwriters shall object.

SECTION 4. Payment of Expenses.

(a) Expenses. The Company agrees, whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, to pay all costs, expenses, fees and taxes (other than income taxes or similar taxes) incident to and in connection with the performance of the Company’s obligations under this Agreement, including (i) accounting fees of the Company, (ii) the fees and disbursements of counsel for the Company, (iii) costs, expenses and fees relating to the authorization, issuance, sale and delivery by the Company of the Securities and the preparation and printing of certificates for the Securities, including any transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters; (iv) costs, expenses and fees relating to the preparation, printing and filing under the Securities Act of the Registration Statement (including any exhibits thereto), any Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus and any amendment or supplement thereto, or any document incorporated by reference therein; (v) costs, expenses and fees relating to the distribution of the Registration Statement (including any exhibits thereto), any Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus and any amendment or supplement thereto, all as provided in this Agreement; (vi) costs, expenses and fees relating to the production and distribution of this Agreement, any supplemental agreement among Underwriters, closing documents (including any compilations thereof) and such other documents as may be required in connection with the offering, purchase, sale and delivery of the Securities; (vii) the listing of the Securities on NASDAQ and/or any other exchange; (viii) the costs and charges of the Trustee and any paying agent, registrar or depositary; (ix) all fees and expenses in connection with the qualification of the Securities for offering and sale under state securities laws as provided in Section 3(a)(v) including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky survey; (x) the fees and expenses incurred in connection with having the Notes eligible for clearance, settlement and trading through the facilities of DTC; (xi) the investor presentations on any “road show” undertaken in connection with the marketing of the Securities, including, without limitation, expenses associated with any electronic road show, travel and lodging expenses of the representatives and officers of the Company; (xii) the reasonable fees and expenses of the Representative’s counsel, up to a maximum of $100,000 and (xiii) all other costs and expenses of the Company incident to the performance of its obligations under this Agreement.

(b) Reimbursement of Underwriters’ Expenses. If the Company shall fail to tender the Securities for delivery to the Underwriters for any reason or the Underwriters shall decline to purchase the Securities for any reason permitted under this Agreement, the Company will reimburse the Underwriters for all reasonable out-of-pocket expenses incurred by the Underwriters in connection with this Agreement and the proposed purchase of the Securities up to a maximum of $15,000, and upon demand the Company shall pay the full amount thereof to the Representative; provided, however, that reimbursement of the fees and expenses of Underwriters’ counsel shall be governed by Sections 4(a) and 4(c) hereof. If this Agreement is terminated pursuant to Section 9(a) by reason of the default of one or more Underwriters, the Company shall not be obligated to reimburse any defaulting Underwriter on account of those expenses.

 

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(c) Reimbursement of Fees and Expenses of Underwriters’ Counsel. Notwithstanding the foregoing, whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company shall not be required to pay or reimburse any costs, fees or expenses of Underwriters’ counsel in excess of $100,000 in the aggregate.

SECTION 5. Conditions of Underwriters’ Obligations. The obligations of the several Underwriters hereunder are subject to the accuracy at the Closing Time, as if made as of the Closing Time, of the representations and warranties of the Company contained in Sections 1(a) hereof or in certificates or letters of any officer of the Company or any of the Subsidiaries delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions:

(a) Effectiveness of Registration Statement; Rule 430A Information. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and at the Closing Time no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto shall have been issued under the Securities Act, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the knowledge of the Company, contemplated; and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the Underwriters. A prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) without reliance on Rule 424(b)(8) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A of the Securities Act Regulations. If the Company has elected to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall have become effective by 10:00 p.m., Eastern Time, on the date of this Agreement. All material required to be filed by the Company pursuant to Rule 433(d) shall have been filed with the Commission within the applicable time period prescribed for such filing by Rule 433.

(b) Opinion of Counsel for the Company. At the Closing Time, the Representative shall have received the favorable opinion and negative assurance letter, each dated the Closing Time, of Honigman Miller Schwartz and Cohn LLP, counsel for the Company, each in form and substance reasonably satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letters for each of the other Underwriters substantially to the effect set forth in Annex A hereto and to such further effect as counsel to the Underwriters may reasonably request.

(c) Opinion of Counsel for Underwriters. At the Closing Time, the Representative shall have received the favorable opinion, dated the Closing Time, of Stradley Ronon Stevens & Young, LLP, counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters with respect to such matters as the Representative shall reasonably request.

(d) Officers’ Certificate. At the Closing Time, there shall not have been, since the date hereof, since the Applicable Time or since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and the Significant Subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business and the Representative shall have received a certificate of the Chief Executive Officer of the Company and of the Chief Financial Officer of the Company, dated the Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties of the Company in Section 1(a) hereof are true and correct with the same force and effect as though expressly made at and as of the Closing Time, (iii) the Company has complied in all material respects with all agreements and satisfied all conditions on their part to be performed or satisfied at or prior to the Closing Time and (iv) no stop order suspending the effectiveness of the Registration Statement under the Securities Act has been issued, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to their knowledge, contemplated by any Governmental Entity.

 

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(e) Chief Financial Officer’s Certificates. The Representative shall have received certificates from the Chief Financial Officer of the Company, at the time of execution of this Agreement and at the Closing Time, to the effect that (i) the Chief Financial Officer of the Company is familiar with the accounting, operations and records systems of the Company; (ii) the Chief Financial Officer of the Company has carefully examined the Registration Statement, together with any amendments thereto, the Pricing Disclosure Package, the Prospectus, any supplements to the Prospectus and the Underwriting Agreement; and (iii) the Chief Financial Officer of the Company has supervised the compilation of and reviewed the dollar and other amounts marked on copies of certain information incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus included as an exhibit to such certificates, has compared such dollar and other amounts to amounts in analyses prepared by the Company from its accounting records or other records and found them to be in agreement in all material respects as of the specified dates and there is no reason to believe that the information contained in the certificates of the Chief Financial Officer of the Company is not true, accurate and complete in all material respects or contains any omissions that would cause the information provided to be materially misleading.

(f) Accountant’s Comfort Letter. At the time of the execution of this Agreement, the Representative shall have received from Deloitte & Touche LLP a letter, dated such date, in form and substance reasonably satisfactory to the Representative, together with signed or reproduced copies of such letter for each of the other Underwriters containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(g) Bring-down Comfort Letters. At the Closing Time, the Representative shall have received from Deloitte & Touche LLP a letter, dated the Closing Time, to the effect that it reaffirms the statements made in the letter furnished pursuant to Section 5(f) hereof, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time.

(h) Approval of Listing. On or prior to the date of this Agreement, the Company shall have submitted an application to NASDAQ to have the Securities listed on NASDAQ no later than 30 days following the Closing Time.

(i) No Objection. FINRA has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements relating to the offering of the Securities.

(j) DTC Eligibility. At the Closing Time, the Global Notes shall be eligible for clearance, settlement and trading in book-entry form through the facilities of DTC.

(k) Corporate Proceedings. All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the Securities, the Indenture, the Pricing Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and the transactions contemplated hereby and thereby shall be reasonably satisfactory in all material respects to counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.

(l) No Material Adverse Change – Company. (i) Neither the Company nor any Subsidiary shall have sustained since the date of the latest audited financial statements included or incorporated by reference in the Pricing Disclosure Package or the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Disclosure Package or Prospectus and (ii) since the respective dates as of which information is given in each of the Pricing Disclosure Package or the Prospectus there shall not have been any change in the capital stock shares or long-term debt of the Company or any Subsidiary or any change, or any development involving a prospective change, not set forth or contemplated in the Pricing Disclosure Package or Prospectus, in or affecting the Properties, the general affairs, management, financial position, shareholders’ equity or results of operations of the Company and the Subsidiaries, taken as a whole, otherwise than as set forth or contemplated in each of the Pricing Disclosure Package and the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the reasonable judgment of the Representative so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities being delivered on the terms and in the manner and on the terms contemplated in each of the Pricing Disclosure Package and the Prospectus.

 

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(m) No Material Adverse Change – Financial Markets. At the Closing Time there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange or on NASDAQ, (ii) a suspension or material limitation in trading in the Company’s securities on NASDAQ, (iii) a general moratorium on commercial banking activities declared by either federal or state authorities or (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or a material adverse change in general economic, political or financial conditions, including without limitation as a result of terrorist activities after the date hereof (or the effect of international conditions on the financial markets in the United States shall be such), or any other calamity or crisis, if the effect of any such event specified in this clause (iv) in the reasonable judgment of the Representative makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated in the Prospectus.

(n) Change in Rating. On or after the date hereof (i) no downgrading or other negative development shall have occurred in the rating accorded to the Company’s or any Subsidiary’s financial strength by A.M. Best Company or any other “nationally recognized statistical rating organization,” as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act Regulations (whether or not such downgrading or negative development has been publicly announced by A.M. Best Company) and (ii) except as described in the Pricing Disclosure Package and the Prospectus, no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s or any Subsidiary’s financial strength.

(o) Good Standing. The Representative shall have received satisfactory evidence of the good standing of the Company and the Subsidiaries in their respective jurisdictions of organization and their good standing as foreign entities in such other jurisdictions as the Representative may request, in each case in writing or any standard form of telecommunication from the appropriate governmental authorities of such jurisdictions.

(p) Conditions to Purchase of Option Securities. In the event that the Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Company contained herein and the statements in any certificates and letters furnished by the Company or any of the Subsidiaries hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representative shall have received:

(i) Officers’ Certificate. A certificate, dated such Date of Delivery, of the Chief Executive Officer of the Company, and of the Chief Financial Officer of the Company, confirming that the certificate delivered at the Closing Time pursuant to Section 5(d) hereof remains true and correct as of such Date of Delivery.

(ii) Chief Financial Officer’s Certificate. A certificate, dated such Date of Delivery, of the Chief Financial Officer of the Company, confirming that the certificate delivered at the Closing Time pursuant to Section 5(e) hereof remains true and correct as of such Date of Delivery.

(iii) Opinion of Counsel for the Company. The favorable opinion and negative assurance letter of Honigman Miller Schwartz and Cohn LLP, counsel for the Company, in form and substance reasonably satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion and negative assurance letter required by Section 5(b) hereof.

(iv) Opinion of Counsel for Underwriters. The favorable opinion of Stradley Ronon Stevens & Young, LLP, counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof.

 

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(v) Bring-down Comfort Letters. A letter from Deloitte & Touche LLP in form and substance satisfactory to the Representative and dated such Date of Delivery, substantially in the same form and substance as the letters furnished to the Representative pursuant to Section 5(g) hereof, except that the “specified date” in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Date of Delivery.

(q) Additional Documents. At the Closing Time and at each Date of Delivery, if any, counsel for the Underwriters shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be reasonably satisfactory in form and substance to the Representative and counsel for the Underwriters.

(r) Termination of Agreement. If any condition specified in this Section 5 shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several Underwriters to purchase the relevant Option Securities, may be terminated by the Representative by notice to the Company at any time at or prior to the Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 hereof and except that Sections 1, 6, 7, 8, 11, 14 and 15 hereof shall survive any such termination and remain in full force and effect.

SECTION 6. Indemnification.

(a) Indemnification of Underwriters. The Company agrees to indemnify and hold harmless each Underwriter, its affiliates (as such term is defined in Rule 501(b) under the Securities Act Regulation (each, an “Affiliate”)), its selling agents and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act as follows:

(i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus, any Issuer Free Writing Prospectus, the Pricing Disclosure Package or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever, in each case based upon any such untrue statement or omission, or any such alleged untrue statement or omission; and

(iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of one counsel chosen by the Representative), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, any preliminary prospectus, any Issuer Free Writing Prospectus, the Pricing Disclosure Package or the Prospectus (or any amendment or supplement thereto), in reliance upon and in conformity with the Underwriter Information.

 

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(b) Indemnification of the Company, Directors, and Officers. Each Underwriter severally agrees to indemnify and hold harmless the Company, its directors and officers, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, any preliminary prospectus, any Issuer Free Writing Prospectus, the Pricing Disclosure Package or the Prospectus (or any amendment or supplement thereto), in reliance upon and in conformity with the Underwriter Information.

(c) Actions against Parties; Notification. Each indemnified party shall give written notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. If any such claim is brought against an indemnified party, and the indemnified party notifies the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party (which shall not, except with the consent of the indemnified party, also be counsel to the indemnifying party). After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the Representative shall have the right to employ one counsel (in addition to local counsel) to represent jointly the Representative and those other Underwriters and their respective directors, officers and controlling persons who may be subject to liability arising out of any claim or action in respect of which indemnity may be sought by the Underwriter against the Company under this Section 6, and the Company shall not be permitted to assume the defense of such claim or action, if (i) the Company and the Underwriters shall have so mutually agreed, (ii) the Company has failed within a reasonable time to retain counsel reasonably satisfactory to the Underwriters, (iii) the Underwriters and their respective directors, officers and controlling persons shall have reasonably concluded, after consultation with counsel, that there are or may be legal defenses available to them that are different from or in addition to those available to the Company or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Underwriters or their respective directors, officers or controlling persons, on the one hand, and the Company, on the other hand, and representation of both sets of parties by the same counsel would present actual or potential differing interests between them, and in any such event the fees and expenses of such separate counsel shall be paid by the Company. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. No indemnified party shall, without the prior written consent of the indemnifying party, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof, without the prior written consent of the indemnifying party.

(d) Other Rights. The obligations of the parties to this Agreement contained in this Section 6 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.

SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims,

 

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damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and of the Underwriters, on the other hand, in connection with the statements or omissions, which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.

The relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company, on the one hand, and the total underwriting discount received by the Underwriters, on the other hand, in each case as set forth on the cover of the Prospectus, bear to the aggregate initial public offering price of the Securities as set forth on the cover of the Prospectus.

The relative fault of the Company, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or by the Underwriters, on the other hand, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

The Company, on the one hand, and the Underwriters, on the other hand, agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact.

Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions received by such Underwriter in connection with the Securities underwritten by it and distributed to the public.

No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each of Underwriter’s Affiliates and selling agents shall have the same rights to contribution as such Underwriter, and each director and officer of the Company and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. The Underwriters’ respective obligations to contribute pursuant to this Section 7 are several in proportion to the aggregate principal amount of Initial Securities set forth opposite their respective names in Schedule I hereto and any Option Securities and not joint.

SECTION 8. Representations, Warranties and Agreements to Survive. All representations, warranties and agreements contained in this Agreement or in certificates or letters of officers of the Company or any of the Subsidiaries submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its officers or directors, or any person controlling the Company and (ii) delivery of and payment for the Securities.

SECTION 9. Termination of Agreement.

 

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(a) Termination. The Representative may terminate this Agreement without liability to the Company, by notice to the Company, at any time at or prior to the Closing Time (i) if there has been, in the judgment of the Representative, since the time of execution of this Agreement or since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package or the Prospectus, any material adverse change in or affecting the condition, financial or otherwise, or in the earnings, business affairs or business prospects of Company and the Subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representative, impracticable or inadvisable to proceed with the completion of the offering or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or NASDAQ, or (iv) if trading generally on the New York Stock Exchange or on NASDAQ has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by order of the Commission, FINRA or any other governmental authority, or (v) if a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States, or (vi) if a banking moratorium has been declared by either Federal or New York authorities.

(b) Liabilities. If this Agreement is terminated pursuant to this Section 9, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7, 8, 11, 14 and 15 hereof shall survive such termination and remain in full force and effect.

SECTION 10. Default by One or More of the Underwriters. If, at the Closing Time or any Date of Delivery, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase the Securities that it has or they have agreed to purchase hereunder on such date (the “Defaulted Securities”), and the aggregate principal amount of Defaulted Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than 10% of the aggregate principal amount of the Securities to be purchased on such date, the non-defaulting Underwriters shall be obligated severally in the proportions that the aggregate principal amount of Initial Securities set forth opposite their respective names in Schedule I bears to the aggregate principal amount of Initial Securities set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Representative may specify, to purchase the Initial Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided, that in no event shall the aggregate principal amount of Securities that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 10 by an amount in excess of 10% of such Securities without the written consent of such Underwriter. If, at the Closing Time, any Underwriter or Underwriters shall fail or refuse to purchase Initial Securities and the aggregate principal amount of Initial Securities with respect to which such default occurs is more than 10% of the aggregate principal amount of Initial Securities to be purchased on such date, and arrangements satisfactory to the Representative and the Company for the purchase of such Initial Securities are not made within 48 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company, except that the Company will continue to be liable for the payment of expenses to the extent set forth in Section 4 hereof and the indemnity and contribution agreements in Section 9 hereof. In any such case either the Representative or the Company shall have the right to postpone the Closing Time, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement, the Pricing Disclosure Package, and the Prospectus or in any other documents or arrangements may be effected. If, on any Date of Delivery, any Underwriter or Underwriters shall fail or refuse to purchase Option Securities and the aggregate principal amount of Option Securities with respect to which such default occurs is more than 10% of the aggregate principal amount of Option Securities to be purchased on such Date of Delivery, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase the Option Securities to be sold on such Date of Delivery or (ii) purchase not less than the aggregate principal amount of Option Securities that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. As used herein, the term “Underwriter” includes any person substituted for an Underwriter under this Section 10.

No action taken pursuant to this Section 10 shall relieve any defaulting Underwriter from liability in respect of its default.

 

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SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to the Representative at: Boenning & Scattergood, Inc., 4 Tower Bridge, 200 Barr Harbor Drive, Suite 300, West Conshohocken, Pennsylvania 19428, attention Anthony Latini, with a copy to the attention of Kristen Winsko, Esq. (General Counsel) (at the same address) and Stradley Ronon Stevens & Young, LLP, 2005 Market Street, Suite 2600, Philadelphia, PA 19103, attention Thomas L. Hanley, Esq.; notices to the Company shall be directed to the Company at 550 West Merrill Street, Suite 200, Birmingham, Michigan 48009, attention Richard J. Fiato, Esq., Corporate Counsel and Honigman Miller Schwartz and Cohn LLP, 2290 First National Building, 660 Woodward Avenue, Detroit, Michigan 48226, attention Donald J. Kunz, Esq.

SECTION 12. No Advisory or Fiduciary Relationship. The Company acknowledges and agrees that (a) the purchase and sale of the Securities pursuant to this Agreement, including the determination of the initial public offering price of the Securities and any related discounts and commissions, is an arm’s-length commercial transaction among the Company, on the one hand, and the several Underwriters, on the other hand, (b) in connection with the offering of the Securities and the process leading thereto each Underwriter is and has been acting solely as a principal and is not the agent or fiduciary of the Company or any of the Subsidiaries or the Company’s shareholders, creditors, employees or any other party, (c) no Underwriter has assumed or will assume an advisory or fiduciary responsibility in favor of the Company with respect to the offering of the Securities or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company or any of the Subsidiaries on other matters) and no Underwriter has any obligation to the Company with respect to the offering of the Securities except the obligations expressly set forth in this Agreement, (d) the Underwriters and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and (e) the Underwriters have not provided any legal, accounting, regulatory or tax advice with respect to the offering of the Securities and the Company has consulted its own respective legal, accounting, regulatory and tax advisors to the extent it deemed appropriate.

SECTION 13. Parties. This Agreement shall inure to the benefit of and be binding upon the Underwriters, the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters, the Company and their respective successors and the Affiliates, controlling persons and officers and directors referred to in Sections 6 and 7 hereof and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters, the Company and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase.

SECTION 14. Trial by Jury. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its shareholders and affiliates), and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

SECTION 15. GOVERNING LAW. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CHOICE OF LAW PROVISIONS.

SECTION 16. TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 17. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

 

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SECTION 18. Counterparts. This Agreement may be executed in any number of counterparts (including by facsimile or other standard form of electronic transmission), each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement, and each such signature shall constitute an original signature for all purposes hereof.

SECTION 19. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.

SECTION 20. Patriot Act. In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Underwriters are required to obtain, verify and record information that identifies their respective clients, including the Company, which information may include the name and address of their respective clients, as well as other information that will allow the Underwriters to properly identify their respective clients.

 

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If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Underwriters, on the one hand, and the Company, on the other hand, in accordance with its terms.

 

Very truly yours,
CONIFER HOLDINGS, INC.
By:  

 

 

[Name]

 

[Title]

CONFIRMED AND ACCEPTED,

as of the date first above written:

Boenning & Scattergood, Inc.

By:  

 

    Authorized Signatory

For itself and as Representative of the other Underwriters named in Schedule I hereto.

[Signature Page to Underwriting Agreement]

 

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SCHEDULE I

 

Name of Underwriter

   Principal Amount
of Notes
 

Boenning & Scattergood, Inc.

  

American Capital Partners, LLC

  
  
  
  

 

 

 

Total

  
  

 

 

 


SCHEDULE II

 

1.

Pricing term sheet substantially in the form of Schedule III.

 

2.

Investor Presentation dated                      2018.

(Back To Top)

Section 3: EX-4.2 (EX-4.2)

EX-4.2

Exhibit 4.2

CONIFER HOLDINGS, INC.

AND

WILMINGTON TRUST, NATIONAL ASSOCIATION,

as TRUSTEE

 

 

INDENTURE

Dated as of     , 2018

 

 


CROSS REFERENCE SHEET

Between

Provisions of Sections 310 through 318(a) inclusive of the Trust Indenture Act of 1939 and the Indenture dated as of, between Conifer Holdings, Inc., as issuer, and Wilmington Trust, National Association, as trustee.

 

    Section of Act   Section of Indenture
  310(a)(1) and (2)   8.09
       310(a)(3), (4) and (5)   *
  310(b)   8.08 and 8.10
  310(c)   *
  311(a)   8.13
  311(b)   8.13
  311(c)   *
  312(a)   6.01 and 6.02
  312(b)   6.02(a)
  312(c)   6.02(b)
  313(a)(1), (2), (3), (4), (6) and (7)   6.04(a)
  313(a)(5)   *
  313(b)(1)   *
  313(b)(2)   6.04(a)
  313(c)   6.04(a)
  313(d)   6.04(b)
  314(a)(1)   6.03
  314(a)(2)   6.03
  314(a)(3)   6.03
  314(b)   *
  314(c)(1)   5.06 and 15.05
  314(c)(2)   15.05
  314(c)(3)   *
  314(d)   *
  314(e)   15.05
  314(f)   *
  315(a), (c) and (d)   8.01
  315(b)   7.08
  315(e)   7.09
  316(a)(1)   7.07
  316(a)(2)   *
  316(a) last para.   9.03
  316(b)   7.10
  317(a)   7.02
  317(b)   5.05
  318(a)   15.07

 

*

Not Applicable.

This cross reference sheet shall not, for any purpose, be considered part of the Indenture.


TABLE OF CONTENTS

 

            Page  

ARTICLE 1 DEFINITIONS

     1  

Section 1.01

     Definitions      1  

ARTICLE 2 FORMS OF NOTES

     7  

Section 2.01

     Forms Generally      7  

Section 2.02

     Forms of Notes      7  

Section 2.03

     Form of Trustee’s Certificate of Authentication      8  

Section 2.04

     Notes in Global Form      8  

ARTICLE 3 THE NOTES

     10  

Section 3.01

     Title and Terms      10  

Section 3.02

     Denominations      12  

Section 3.03

     Payment of Principal and Interest      12  

Section 3.04

     Execution of Notes      12  

Section 3.05

     Temporary Notes      14  

Section 3.06

     Exchange and Registration of Transfer of Notes      14  

Section 3.07

     Mutilated. Destroyed. Lost or Stolen Notes      15  

Section 3.08

     Payment of Interest; Interest Rights Preserved      16  

Section 3.09

     Persons Deemed Owners      17  

Section 3.10

     Cancellation of Notes Paid      17  

Section 3.11

     Currency and Manner of Payments      18  

Section 3.12

     CUSIP Numbers      19  

ARTICLE 4 REDEMPTION OF NOTES

     19  

Section 4.01

     Applicability of Article      19  

Section 4.02

     Notice of Redemption; Selection of Notes      20  

Section 4.03

     Payment of Notes Called for Redemption      21  

Section 4.04

     Exclusion of Certain Notes from Eligibility for Selection for Redemption      22  

Section 4.05

     Provisions with Respect to any Sinking Funds      22  

ARTICLE 5 PARTICULAR COVENANTS OF THE COMPANY

     23  

Section 5.01

     Payment of Principal, Premium and Interest      23  

Section 5.02

     Offices for Notices and Payments      23  

Section 5.03

     Appointments to Fill Vacancies in Trustee’s Office      24  

Section 5.04

     Provisions as to Paying Agent      24  

Section 5.05

     Certificate to Trustee      25  

Section 5.06

     Waivers of Covenants      25  

 

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ARTICLE 6 HOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

     26  

Section 6.01

     Holders’ Lists      26  

Section 6.02

     Preservation and Disclosure of Lists      26  

Section 6.03

     Reports by the Company      26  

Section 6.04

     Reports by the Trustee      26  

ARTICLE 7 REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT

     27  

Section 7.01

     Events of Default      27  

Section 7.02

     Payment of Notes Upon Default; Suit Therefor      29  

Section 7.03

     Application of Moneys Collected by Trustee      31  

Section 7.04

     Proceedings by Holders      32  

Section 7.05

     Proceedings by Trustee      32  

Section 7.06

     Remedies Cumulative and Continuing      32  

Section 7.07

     Direction of Proceedings and Waiver of Defaults by Majority of Holders      33  

Section 7.08

     Notice of Defaults      33  

Section 7.09

     Undertaking to Pay Costs      34  

Section 7.10

     Unconditional Right of Holders to Receive Principal, Premium and Interest      34  

ARTICLE 8 CONCERNING THE TRUSTEE

     34  

Section 8.01

     Duties and Responsibilities of Trustee.      34  

Section 8.02

     Reliance on Documents, Opinions      35  

Section 8.03

     No Responsibility for Recitals      37  

Section 8.04

     Trustee and Agents May Own Notes      37  

Section 8.05

     Moneys to be Held in Trust      37  

Section 8.06

     Compensation and Expenses of Trustee      37  

Section 8.07

     Officer’s Certificate as Evidence      38  

Section 8.08

     Conflicting Interest of Trustee      38  

Section 8.09

     Eligibility of Trustee      38  

Section 8.10

     Resignation or Removal of Trustee      39  

Section 8.11

     Acceptance by Successor Trustee      40  

Section 8.12

     Succession by Merger      41  

Section 8.13

     Limitation on Rights of Trustee as a Creditor      41  

Section 8.14

     Authenticating Agents      41  

Section 8.15

     Trustee’s Application for Instructions from the Company      44  

ARTICLE 9 CONCERNING THE HOLDERS

     44  

Section 9.01

     Action by Holders      44  

Section 9.02

     Proof of Execution by Holders      44  

Section 9.03

     Company-Owned Notes Disregarded      45  

Section 9.04

     Revocation of Consents; Future Holders Bound      45  

 

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ARTICLE 10 HOLDERS’ MEETINGS

     45  

Section 10.01

     Purposes of Meetings      45  

Section 10.02

     Call of Meetings by Trustee      46  

Section 10.03

     Call of Meetings by Company or Holders      46  

Section 10.04

     Qualifications for Voting      46  

Section 10.05

     Regulations      46  

Section 10.06

     Voting      47  

Section 10.07

     No Delay of Rights by Meeting      48  

ARTICLE 11 SUPPLEMENTAL INDENTURES

     48  

Section 11.01

     Supplemental Indentures without Consent of Holders      48  

Section 11.02

     Supplemental Indentures with Consent of Holders      49  

Section 11.03

     Effect of Supplemental Indentures      50  

Section 11.04

     Notation on Notes      51  

Section 11.05

     Evidence of Compliance of Supplemental Indenture to be Furnished Trustee      51  

ARTICLE 12 CONSOLIDATION, MERGER, SALE AND CONVEYANCE

     51  

Section 12.01

     Company May Consolidate on Certain Terms      51  

Section 12.02

     Successor Entity to be Substituted      51  

Section 12.03

     Opinion of Counsel to Be Given to the Trustee      52  

ARTICLE 13 SATISFACTION, DISCHARGE AND DEFEASANCE OF INDENTURE

     52  

Section 13.01

     Satisfaction, Discharge and Legal Defeasance of Notes of any Series      52  

Section 13.02

     Covenant Defeasance of Notes of any Series      53  

Section 13.03

     Application of Trust Funds; Indemnification      55  

Section 13.05

     Return of Unclaimed Moneys      55  

Section 13.06

     Reinstatement      56  

ARTICLE 14 IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

     56  

Section 14.01

     Indenture and Notes Solely Obligations of the Company      56  

ARTICLE 15 MISCELLANEOUS PROVISIONS

     56  

Section 15.01

     Provisions Binding on Successors of the Company      56  

Section 15.02

     Indenture for Sole Benefit of Parties and Holders of Notes      57  

Section 15.03

     Addresses for Notices      57  

Section 15.04

     Contract; Waiver of Trial by Jury      58  

Section 15.05

     Evidence of Compliance with Conditions Precedent      58  

 

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Section 15.06

     Legal Holidays      58  

Section 15.07

     Trust Indenture Act of 1939 to Control      59  

Section 15.08

     Table of Contents. Headings      59  

Section 15.09

     Determination of Principal Amount      59  

Section 15.10

     Execution in Counterparts      59  

 

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THIS INDENTURE, dated as of     , 2018, between Conifer Holdings, Inc., a Michigan corporation (the “Company”), and Wilmington Trust, National Association, as trustee (the “Trustee”).

RECITALS OF THE COMPANY

The Company has duly authorized the execution and delivery of this Indenture to provide for the issue of (i) the Company’s     % Senior Unsecured Notes due      to be issued in one or more series as in this Indenture provided, up to such principal amount or amounts as may from time to time be authorized in or pursuant to one or more resolutions of the Board of Directors (the “Initial Notes”), (ii) if and when issued, Additional Notes, and (iii) any other unsecured debentures, notes, bonds or other evidences of indebtedness to be issued in one or more series as in this Indenture provided, up to such principal amount or amounts as may from time to time be authorized in or pursuant to one or more resolutions of the Board of Directors (collectively, with the Initial Notes and Additional Notes, the “Notes”).

All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase or acceptance of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of the respective Holders from time to time of the Notes or of any series thereof as follows:

ARTICLE 1

DEFINITIONS

Section 1.01 Definitions. The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01. All other terms used in this Indenture which are defined in the Trust Indenture Act of 1939 or which are by reference therein defined in the Securities Act shall have (except as herein otherwise expressly provided or unless the context otherwise requires) the meanings assigned to such terms in said Trust Indenture Act of 1939 and in the Securities Act as in force at the date of the execution of this Indenture. All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States for domestic companies at the date of such computation. All references to such terms herein shall be both to the singular or the plural, as the context so requires. Unless the context otherwise requires, any reference to an “Article” or a “Section” refers to an Article or Section, as the case may be, of this Indenture. The words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The words “including,” “includes” and “include” shall be deemed to be followed by the words “without limitation.”


(a) The term “Act” has the meaning set forth in Section 9.01.

(b) The term “Additional Notes” means any notes issued under the Indenture in addition to the Initial Notes, having the same terms in all respects as the Initial Notes, or in all respects except with respect to issue date and interest paid or payable on or prior to the first interest payment date after the issuance of such Additional Notes.

(c) The term “Affiliate”, when used with respect to 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 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.

(d) The term “Authenticating Agent” means the agent of the Trustee, if any, which at the time shall be appointed and acting pursuant to Section 8.14.

(e) The term “Board of Directors” means the Board of Directors of the Company or any authorized committee of such Board designated by the Board of Directors, Articles of Incorporation or Bylaws of the Company to act for such Board for purposes of this Indenture.

(f) The term “Board Resolution” means a copy of a resolution certified by a Vice President, the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.

(g) The term “Business Day”, when used with respect to any Place of Payment or any other particular location, means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions or trust companies in that Place of Payment or other location are authorized or obligated by law, regulation or executive order to close.

(h) The term “Commission” means the U.S. Securities and Exchange Commission.

(i) The term “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 successor or successors.

(j) The terms “Company Request” and “Company Order” mean, respectively, a written request or order signed in the name of the Company by its Chairman of the Board, Vice Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Vice President, Treasurer, Secretary, Assistant Secretary or Assistant Treasurer, and delivered to the Trustee.

 

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(k) The term “Conversion Date” has the meaning set forth in Section 3.11.

(l) The term “Corporate Trust Office” means the designated office of the Trustee at which, at any particular time, its corporate trust business shall be administered, which office at the date hereof is located at 1100 North Market Street, Wilmington, DE 19890 Attention: Conifer Holdings, Inc. Administrator, 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 such successor Trustee may designate from time to time by notice to the Company).

(m) The term “Currency Determination Agent” means the financial institution, if any, from time to time selected by the Company for purposes of Section 3.11.

(n) The term “Depository” means, unless otherwise specified by the Company pursuant to Section 3.01, with respect to Notes of any series issuable or issued as a Global Note, The Depository Trust Company, New York, New York, or any successor thereto registered as a clearing agency pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation.

(o) The term “Dollar” means the coin or currency of the United States of America which as of the time of payment is legal tender for the payment of public and private debts.

(p) The term “Dollar Equivalent of the Foreign Currency” has the meaning set forth in Section 3.11.

(q) The term “Event of Default” has the meaning set forth in Section 7.01.

(r) The term “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(s) The term “Foreign Currency” means a currency issued by the government of any country other than the United States of America.

(t) The term “Global Note” means a Note issued in global form pursuant to Section 2.04 hereof to evidence all or part of a series of Note.

(u) The term “Government Obligations” means securities which are (i) direct obligations of the government that issued the currency in which the Notes of a series are denominated or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the government that issued the currency in which the Notes of such series are denominated, the payment of which obligations is unconditionally guaranteed by such government, and which, in either case, are full faith and credit obligations of such government, are denominated in the currency in which the Notes of such series are denominated and which are not callable or redeemable at the option of the issuer thereof.

 

3


(v) The term “Holder” means any Person in whose name a Note of any series is registered in the Note Register applicable to Notes of such series.

(w) The term “Indenture” means this instrument as originally executed and delivered or, if amended or supplemented as herein provided pursuant to the applicable provisions hereof, as so amended or supplemented.

(x) The term “Indexed Note” means a Note, the terms of which provide that the principal amount thereof payable at Stated Maturity may be more or less than the principal face amount thereof at original issuance.

(y) The term “interest”, when used with respect to an Original Issue Discount Note that by its terms bears interest only after maturity, means interest payable after maturity.

(z) The term “Interest Payment Date”, when used with respect to any series of Notes, means the Stated Maturity of an installment of interest on such Notes.

(aa) The term “Market Exchange Rate” has the meaning set forth in Section 3.11.

(bb) The term “Material Subsidiary” means a direct or indirect subsidiary of Conifer that is an insurance company with statutory surplus of at least $10,000,000 for the most recently completed fiscal quarter.

(cc) The terms “Note” or “Notes” has the meaning set forth in the Recitals of the Company.

(dd) The term “Note Register” has the meaning set forth in Section 3.06.

(ee) The term “Note Registrar” has the meaning set forth in Section 3.06.

(ff) The term “Officer’s Certificate”, when used with respect to the Company, means a certificate signed by its Chairman of the Board, Vice Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Treasurer or Secretary, or any Vice President, Assistant Secretary or Assistant Treasurer of the Company, and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 15.05 to the extent required by the provisions of such Section.

(gg) The term “Opinion of Counsel” means an opinion in writing signed by legal counsel who may be an employee of or counsel to the Company and who shall be reasonably acceptable to the Trustee. Each such opinion shall include the statements provided for in Sections 3.04, 11.05, 12.03, 13.01, 13.02 and 15.05 to the extent required by the provisions of such Sections.

(hh) The term “Original Issue Discount Note” means any Note which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof pursuant to Section 7.01.

 

4


(ii) The term “Outstanding”, when used with respect to Notes of any series means, as of the date of determination, all such Notes theretofore authenticated and delivered under this Indenture, except:

(1) such Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;

(2) such Notes for whose payment or redemption money in the necessary amount and in the specified currency has been theretofore deposited with the Trustee or any paying agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own paying agent) for the Holders of such Notes, provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made;

(3) such Notes that have been paid pursuant to Section 3.07 or such Notes in exchange for or in lieu of which other such Notes have been authenticated and delivered pursuant to this Indenture, unless proof satisfactory to the Trustee is presented that any such Notes are held by Persons in whose hands any of such Notes are a legal, valid and binding obligation of the Company, and such Notes the indebtedness in respect to which has been discharged in accordance with Section 13.01 provided, however, that in determining whether the Holders of the requisite principal amount of such Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, such Notes owned by the Company or any other obligor upon such Notes or any Affiliate of the Company or such other obligor (except in the case in which the Company or such other obligor or Affiliate owns all Notes Outstanding under the Indenture, or all Notes of each such series, as the case may be, without regard to this proviso) shall be disregarded and deemed not to be Outstanding in the manner set forth in Section 9.03, provided, however, that for the purposes of determining whether the Trustee shall be protected in relying on any such request, demand, authorization, direction, notice, consent, or waiver only such Notes which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded.

(jj) The term “Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof.

(kk) The term “Place of Payment”, when used with respect to the Notes of any series, means the place or places where the principal of (premium, if any) and interest on the Notes of that series are payable as specified in accordance with Section 3.01.

(ll) The term “Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note, and for the purposes of this definition, any Note authenticated and delivered under Section 3.07 in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note.

 

5


(mm) The term “Redemption Date”, when used with respect to any Note to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.

(nn) The term “Redemption Price”, when used with respect to any Note to be redeemed, means the price specified in such Note at which it is to be redeemed pursuant to this Indenture.

(oo) The term “Registration Statement” means that certain Form S-1 Registration Statement of the Company filed with the Securities and Exchange Commission with respect to the Initial Notes, as amended from time to time, and any successor registration statement on any applicable form.

(pp) The term “Regular Record Date” for the interest payable on any Note on any Interest Payment Date means the date specified in such Note as the “Regular Record Date” as contemplated by Section 3.01, whether or not a Business Day.

(qq) The term “Responsible Officer”, when used with respect to the Trustee, means any officer of the Trustee assigned to the corporate trust administration unit (or any successor division or unit) of the Trustee located at the Corporate Trust Office of the Trustee, who shall have direct responsibility for the administration of this Indenture and, for the purposes of Section 7.07, Section 7.08 and Section 8.01(c)(2), shall also include any other officer of the Trustee to whom any corporate trust matter relating to this Indenture is referred because of such officer’s knowledge of and familiarity with the particular subject.

(rr) The term “Responsible Officer”, when used with respect to the Company, means the Chairman of the Board, Vice Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Treasurer, or Secretary, or any Vice President, Assistant Secretary or Assistant Treasurer, in each case, of the Company.

(ss) The term “Securities Act” means the Securities Act of 1933, as amended.

(tt) The term “Special Record Date” for the payment of any Defaulted Interest (as defined in Section 3.08) means a date fixed by the Company pursuant to Section 3.08.

(uu) The term “Stated Maturity” when used with respect to any Note or any installment of principal thereof or of interest thereon, means the date specified in such Note as the fixed date on which the principal of such Note, or such installment of interest, is due and payable, including, without limitation, the “Final Stated Maturity” as defined in any supplemental indenture.

(vv) The term “Subsidiary” means any Person of which the Company, or the Company and one or more Subsidiaries, or any one or more Subsidiaries, directly or indirectly own more than 50% of the Voting Stock.

(ww) The term “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 “Trustee” shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, “Trustee” as used with respect to the Notes of any series shall mean the Trustee with respect to the Notes of that series.

 

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(xx) The term “Trust Indenture Act of 1939” means the Trust Indenture Act of 1939, as amended, as in force at the date as of which this Indenture was executed provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, “Trust Indenture Act of 1939” means to the extent required by any such amendment the Trust Indenture Act of 1939 as so amended.

(yy) The term “Voting Stock” means outstanding shares of capital stock or similar equity interests having under ordinary circumstances voting power for the election of directors, managers or the substantial equivalent thereof, whether at all times or only so long as no senior class of stock or similar equity interest has such voting power by reason of the happening of any contingency.

ARTICLE 2

FORMS OF NOTES

Section 2.01 Forms Generally. The Notes of each series and the certificates of authentication thereon shall have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture (the provisions of which shall be appropriate to reflect the terms of each series of Notes, including the currency or denomination, which may be Dollars or Foreign Currency), and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon, as may be required to comply with the rules of any securities exchange, or as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their signing of such Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note.

Section 2.02 Forms of Notes. The Notes of each series shall be in such form or forms (including global form) as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto.

Prior to the delivery of a Note of any series in any such form to the Trustee for the Notes of such series for authentication, the Company shall deliver to the Trustee the following:

(a) The Board Resolution or indenture supplemental hereto by or pursuant to which such form of Note has been approved;

(b) An Officer’s Certificate dated the date such Certificate is delivered to the Trustee stating that all conditions precedent provided for in this Indenture relating to the authentication and delivery of Notes in such form have been complied with; and

(c) The Opinion of Counsel described in Section 3.04.

The definitive Notes shall be printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner, all as determined by the officers executing such Notes, as evidenced by their execution thereof.

 

7


Section 2.03 Form of Trustees Certificate of Authentication. The following is the form of the Certificate of Authentication of the Trustee to be endorsed on all Notes substantially as follows:

This is one of the Notes of the series designated therein issued under the within-mentioned Indenture.

 

 

as Trustee
By:  

 

  Authorized Signatory

Section 2.04 Notes in Global Form.

(a) If the Company shall establish pursuant to Section 3.01 that the Notes of a particular series are to be issued in whole or in part in the form of one or more Global Notes, then the Company shall execute and the Trustee or its agent shall, in accordance with Section 3.04 and the Company Order delivered to the Trustee or its agent thereunder, authenticate and deliver such Global Note or Global Notes, which (i) shall represent, and shall be denominated in an amount equal to the aggregate principal amount of, the Outstanding Notes of such series to be represented by such Global Note or Global Notes, or such portion thereof as the Company shall specify in a Company Order, (ii) shall be registered in the name of the Depository for such Global Note or Global Notes or its nominee, (iii) shall be delivered by the Trustee or its agent to the Depository or pursuant to the Depository’s instruction or held by the Trustee as custodian for the Depository and (iv) shall bear a legend substantially to the following effect: “Unless this certificate is presented by an authorized representative of the Depository to the Company or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of the nominee of the Depository or in such other name as is requested by an authorized representative of the Depository (and any payment is made to the nominee of the Depository or to such other entity as is requested by an authorized representative of the Depository), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, the nominee of the Depository, has an interest herein.”

(b) Notwithstanding any other provision of this Section 2.04 or of Section 3.06, and subject to the provisions of paragraph (c) below, unless the terms of a Global Note expressly permit such Global Note to be exchanged in whole or in part for individual certificates representing Notes, a Global Note may be transferred, in whole but not in part and in the manner provided in Section 3.06, only to a nominee of the Depository for such Global Note, or to the Depository, or a successor Depository for such Global Note selected or approved by the Company, or to a nominee of such successor Depository.

(c) (1) If at any time the Depository for a Global Note notifies the Company that it is unwilling or unable to continue as Depository for such Global Note or if at any time the Depository for the Global Notes for such series shall no longer be eligible or in good standing under the Exchange Act or other applicable statute or regulation, the Company shall appoint a

 

8


successor Depository with respect to such Global Note. If a successor Depository for such Global Note is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company will execute, and the Trustee or its agent, upon receipt of a Company Request for the authentication and delivery of certificates representing Notes of such series in exchange for such Global Note, will authenticate and deliver, certificates representing Notes of such series of like tenor and terms in an aggregate principal amount equal to the principal amount of the Global Note in exchange for such Global Note.

(2) The Company may at any time and in its sole discretion (subject, however, to the procedures of the Depository) determine that the Notes of any series or portion thereof issued or issuable in the form of one or more Global Notes shall no longer be represented by such Global Note or Global Notes. In such event the Company will execute, and the Trustee, upon receipt of a Company Request for the authentication and delivery of certificates representing Notes of such series in exchange in whole or in part for such Global Note, will authenticate and deliver certificates representing Notes of such series of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such Global Note or Global Notes representing such series or portion thereof in exchange for such Global Note or Global Notes.

(3) If an Event of Default with respect to Notes issued or issuable in the form of a Global Note has occurred and is continuing, the Depository for such Global Note may surrender such Global Note in exchange in whole or in part for certificates representing Notes of such series of like tenor and terms in definitive form on such terms as are acceptable to the Company and such Depository. Thereupon, the Company shall execute, and the Trustee or its agent shall authenticate and deliver, without a service charge, (A) to each Person specified by the Depository a certificate or certificates representing Notes of the same series of like tenor and terms and of any authorized denomination as requested by such Person in an aggregate principal amount equal to and in exchange for such Person’s beneficial interest as specified by the Depository in the Global Note and (B) to such Depository a new Global Note of like tenor and terms and in an authorized denomination equal to the difference, if any, between the principal amount of the surrendered Global Note and the aggregate principal amount of certificates representing Notes delivered to Holders thereof.

(4) In any exchange provided for in any of the preceding three paragraphs, the Company will execute, and the Trustee or its agent will authenticate and deliver, certificates representing Notes in definitive registered form in authorized denominations for Notes of the same series or any integral multiple thereof. Upon the exchange of the entire principal amount of a Global Note for certificates representing Notes, such Global Note shall be cancelled by the Trustee or its agent. Except as provided in the preceding paragraph, certificates representing Notes issued in exchange for a Global Note pursuant to this Section shall be registered in such names and in such authorized minimum denominations for Notes of that series or any integral multiple thereof, as the Depository shall instruct the Trustee or its agent. The Trustee or the Note Registrar shall deliver at its Corporate Trust Office such certificates representing Notes to the Holders in whose names such Note are so registered.

 

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ARTICLE 3

THE NOTES

Section 3.01 Title and Terms. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is unlimited. The Notes may be issued up to the aggregate principal amount of Notes from time to time authorized by or pursuant to a Board Resolution.

The Notes may be issued in one or more series. All Notes of each series issued under this Indenture shall in all respects be equally and ratably entitled to the benefits hereof with respect to such series without preference, priority or distinction on account of the actual time or times of the authentication and delivery or maturity of the Notes of such series. There shall be established in or pursuant to a Board Resolution, and set forth in an Officer’s Certificate to the extent not established in a Board Resolution, or established in one or more indentures supplemental hereto, prior to the issuance of Notes of any series:

(a) the title of the Notes of the series (which shall distinguish the Notes of the series from all other series of Notes);

(b) any limit upon the aggregate principal amount of the Notes of the series which may be authenticated and delivered under this Indenture (except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes of that series pursuant to this Article Three, the second paragraph of Section 4.03, or Section 11.04);

(c) the date or dates (or the manner of calculation thereof) on which the principal of the Notes of the series is payable;

(d) the rate or rates (or the manner of calculation thereof) at which the Notes of the series shall bear interest, if any, the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest shall be payable and the Regular Record Date for the interest payable on any Interest Payment Date;

(e) the Place of Payment;

(f) the period or periods within which, the price or prices at which, the currency or currency units in which, and the terms and conditions upon which Notes of the series may be redeemed, in whole or in part, at the option of the Company;

(g) the obligation, if any, of the Company to redeem or purchase Notes of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices in the currency at which, the currency or currency units in which, and the terms and conditions upon which Notes of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;

(h) the denominations in which the Notes of such series shall be issuable if other than minimum denominations of $25 and any integral multiple of $25 in excess thereof;

 

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(i) if other than Dollars, the currencies in which payments of interest or principal of (and premium, if any, with respect to) the Notes of the series are to be made;

(j) if the interest on or principal of (or premium, if any, with respect to) the Notes of the series are to be payable, at the election of the Company or a Holder thereof or otherwise, in a currency other than that in which such Notes are payable, the period or periods within which, and the other terms and conditions upon which, such election may be made, and the time and manner of determining the exchange rate between the currency in such Notes are denominated or stated to be payable and the currency in which such Notes or any of them are to be so payable;

(k) whether the amount of payments of interest on or principal of (or premium, if any, with respect to) the Notes of such series may be determined with reference to an index, formula or other method (which index, formula or method may be based, without limitation, on one or more currencies, commodities, equity indices or other indices), and, if so, the terms and conditions upon which and the manner in which such amounts shall be determined and paid or payable;

(l) the extent to which any Notes will be issuable in permanent global form, the manner in which any payments on a permanent Global Note will be made, and the appointment of any Depository relating thereto;

(m) any deletions from, modifications of or additions to the Events of Default or covenants with respect to the Notes of such series, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth herein;

(n) if any of the Notes of such series are to be issuable upon the exercise of warrants, this shall be so established as well as the time, manner and place for such Notes to be authenticated and delivered;

(o) the inapplicability of any of the provisions of Article 13 with respect to any series of Notes;

(p) the terms of any right to convert the Notes of such series into, or exchange the Notes for, the Company’s common shares or other securities or property or cash in lieu of the Company’s ordinary shares or other securities or property, or any combination thereof; and any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture).

All Notes of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to such Board Resolution and set forth in such Officer’s Certificate or in any such indenture supplemental hereto.

Notwithstanding Section 3.01(b) and unless otherwise expressly provided with respect to a series of Notes, the aggregate principal amount of a series of Notes may be increased and additional Notes of such series may be issued up to the maximum aggregate principal amount authorized with respect to such series as increased.

 

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If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officer’s Certificate setting forth the terms of the series.

Section 3.02 Denominations. The Notes of each series shall be issuable in registered form without coupons in such denominations as shall be specified as contemplated in Section 3.01. In the absence of any specification with respect to the Notes of any series, the Notes of such series shall be issuable in minimum denominations of $25 and any integral multiple of $25 in excess thereof, which may be in Dollars or any Foreign Currency.

Section 3.03 Payment of Principal and Interest. The principal of, premium, if any, and interest on the Notes shall be payable at the office or agency of the Company designated for that purpose in the Place of Payment, as provided in Section 5.02; provided, however, that interest may be payable at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear on the Note Register on the Regular Record Date for such interest payment.

Section 3.04 Execution of Notes. The Notes shall be executed manually or by facsimile in the name and on behalf of the Company by its Chairman of the Board of Directors, its President, one of its Vice Presidents, its Treasurer, its Secretary or one of its Assistant Secretaries. Only such Notes as shall bear thereon a certificate of authentication substantially in the form hereinbefore recited, manually executed by the Trustee, shall be entitled to the benefits of this Indenture or be valid or become obligatory for any purpose. Such certificate by the Trustee upon any Note executed by the Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture.

In case any officer of the Company who shall have executed any of the Notes shall cease to be such officer before the Notes so executed shall have been authenticated and delivered by the Trustee, or disposed of by the Company, such Notes nevertheless shall be valid and binding and may be authenticated and delivered or disposed of as though the Person who executed such Notes had not ceased to be such officer of the Company; and any Notes may be executed on behalf of the Company by such Persons as, at the actual date of the execution of such Note, shall be the proper officers of the Company, although at the date of such Note or of the execution of this Indenture any such Person was not such an officer.

At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes of any series, properly created in accordance with Section 3.01 and executed by the Company, to the Trustee for authentication; and the Trustee shall authenticate and deliver such Notes upon receipt of a Company Order. In the event that any other Person performs the Trustee’s duties as Authenticating Agent pursuant to a duly executed agreement, the Company shall notify the Trustee in writing of the issuance of any Notes hereunder, such notice to be delivered in accordance with the provisions of Section 15.03 on the date such Notes are delivered by the Company for authentication to such other Person.

 

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Prior to any such authentication and delivery, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, in addition to the Officer’s Certificates relating to the issuance of any series of Notes pursuant to Sections 2.02, 3.01 (if required by that Section), and Section 15.05, Opinions of Counsel stating that:

(a) all instruments furnished to the Trustee conform to the requirements of this Indenture and constitute sufficient authority hereunder for the Trustee to authenticate and deliver such Notes;

(b) all laws and requirements with respect to the form and execution by the Company of the supplemental indenture, if any, have been complied with; the execution and delivery of the supplemental indenture, if any, will not violate the terms of this Indenture; the supplemental indenture has been duly qualified under the Trust Indenture Act of 1939; the Company has corporate or company power to execute and deliver any such supplemental indenture and has taken all necessary corporate action for those purposes; and any such supplemental indenture has been executed and delivered and constitutes the legal, valid and binding obligation of the Company enforceable in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally from time to time in effect); and

(c) the form and terms of such Notes have been established in conformity with the provisions of this Indenture; and all laws and requirements with respect to the execution and delivery by the Company of such Notes have been complied with; the authentication and delivery of the Notes by the Trustee will not violate the terms of this Indenture; the Company has the corporate or company power to issue such Notes; and such Notes have been duly executed on behalf of the Company and, assuming due authentication and delivery by the Trustee, constitute legal, valid and binding obligations of the Company in accordance with their terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally from time to time in effect) and are entitled to the benefits of this Indenture, equally and ratably with all other Outstanding Notes, if any, of such series.

The Trustee shall not be required to authenticate such Notes if the issue thereof will adversely affect the Trustee’s own rights, duties or immunities under the Notes and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee or such action would expose the Trustee to personal liability to existing Holders.

Unless otherwise provided in the form of Note for any series, all Notes shall be dated the date of their authentication.

No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.

 

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Section 3.05 Temporary Notes. Pending the preparation of definitive Notes of any series, the Company may execute, and upon receipt of the documents required by Sections 2.02, 3.01 and 3.04, together with a Company Order, the Trustee shall authenticate and deliver, such temporary Notes which may be printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denominations, substantially of the tenor of such definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such temporary Notes may determine, as evidenced by their execution of such temporary Notes.

If temporary Notes of any series are issued, the Company will cause definitive Notes of such series to be prepared without unreasonable delay. After the preparation of definitive Notes of any series, the temporary Notes of such series shall be exchangeable for definitive Notes of such series, upon surrender of the temporary Notes of such series at any office or agency maintained by the Company for such purposes as provided in Section 5.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes of any series, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of such series having the same interest rate and Stated Maturity and bearing interest from the same date of any authorized denominations. Until so exchanged the temporary Notes of such series shall in all respects be entitled to the same benefits under this Indenture as definitive Notes of such series.

Section 3.06 Exchange and Registration of Transfer of Notes. Notes may be exchanged for a like aggregate principal amount of Notes of such series that are of other authorized denominations. Notes to be exchanged shall be surrendered at any office or agency to be maintained for such purpose by the Company, as provided in Section 5.02, and the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor the Note or Notes of authorized denominations which the Holder making the exchange shall be entitled to receive. Each agent of the Company appointed pursuant to Section 5.02 as a person authorized to register and register transfer of Notes is sometimes herein referred to as a “Note Registrar.”

The Company shall keep, at an office or agency of the Company maintained for such purpose, as provided in Section 5.02, a register for each series of Notes hereunder (the registers of all Note Registrars being herein sometimes collectively referred to as the “Note Register”) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and shall register the transfer of Notes as provided in this Article Three. For avoidance of doubt, there shall only be one Note Register for each series of Notes. At all reasonable times, such Note Register shall be open for inspection by the Trustee and any Note Registrar other than the Trustee. Upon due presentment for registration of transfer of any Note at any such office or agency, the Company shall execute and cause to be registered and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Note or Notes of the same series of authorized denominations for an equal aggregate principal amount. Registration or registration of transfer of any Note by any Note Registrar in the registry books maintained by such Note Registrar, and delivery of such Note, duly authenticated, shall be deemed to complete the registration or registration of transfer of such Note. The Trustee is hereby appointed as Note Registrar for each series of Notes.

 

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No Person shall at any time be appointed as or act as a Note Registrar unless such Person is at such time empowered under applicable law to act as such and duly registered to act as such under and to the extent required by applicable law and regulations.

All Notes presented to a Note Registrar for registration of transfer shall be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and such Note Registrar duly executed by the registered Holder or such Holder’s attorney duly authorized in writing.

No service charge shall be made for any exchange or registration of transfer of Notes, but the Company or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith.

The Company shall not be required to issue, exchange or register a transfer of (a) any Notes of any series for a period of 15 days next preceding the mailing of a notice of redemption of Notes of such series and ending at the close of business on the day of the mailing of a notice of redemption of Notes of such series so selected for redemption, or (b) any Notes selected, called or being called for redemption except, in the case of any Note to be redeemed in part, the portion thereof not so to be redeemed.

All Notes issued in exchange for or upon registration of transfer of Notes shall be valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered for such exchange or registration of transfer.

None of the Trustee, any agent of the Trustee, any paying agent or the Company will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any actions taken or not taken by the Depository.

The Trustee 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 Note (including any transfers between or among Depository participants or beneficial owners of interests in any registered 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 3.07 Mutilated. Destroyed. Lost or Stolen Notes. In case any temporary or definitive Note shall become mutilated or be destroyed, lost or stolen, the Company in its discretion may execute, and upon its request the Trustee shall authenticate and deliver, a new Note, bearing a number, letter or other distinguishing mark not contemporaneously Outstanding, in exchange and substitution for the mutilated Note, or in lieu of and in substitution for the Note so destroyed, lost or stolen. In every case the applicant for a substituted Note shall furnish to the Company and to the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and to the Trustee evidence to their satisfaction of the destruction, loss or theft, of such Note and of the ownership thereof.

 

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In the absence of notice to the Trustee or the Company that such Note has been acquired by a bona fide purchaser, the Trustee shall authenticate any such substituted Note and deliver the same upon any Company Request. Upon the issuance of any substituted Note, 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 connected therewith. In case any Note which has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substituted Note, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Note) if the applicant for such payment shall furnish to the Company and to the Trustee such security or indemnity as may be required by them to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the Company and to the Trustee of the destruction, loss or theft of such Note and of the ownership thereof.

Every substituted Note issued pursuant to the provisions of this Section 3.07 by virtue of the fact that any Note is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be found at any time, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. All Notes shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes and shall preclude (to the extent permitted by law) any and all other rights or remedies with respect to the replacement or payment of negotiable instruments or other securities without their surrender.

Section 3.08 Payment of Interest; Interest Rights Preserved. Interest which is payable, and is punctually paid or duly provided for, on any Interest Payment Date, on any Note, shall, unless otherwise provided in such Note, be paid to the Person in whose name the Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest.

Unless otherwise stated in the form of Note of a series, interest on the Notes of any series shall be computed on the basis of a 360 day year comprised of twelve 30 day months.

Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the registered Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in paragraph (a) or (b) below:

(a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names any such Notes (or their respective Predecessor Notes) 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 Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money

 

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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 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 paragraph provided.

Thereupon, the Company shall fix a 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 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 such Notes, at such Holder’s address as it appears in the Note Register, not less than 10 days prior to such Special Record Date. 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 such Notes (or their respective Predecessor Notes) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following paragraph (b).

(b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes of that series 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 paragraph, such payment shall be deemed practicable by the Trustee.

Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.

Section 3.09 Persons Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name any Note is registered as the owner of such Note for the purpose of receiving payment of principal of, premium, if any, and (subject to Section 3.08) interest on, such Note and for all other purposes whatsoever whether or not such Note 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 3.10 Cancellation of Notes Paid. All Notes surrendered for the purpose of payment, redemption, exchange or registration of transfer or delivered in satisfaction in whole or in part of any sinking fund obligation shall, if surrendered to the Company or any agent of the Trustee or the Company under this Indenture, be delivered to the Trustee and promptly cancelled by it, or, if surrendered to the Trustee, shall be promptly cancelled by it, and no Notes shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Company may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Notes previously authenticated hereunder which the Company has not issued and sold, and all Notes so delivered shall be promptly cancelled by the Trustee. The Trustee shall dispose of cancelled Notes in accordance with its customary procedures (subject to the record retention requirements of the Exchange Act). The Company may direct the Trustee in writing to deliver a certificate of such cancellation to the Company.

 

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Section 3.11 Currency and Manner of Payments. (a) With respect to Notes denominated in Dollars or a Foreign Currency, the following payment provisions shall apply:

(1) Except as provided in subparagraph (a)(2) or in paragraph (c) of this Section 3.11, payment of principal of and premium, if any, on any Notes will be made at the offices established pursuant to Section 5.02 by delivery of a check in the currency in which the Note is denominated on the payment date against surrender of such Note, and any interest on any Note will be paid at such office by mailing a check in the currency in which the Notes were issued to the Person entitled thereto at the address of such Person appearing on the Note Register.

(2) Payment of the principal of and premium, if any, and interest on such Note may also, subject to applicable laws and regulations and subject to surrender as aforesaid in the case of principal and premium, if any, be made at such other place or places as may be designated by the Company by any appropriate method.

(b) Not later than the fourth Business Day after the Regular Record Date for such Interest Payment Date, the paying agent will deliver to the Company a written notice specifying, in the currency in which each series of the Notes are denominated, the respective aggregate amounts of principal of and premium, if any, and interest on the Notes to be made on such payment date, specifying the amounts so payable in respect of the Notes. The failure of the paying agent to deliver such notice shall not relieve the Company from its obligation to make all payments with respect to any Note when due.

(c) If the Foreign Currency in which any of the Notes are denominated ceases to be used both by the government of the country which issued such currency and for the settlement of transactions by public institutions of or within the international banking community, then with respect to each date for the payment of Foreign Currency occurring after the last date on which the Foreign Currency was so used (the “Conversion Date”), the Dollar shall be the currency of payment for use on each such Interest Payment Date. The Dollar amount to be paid by the Company to the Trustee and by the Trustee or any paying agent to the Holder of such Notes with respect to such payment date shall be the Dollar Equivalent of the Foreign Currency as determined by the Currency Determination Agent in the manner provided in paragraph (d) below.

(d) The “Dollar Equivalent of the Foreign Currency” shall be determined by the Currency Determination Agent by converting the specified Foreign Currency into Dollars at the Market Exchange Rate as of the Conversion Date.

(e) The “Market Exchange Rate” shall mean, for any currency, the highest firm bid quotation for U.S. dollars received by the Currency Determination Agent at approximately 11:00 a.m., New York City time, on the second Business Day preceding the applicable payment date (or, if no such rate is quoted on such date, the last date on which such rate was quoted, or under the circumstances described in the foregoing paragraph (c), on the

 

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Conversion Date), from three recognized foreign exchange dealers in New York City selected by the Currency Determination Agent and approved by the Company (one of which may be the Currency Determination Agent) for the purchase by the quoting dealer, for settlement on such payment date, of the aggregate amount of such currency payable on such payment in respect of all Notes denominated in such currency.

(f) All decisions and determinations of the Currency Determination Agent regarding the Dollar Equivalent of the Foreign Currency and the Market Exchange Rate shall be in its sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and irrevocably binding upon the Company and all Holders of the Notes. In the event that the Foreign Currency ceases to be used both by the government of the country which issued such currency and for the settlement of transactions by public institutions of or within the international banking community, the Company, after learning thereof, will promptly give notice thereof to the Trustee and the Holders specifying the Conversion Date.

(g) The Trustee shall be fully justified and protected in relying on and acting upon the information so received by it from the Company or the Currency Determination Agent and shall not otherwise have any duty or obligation to determine such information independently.

(h) If the principal of (and premium, if any) and interest on any Notes is payable in a Foreign Currency and such Foreign Currency is not available for payment due to the imposition of exchange controls or other circumstances beyond the control of the Company, then the Company shall be entitled to satisfy its obligations to Holders under this Indenture by making such payment in Dollars on the basis of the Market Exchange Rate for such Foreign Currency on the latest date for which such rate was established on or before the date on which payment is due. Any payment made pursuant to this Section 3.11 in Dollars where the required payment is in a Foreign Currency shall not constitute a default or Event of Default under this Indenture.

Section 3.12 CUSIP Numbers. The Company in issuing the Notes 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 Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, 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 changes in the “CUSIP” numbers.

ARTICLE 4

REDEMPTION OF NOTES

Section 4.01 Applicability of Article. The Company may reserve the right to redeem and pay before Stated Maturity all or any part of the Notes of any series, either by optional redemption, sinking fund (mandatory or optional) or otherwise, by provision therefor in the form of Note for such series on such terms as are specified in such form or the Board Resolution or Officer’s Certificate delivered pursuant to Section 3.01 or the indenture supplemental hereto as provided in Section 3.01 with respect to Notes of such series. Redemption of Notes of any series shall be made in accordance with the terms of such Notes and, to the extent that this Article does not conflict with such terms, in accordance with this Article.

 

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Section 4.02 Notice of Redemption; Selection of Notes. In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of a series of Notes pursuant to Section 4.01, the Company shall fix a date for redemption and the Company, or, at the Company’s request, the Trustee in the name of and at the expense of the Company, shall mail a notice of such redemption at least 30 days and not more than 60 days prior to the date fixed for redemption to the Holders of Notes so to be redeemed as a whole or in part at their last addresses as the same appear on the Note Register; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the Redemption Date (or such shorter period as may be acceptable to the Trustee), an Officer’s Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the next succeeding paragraph. Such mailing by the Trustee shall be by first class mail; provided, however, that so long as the Notes of such series are represented by one or more Global Notes, such notice shall be given in accordance with the procedures of the Depository therefor. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Note.

Notice of redemption shall be given in the name of the Company and shall specify the date fixed for redemption, the Redemption Price at which Notes of any series are to be redeemed, or if not then ascertainable, the manner of calculation thereof, the place of payment (which shall be at the offices or agencies to be maintained by the Company pursuant to Section 5.02), that payment of the Redemption Price will be made upon presentation and surrender of such Notes, that interest accrued to the date fixed for redemption will be paid as specified in said notice, that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue, and the Section of this Indenture or the paragraph or section of the Notes pursuant to which Notes will be redeemed. In case less than all Notes of any series are to be redeemed, the notice of redemption shall also identify the particular Notes to be redeemed as a whole or in part and shall state that the redemption is for the sinking fund, if such is the case. In case any Note is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Note, a new Note or Notes of such series in aggregate principal amount equal to the unredeemed portion thereof will be issued without charge to the Holder.

If Notes of any series are to be redeemed, the Company shall give the Trustee notice, at least 45 days (or such shorter period acceptable to the Trustee) in advance of the date fixed for redemption, as to the aggregate principal amount of Notes to be redeemed and as to the date fixed for redemption. Notes may be redeemed in part in multiples equal to the minimum authorized denomination for Notes of such series or any multiple thereof. Thereupon the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Notes or portions thereof to be redeemed, and shall as promptly as practicable notify the Company of the Notes or portions thereof so selected; provided, however, if the Notes of such series are represented by one or more Global Notes, interests in such Notes shall be selected for redemption by the Depository therefor in accordance with its customary procedures and the

 

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Trustee shall have no responsibilities with respect to such selection. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Notes of any series shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of such Note which has been or is to be redeemed. In the case of any redemption of Notes (a) prior to the expiration of any restriction on such redemption provided in the terms of such Notes or elsewhere in this Indenture, or (b) pursuant to an election of the Company which is subject to a condition specified in the terms of such Notes or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officer’s Certificate evidencing compliance with such restriction or condition.

On or prior to 11:00 AM New York City time on the date fixed for redemption specified in the notice of redemption given as provided in this Section 4.02, the Company will deposit with the Trustee or with the paying agent an amount of money in the currency in which the Notes of such series are payable sufficient to redeem on the date fixed for redemption all the Notes so called for redemption at the appropriate Redemption Price, together with accrued interest to the date fixed for redemption.

The Trustee shall not mail any notice of redemption of any series of Notes during the continuation of any default in payment of interest on any series of Notes when due or of any Event of Default, except that where notice of redemption with respect to any series of Notes shall have been mailed prior to the occurrence of such default or Event of Default, the Trustee shall redeem such Notes provided funds are deposited with it for such purpose.

Section 4.03 Payment of Notes Called for Redemption. If notice of redemption has been given as herein provided, the Notes or portions of Notes with respect to which such notice has been given shall become due and payable on the date and at the place stated in such notice at the applicable Redemption Price, together with interest accrued to the date fixed for redemption, and on and after said date (unless the Company shall default in the payment of such Notes or portions thereof at the Redemption Price, together with interest accrued to said date) interest on the Notes or portions of Notes so called for redemption shall cease to accrue, and such Notes and portions of Notes shall be deemed not to be Outstanding hereunder and shall not be entitled to any benefit under this Indenture except to receive payment of the Redemption Price, together with accrued interest to the date fixed for redemption. On presentation and surrender of such Notes at the place of payment in said notice specified, the Notes or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price, together with interest accrued thereon to the date fixed for redemption; provided, however, that any installments of interest becoming due on or prior to the date fixed for redemption shall be payable to the Holders of such Notes, or one or more previous Notes evidencing all or a portion of the same debt as that evidenced by such particular Notes, registered as such on the relevant record dates according to their terms and the provisions of Section 3.08.

Upon presentation and surrender of any Note redeemed in part only, 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, the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Note or Notes of the same series having the same interest rate and Stated Maturity and bearing interest from the same date, of any authorized denominations as requested by such Holder, in aggregate principal amount equal to the unredeemed portion of the Note so presented and surrendered.

 

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Section 4.04 Exclusion of Certain Notes from Eligibility for Selection for Redemption. Notes shall be excluded from eligibility for selection for redemption if they are identified by registration and certificate number in a written statement signed by a Responsible Officer of the Company and delivered to the Trustee at least 45 days prior to the last date on which notice of redemption may be given as being owned of record and beneficially by, and not pledged or hypothecated by, either (a) the Company or (b) an entity specifically identified in such written statement as directly or indirectly controlling or controlled by or under direct or indirect common control with the Company.

Section 4.05 Provisions with Respect to any Sinking Funds. Unless the form or terms of any series of Notes shall provide otherwise, in lieu of making all or any part of any mandatory sinking fund payment with respect to such series of Notes in cash, the Company may at its option (a) deliver to the Trustee for cancellation any Notes of such series theretofore acquired by the Company, or (b) receive credit for any Notes of such series (not previously so credited) acquired by the Company and theretofore delivered to the Trustee for cancellation or redeemed pursuant to provisions for an optional redemption or optional sinking fund redemption, then Notes so delivered or credited shall be credited at the applicable sinking fund Redemption Price with respect to the Notes of such series.

On or before the 45th day next preceding each sinking fund Redemption Date, the Company will deliver to the Trustee a certificate signed by the Chief Financial Officer, any Vice President, the Treasurer or any Assistant Treasurer of the Company specifying (i) the portion of the mandatory sinking fund payment to be satisfied by deposit of cash in the currency in which the Notes of such series are payable, by delivery of Notes theretofore purchased or otherwise acquired by the Company (which Notes shall accompany such certificate) and by credit for Notes acquired by the Company and theretofore delivered to the Trustee for cancellation or redeemed by the Company pursuant to provisions for optional redemption or optional sinking fund redemption and stating that the credit to be applied has not theretofore been so applied and the basis for such credit and (ii) whether the Company intends to exercise its right, if any, to make an optional sinking fund payment, and, if so, the amount thereof. Such certificate shall also state that no Event of Default has occurred and is continuing. Such certificate shall be irrevocable, and upon its delivery, the Company shall be obligated to make the payment or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. In case of the failure of the Company on or before the 45th day next preceding each sinking fund Redemption Date to deliver such certificate (or to deliver the Notes specified in this paragraph), the sinking fund payment due on the next succeeding sinking fund payment date shall be paid entirely in cash (in the currency described above) and shall be sufficient to redeem the principal amount of Notes as a mandatory sinking fund payment, without the option to deliver or credit Notes as provided in the first paragraph of this Section 4.05 and without the right to make an optional sinking fund payment as provided herein.

If the sinking fund payment or payments (mandatory or optional) with respect to any series of Notes made in cash (in the currency described above) shall exceed the minimum authorized denomination set forth in an Officer’s Certificate pursuant to Section 3.01 or the

 

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equivalent in the currency in which the Notes of such series are payable (or a lesser sum if the Company shall so request), unless otherwise provided by the terms of such series of Notes, said cash shall be applied by the Trustee on the sinking fund Redemption Date with respect to Notes of such series at the applicable sinking fund Redemption Price with respect to Notes of such series, together with accrued interest, if any, to the date fixed for redemption, with the effect provided in Section 4.03. The Trustee shall select, in the manner provided in Section 4.02, for redemption on such sinking fund Redemption Date a sufficient principal amount of Notes of such series to utilize said cash and shall thereupon cause notice of redemption of the Notes of such series for the sinking fund to be given in the manner provided in Section 4.02 (and with the effect provided in Section 4.03) for the redemption of Notes in part at the option of the Company. Notes of any series which are identified by registration and certificate number in an Officer’s Certificate at least 45 days prior to the sinking fund Redemption Date as being beneficially owned by, and not pledged or hypothecated by, the Company or an entity directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be excluded from Notes of such series eligible for selection for redemption. Any sinking fund moneys not so applied or allocated by the Trustee to the redemption of Notes of such series shall be added to the next cash sinking fund payment with respect to Notes of such series received by the Trustee and, together with such payment, shall be applied in accordance with the provisions of this Section 4.05. Any and all sinking fund moneys with respect to Notes of any series held by the Trustee at the maturity of Notes of such series, and not held for the payment or redemption of particular Notes of such series, shall be applied by the Trustee, together with other moneys, if necessary, to be deposited sufficient for the purpose, to the payment of the principal of the Notes of such series at maturity.

The Trustee shall not convert any currency in which the Notes of such series are payable for the purposes of such sinking fund application unless a Company Request is made, and any such conversion agreed to by the Trustee in response to such request shall be for the account and at the expense of the Company and shall not affect the Company’s obligation to pay the Holders in the currency to which such Holder is entitled.

On or before each sinking fund Redemption Date provided with respect to Notes of any series, the Company shall pay to the Trustee in cash in the currency described above a sum equal to all accrued interest, if any, to the date fixed for redemption on Notes to be redeemed on such sinking fund Redemption Date pursuant to this Section 4.05.

ARTICLE 5

PARTICULAR COVENANTS OF THE COMPANY

Section 5.01 Payment of Principal, Premium and Interest. The Company will duly and punctually pay or cause to be paid (in the currency in which the Notes of such series are payable) the principal of and premium, if any, and interest on each of the Notes at the place (subject to Section 3.03), at the respective times and in the manner provided in each series of Notes and in this Indenture.

Section 5.02 Offices for Notices and Payments. (a) So long as the Notes of any series remain Outstanding, the Company will maintain at the Place of Payment, an office or agency where the Notes may be presented for payment, an office or agency where the Notes may be

 

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presented for registration of transfer and for exchange as provided in this Indenture, and an office or agency where notices and demands to or upon the Company in respect of the Notes or of this Indenture may be served and shall give the Trustee written notice thereof and any changes in the location thereof. In case the Company shall at any time fail to maintain any such office or agency, or shall fail to give notice to the Trustee of any change in the location thereof, presentation and demand may be made and notice may be served in respect of the Notes or of this Indenture at the Corporate Trust Office. The Company hereby appoints the Trustee as its agent and the Corporate Trust Office as the office for all of the foregoing purposes with respect to the Notes of each series; provided that the Trustee and the Corporate Trust Office shall not be an office or agency of the Company for the purposes of service of legal process on the Company.

(b) In addition to the office or agency maintained by the Company pursuant to Section 5.02(a), the Company may from time to time designate one or more other offices or agencies where the Notes may be presented for payment and presented for registration of transfer and for exchange in the manner provided in this Indenture, and the Company may from time to time rescind such designations, as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain such office and agency at the Place of Payment, for the purposes abovementioned. The Company will give to the Trustee prompt written notice of (i) any such designation or rescission thereof, and (ii) the location of any such office or agency outside the Place of Payment and of any change of location thereof.

Section 5.03 Appointments to Fill Vacancies in Trustees Office. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 8.10, a Trustee, so that there shall at all times be a Trustee with respect to each series of Notes hereunder.

Section 5.04 Provisions as to Paying Agent. (a)(1)Whenever the Company shall have one or more paying agents for any series of Notes other than the Trustee, it will, on or before each due date of the principal of (and premium, if any) or interest on any Notes of such series, deposit with a paying agent a sum sufficient to pay such amount becoming due, such sum to be held as provided by the Trust Indenture Act of 1939, and (unless such paying agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act.

(2) The Company will cause each paying agent other than the Trustee to execute and deliver to the Trustee an instrument in which such paying agent shall agree with the Trustee, subject to the provisions of this Section, that such paying agent will: (i) comply with the provisions of the Trust Indenture Act of 1939 applicable to it as a paying agent and (ii) during the continuance of any default by the Company (or any other obligor upon any series of Notes) in the making of any payment in respect of the Notes of such series, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such paying agent as such.

(b) If the Company shall act as its own paying agent, it will, on or prior to each due date of the principal of and premium, if any, or interest on Notes of any series, set aside, segregate and hold in trust for the benefit of the Holders of such Notes a sum sufficient to pay such principal and premium, if any, or interest so becoming due and will notify the Trustee

 

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of any failure to take such action and of any failure by the Company (or by any other obligor on such series of Notes) to make any payment of the principal of and premium, if any, or interest on the Notes when the same shall become due and payable.

(c) Anything in this Section 5.04 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture with respect to any or all series of Notes then Outstanding, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by the Company, or any paying agent hereunder, as required by this Section 5.04, such sums to be held by the Trustee upon the trusts herein contained.

(d) Anything in this Section 5.04 to the contrary notwithstanding, the agreement to hold sums in trust provided in this Section 5.04 is subject to Section 13.04.

Section 5.05 Certificate to Trustee. So long as the Notes of any series remain Outstanding, the Company will deliver to the Trustee on or before 120 days after the end of each fiscal year an Officer’s Certificate stating that such officer has reviewed the covenants of the Indenture with respect to each outstanding series of Notes and, in the course of the performance by the signer of his or her duty as an officer of the Company, he or she would normally have knowledge of any default by the Company in the performance or fulfillment or observance of any covenants or agreements contained herein during the preceding fiscal year, stating whether or not he or she has knowledge of any such default and, if so, specifying each such default of which the signer has knowledge and the nature thereof. The Officer’s Certificate need not comply with Section 15.05. The signatory to this Officer’s Certificate shall be the Company’s principal executive officer, principal financial officer or principal accounting officer. The Company shall deliver to the Trustee, as soon as possible and in any event within five (5) days after the Company becomes aware of the occurrence of any Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officer’s Certificate setting forth the details of such Event of Default or default and the action which the Company proposes to take with respect thereto.

Section 5.06 Waivers of Covenants. Anything in this Indenture to the contrary notwithstanding, the Company may fail or omit, in respect of any series of Notes, and in any particular instance, to comply with a covenant, agreement or condition contained in Section 5.05 (unless required to be complied with pursuant to Section 314(a)(4) of the Trust Indenture Act of 1939), or with any additional covenant, agreement or condition contained in a Board Resolution or Officer’s Certificate establishing such series of Notes, any indenture supplemental hereto applicable to such series or any Note of such series (unless such Board Resolution, Officer’s Certificate, or supplemental indenture provides otherwise) if the Company shall have obtained and filed with the Trustee before or after the time for such compliance the consent in writing of the Holders of more than 50% in aggregate principal amount of the Notes of the series affected by such waiver at the time Outstanding, either waiving such compliance in such instance or generally waiving compliance with such covenant or condition, but no such waiver shall extend to or affect any obligation not expressly waived nor impair any right consequent thereon 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.

 

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ARTICLE 6

HOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

Section 6.01 Holders Lists. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee, not more than 10 days after each Regular Record Date with respect to the Notes of any series, and at such other times as the Trustee may request in writing, within 30 days after receipt by the Company of any such request, a list in such form as the Trustee may reasonably require of the names and addresses of the Holders of Notes of such series as of a date not more than 15 days prior to the time such information is furnished; provided, however, that no such list with respect to any particular series of Notes need be furnished at any such time if the Trustee is in possession thereof by reason of its acting as the Note Registrar for such series designated under Section 3.06 or otherwise.

Section 6.02 Preservation and Disclosure of Lists. The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Holders contained in the most recent list furnished to it as provided in Section 6.01 or received by the Trustee in the capacity of the Note Registrar (if so acting) under Section 3.06. The Trustee may destroy any list furnished to it as provided in Section 6.01 upon receipt of a new list so furnished.

(a) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Notes of any series or of all Notes, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act of 1939.

(b) Every Holder, by receiving and holding its Notes, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act of 1939.

Section 6.03 Reports by the Company. The Company agrees to file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act of 1939 at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission; provided further that any such information, documents or reports filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval (or EDGAR) system or any successor thereto shall be deemed to be filed with the Trustee. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such 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 Officer’s Certificates).

Section 6.04 Reports by the Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant

 

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to the Trust Indenture Act of 1939 at the times and in the manner provided pursuant thereto. The interval between transmissions of reports to be transmitted at intervals shall be twelve months or such shorter time required by the Trust Indenture Act of 1939. If the Trust Indenture Act of 1939 does not specify the date on which a report is due, such report shall be due on September 15 of each year following the first issuance of Notes and shall be as of a date not more than sixty (60) days prior thereto.

(b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which Notes of any series are listed, with the Commission and with the Company. The Company will notify the Trustee when the Notes of any series are listed on any stock exchange and of any delisting thereof.

ARTICLE 7

REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT

Section 7.01 Events of Default. “Event of Default”, with respect to any series of Notes, wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), unless such event is either inapplicable to such series or it is specifically deleted or modified in the Board Resolution, Officer’s Certificate or supplemental indenture under which such series of Notes is issued or in the form of Note for such series:

(a) default in the payment of any installment of interest upon any Note of such series as and when the same shall become due and payable, and continuance of such default for a period of 30 days;

(b) default in the payment of the principal of and premium, if any, on any Note of such series as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration or otherwise;

(c) default in the payment or satisfaction of any sinking fund payment or analogous obligation, if any, with respect to the Notes of such series as and when the same shall become due and payable by the terms of the Notes of such series, and continuance of such default for a period of 30 days;

(d) failure on the part of the Company duly to observe or perform any of the covenants, warranties or agreements on the part of the Company in respect of the Notes of such series in this Indenture (other than a covenant, warranty or agreement a default in whose performance or whose breach is specifically dealt with elsewhere in this Section) continued for a period of 90 days after the date on which written notice of such failure, specifying such failure and requiring the same to be remedied, shall have been given to the Company by the Trustee, by registered mail, or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Notes of such series;

(e) if any event of default as defined in any mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any

 

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indebtedness of the Company, whether such indebtedness now exists or is hereafter created or incurred, happens and consists of default in the payment of more than $15,000,000 in principal amount of such indebtedness at the maturity thereof, after giving effect to any applicable grace period, or results in such Indebtedness in principal amount in excess of $15,000,000 becoming or being declared due and payable prior to the date on which it would otherwise become due and payable, and such default is not cured or such acceleration is not rescinded or annulled within a period of 30 days after the date on which written notice of such failure, specifying such failure and requiring the same to be remedied, shall have been given to the Company by the Trustee, by registered mail, or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Notes of such series;

(f) the failure by the Company within 60 days to pay, bond or otherwise discharge any uninsured judgment or court order for the payment of money in excess of $15,000,000, which is not stayed on appeal or is not otherwise being appropriately contested in good faith;

(g) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company under the Federal bankruptcy laws or any other similar applicable Federal or state law, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee or other similar official in bankruptcy or insolvency of the Company or of all or substantially all of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days;

(h) the Company shall institute proceedings to be adjudicated voluntarily bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking an arrangement or a reorganization under the Federal bankruptcy laws or any other similar applicable Federal or state law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee or other similar official in bankruptcy or insolvency of it or of all or substantially all of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due; or

(i) any other Event of Default provided in the Board Resolution, Officer’s Certificate or the supplemental indenture under which such series of Notes is issued or in the form of Note for such series;

then and in each and every such case, so long as such Event of Default with respect to any series of Notes for which there are Notes Outstanding occurs and is continuing (other than an Event of Default specified in paragraph (g) or (h) of this Section 7.01) and shall not have been remedied or waived to the extent permitted by the terms of this Indenture, unless the principal of all of the Notes of such series shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Notes of such series, by notice in writing to the Company (and to the Trustee if given by Holders), may declare the principal (or, if the Notes of that series are Original Issue Discount Notes, such portion of the

 

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principal amount as may be specified in the terms of that series) of all the Notes of such series and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Notes of such series contained to the contrary notwithstanding. If an Event of Default specified in paragraph (g) or (h) of this Section 7.01 occurs and is continuing, then the principal amount of (or, if the Notes of that series are Original Issue Discount Notes, such portion of the principal amount as may be specified in the terms thereof as due and payable upon acceleration) and any accrued and unpaid interest on that series shall immediately become due and payable without any declaration or other act on the part of the Trustee or any Holder. This provision, however, is subject to the condition that if, at any time after the principal of the Notes of such series shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay in the currency in which the Notes of such series are payable all matured installments of interest upon all of the Notes and the principal of and premium, if any, on any and all Notes of such series which shall have become due otherwise than by such declaration (with interest on overdue installments of interest to the extent that payment of such interest is enforceable under applicable law and on such principal and premium, if any, at the rate borne by the Notes of such series or as otherwise provided in the form of Note for such series, to the date of such payment or deposit) and all amounts due to the Trustee under Section 8.06, or provision deemed by the Trustee to be adequate shall have been made therefor, and any and all defaults under this Indenture, other than the nonpayment of principal of and accrued interest on Notes of such series which shall have become due by such declaration, shall have been cured or shall have been waived in accordance with Section 7.07—then and in every such case the Holders of at least a majority in aggregate principal amount of the Notes of such series then Outstanding, by written notice to the Company and to the Trustee, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair any right consequent thereon.

In case the Trustee or any Holders shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission and annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the Holders shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the Holders shall continue as though no such proceeding had been taken.

Section 7.02 Payment of Notes Upon Default; Suit Therefor. The Company covenants that (a) in case default shall be made in the payment of any installment of interest upon any Note of any series as and when the same shall become due and payable, and such default shall have continued for a period of 30 days, or (b) in case default shall be made in the payment of the principal of and premium, if any, on any Note of any series as and when the same shall have become due and payable, whether at maturity of the Note or upon redemption or by declaration or otherwise or (c) in case default shall be made in the making or satisfaction of any sinking fund payment or analogous obligation with respect to the Notes of any series when the same becomes due by the terms of the Notes of any series, and such default shall have continued for a period of 30 days—then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit

 

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of the Holders of any such series, the whole amount that then shall have become due and payable on any such Notes for principal and premium, if any, or interest, or both, as the case may be, with interest upon the overdue principal and premium, if any, and (to the extent that payment of such interest is enforceable under applicable law) upon the overdue installments of interest at the rate borne by the Notes of such series or as otherwise provided in the form of Note of such series; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to the Trustee, its agents, attorneys and counsel, and any expenses or liabilities incurred and advances made by the Trustee, except compensation or advances arising, or expenses or liabilities incurred, as a result of the Trustee’s gross negligence or willful misconduct.

Until such demand is made by the Trustee, the Company may pay the principal of and premium, if any, and interest on the Notes of any series to the Persons entitled thereto, whether or not the principal of and premium, if any, and interest on the Notes of such series are overdue.

In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on such Notes and collect, in the manner provided by law out of the property of the Company or any other obligor on such Notes wherever situated, the moneys adjudged or decreed to be payable. If any Event of Default with respect to any series of Notes occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Notes of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Notes of any series under the Federal bankruptcy laws or any other applicable law, or in case a receiver or trustee shall have been appointed for the property of the Company or such other obligor, or in the case of any other similar judicial proceedings relative to the Company or other obligor upon the Notes of any series, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Notes of such series 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 pursuant to the provisions of this Section 7.02, shall be entitled and empowered by intervention in such proceedings or otherwise, (a) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Notes of such series, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and of the Holders of the Notes of such series allowed in such judicial proceedings relative to the Company or any other obligor on such Notes, its or their creditors, or its or their property, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders of any Notes of any series in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and

 

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(c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of its charges and expenses and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Holders of the Notes of such series to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to such Holders, to pay to the Trustee such amount as shall be sufficient to cover reasonable compensation to the Trustee, its agents, attorneys and counsel, and all other expenses and liabilities incurred and advances made by the Trustee except compensation or advances arising, or expenses or liabilities incurred, as a result of the Trustee’s gross negligence or willful misconduct.

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 or reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder (except, as aforesaid, for the election of a trustee in bankruptcy or other Person performing similar functions) in any such proceeding.

All rights of action and of asserting claims under this Indenture, or under any of the Notes of any series, may be enforced by the Trustee without the possession of any of such Notes, or the production thereof on any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the Holders of the Notes of such series in respect of which such judgment has been recovered.

In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the Holders of the Notes in respect to which such action was taken, and it shall not be necessary to make any Holders of such Notes parties to any such proceedings.

Section 7.03 Application of Moneys Collected by Trustee. Any moneys collected by the Trustee pursuant to Section 7.02 and any other money or property distributed in respect of the Company’s obligations under this Indenture after an Event of Default shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the Notes of such series, and stamping thereon the payment, if only partially paid, and upon surrender thereof, if fully paid:

FIRST: To the payment of costs and expenses of collection and reasonable compensation to the Trustee, its agents, attorneys and counsel, and of all other expenses and liabilities incurred, and all advances made, by the Trustee except compensation or advances arising, or expenses or liabilities incurred, as a result of its gross negligence or willful misconduct, and any other amounts owing the Trustee under Section 8.06;

SECOND: In case the principal of the Notes of such series shall not have become due and be unpaid, to the payment of interest on such Notes, in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the rate borne by such Notes, such payments to be made ratable to the Persons entitled thereto;

 

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THIRD: In case the principal of the Notes of such series shall have become due, by declaration or otherwise, to the payment of the whole amount then owing and unpaid upon such Notes for principal and premium, if any, and interest, with interest on the overdue principal and premium, if any, and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the rate borne by such Notes; and in case such moneys shall be insufficient to pay in full the whole amounts so due and unpaid upon such Notes, then, to the payment of such principal and premium, if any, and interest without preference or priority of principal and premium, if any, over interest, or of interest over principal and premium, if any, or of any installment of interest over any other installment of interest, or of any Note of such series over any other such Note, ratably to the aggregate of such principal and premium, if any, and accrued and unpaid interest; and

FOURTH: To the payment of any surplus then remaining to the Company, its successors or assigns, or to whomsoever may be lawfully entitled to receive the same.

Section 7.04 Proceedings by Holders. No Holder of any Note of any series shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law or in bankruptcy or otherwise upon, under or with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of not less than 25% in aggregate principal amount of the Notes of such series then Outstanding shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to (and if requested, provided to) the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding (and no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 7.07), it being understood and intended, and being expressly covenanted by the taker and Holder of every Note of every series with every other taker and Holder and the Trustee, that no one or more Holders of Notes shall have any right in any manner whatever by virtue of or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other Holder of such Notes, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Notes.

Section 7.05 Proceedings by Trustee. In case of an Event of Default hereunder, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.

Section 7.06 Remedies Cumulative and Continuing. All powers and remedies given by this Article Seven to the Trustee or to the Holders shall, to the extent permitted by law, be

 

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deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the Holders, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Holder to exercise any right or power accruing upon any default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 7.04, every power and remedy given by this Article Seven or by law to the Trustee or to the Holders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Holders.

Section 7.07 Direction of Proceedings and Waiver of Defaults by Majority of Holders. The Holders of a majority in aggregate principal amount of the Outstanding Notes of any series shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Notes of such series by this Indenture; provided, however, that the Trustee shall have the right to decline to follow any such direction if (a) the Trustee shall determine upon advice of counsel that the action or proceeding so directed may not lawfully be taken or (b) if the Trustee in good faith shall determine that the action or proceeding so directed would involve the Trustee in personal liability or (c) if the Trustee in good faith shall so determine that the actions or forbearances specified in or pursuant to such direction would be unduly prejudicial to the interests of Holders of the Notes of all series not joining in the giving of said directions, it being understood that the Trustee shall have no duty to ascertain whether or not such actions or forbearances are duly prejudicial to such Holders, or (d) if the Holders of Notes have not provided to the Trustee indemnity or security satisfactory to the Trustee against any loss, liability or expense that may be incurred in connection with taking such action or forbearance. The Trustee may take any other action deemed proper by the Trustee not inconsistent with such direction. Subject to Section 7.01, the Holders of a majority in aggregate principal amount of the Outstanding Notes of any series may on behalf of the Holders of all the Notes of such series waive any past default or Event of Default hereunder and its consequences except a default in the payment of principal of or premium, if any, or interest on such Notes, or a default in the making of any sinking fund payment with respect to such Notes. Upon any such waiver, the Company, the Trustee and the Holders of such Notes shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default shall have been waived as permitted by this Section 7.07, said default or Event of Default shall for all purposes of the Notes and this Indenture be deemed to have been cured and to be not continuing.

This Section 7.07 shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act of 1939 and such Sections 316(a)(1)(A) and 316(a)(1)(B) are hereby expressly excluded from this Indenture, as permitted by the Trust Indenture Act of 1939.

Section 7.08 Notice of Defaults. Within 90 days after the occurrence of any default actually known to a Responsible Officer of the Trustee hereunder with respect to the Notes of any series, the Trustee shall transmit by first-class by mail, postage prepaid (or in the case of Global Notes, electronically in accordance with the procedures of the Depository), to all Holders of Notes of such series, as their names and addresses appear in the Note Register, notice of such

 

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default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Note of such series or in the payment of any sinking fund installment with respect to Notes of such series, the Trustee shall be protected in withholding such notice if and so long as the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders of Notes of such series; and provided, further, that in the case of any default of the character specified in Section 7.01(c) with respect to Notes of such series, no such notice to Holders shall be given until at least 60 days after the occurrence thereof. For the purpose of this Section, the term “default” means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Notes of such series.

Section 7.09 Undertaking to Pay 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, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act of 1939; provided that neither this Section nor the Trust Indenture Act of 1939 shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Trustee, and any provision of the Trust Indenture Act of 1939 to such effect is hereby expressly excluded from this Indenture, as permitted by the Trust Indenture Act of 1939.

Section 7.10 Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the rights, which are absolute and unconditional, to receive payment of the principal of, premium, if any, and (subject to Section 3.08) interest on such Note on the respective Stated Maturities expressed in such Note (or in the case of redemption or repayment, on the date for redemption or repayment, as the case may be) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.

ARTICLE 8

CONCERNING THE TRUSTEE

Section 8.01 Duties and Responsibilities of Trustee.

(a) Prior to the occurrence of an Event of Default with respect to a particular series and after the curing or waiving of all Events of Default which may have occurred with respect to such series, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee and (2) 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 the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

 

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(b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(1) this paragraph (c) shall not be construed to limit the effect of paragraph (a) of this Section 8.01;

(2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

(3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Notes of any series relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Notes of such series; and no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 8.01.

Section 8.02 Reliance on Documents, Opinions. Subject to the provisions of Section 8.01,

(a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note or other paper document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by Company Request or Company Order (unless otherwise evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;

(c) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and reliance thereon;

 

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(d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have provided to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which may be incurred by it in compliance with such request or direction;

(e) the Trustee shall not be liable for any action taken, suffered or omitted to be taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;

(f) 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, consent, order, approval, bond, debenture, note, or other paper or document, unless requested in writing to do so by the Holders of not less than a majority in principal amount of such Notes then Outstanding; provided, however, that the reasonable expenses of every such investigation shall be paid by the Company or, if paid by the Trustee, shall be repaid by the Company upon demand; and provided, further, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to so proceeding;

(g) 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 liable or responsible for any misconduct, bad faith or negligence on the part of any agent or attorney appointed with due care by it hereunder;

(h) the Trustee shall not be deemed to have notice or be charged with knowledge of any default or Event of Default unless written notice of such default or Event of Default from the Company or any Holder is received by a Responsible Officer of the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture:

(i) 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 enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder;

(j) the permissive rights of the Trustee enumerated herein shall not be construed as duties;

(k) in no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action;

(l) the Trustee may request that the Company deliver an Officer’s Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take

 

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specified actions pursuant to this Indenture, which Officer’s Certificate may be signed by any person authorized to sign an Officer’s Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded;

(m) in no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances; and

(n) the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

Section 8.03 No Responsibility for Recitals. The recitals contained herein and in the Notes (except in the Trustee’s certificate of authentication) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes of any series. The Trustee represents that it is duly authorized to execute and deliver this Indenture. Neither the Trustee nor the Authenticating Agent shall be accountable for the use or application by the Company of any Notes or the proceeds of any Notes authenticated and delivered by the Trustee hereunder.

Section 8.04 Trustee and Agents May Own Notes. The Trustee, any paying agent, or any agent of the Trustee or the Company under this Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes of any series with the same rights it would have if it were not Trustee or such agent and, subject to Sections 8.08 and 8.13, if operative, may otherwise deal with the Company and receive, collect, hold, and retain collections from the Company with the same rights it would have if it were not the Trustee or such agent.

Section 8.05 Moneys to be Held in Trust. Subject to the provisions of Section 13.04, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. Neither the Trustee nor any paying agent shall be under any liability for interest on, or to invest, any moneys received by it hereunder except such as it may agree with the Company to pay thereon. So long as no Event of Default with respect to the Notes of any series shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the receipt of a Company Order.

Section 8.06 Compensation and Expenses of Trustee. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and the Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable

 

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compensation and the expenses and disbursements of its counsel and all persons not regularly in its employ and any amounts paid by the Trustee to any Authenticating Agent pursuant to Section 8.14) except any such expense, disbursement or advance as may arise from its gross negligence or willful misconduct. The Company also covenants to indemnify the Trustee for, and to hold it harmless against, any loss, damage, claim, liability or expense incurred without gross negligence or willful misconduct on the part of the Trustee and arising out of or in connection with this Indenture, including the acceptance or administration of this trust, or the performance of its duties hereunder, including the current payment of all costs and expenses of defending itself against any claim of liability in the premises. The obligations of the Company under this Section 8.06 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Notes. In addition to, but without prejudice to its other rights under this indenture or available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 7.01(g) or Section 7.01(h), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or state bankruptcy, insolvency or other similar law.

Trustee” for purposes of this Section shall include any predecessor Trustee; provided, however, that the negligence, willful misconduct or bad faith of any Trustee hereunder shall not affect the rights of any other Trustee hereunder.

The provisions of this Section shall survive the termination of this Indenture, the satisfaction and discharge of this Indenture and the resignation or removal of the Trustee.

Section 8.07 Officers Certificate as Evidence. Subject to the provisions of Section 8.01, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of gross negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officer’s Certificate conforming to the requirements of this Indenture delivered to the Trustee, and such Certificate, in the absence of gross negligence or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.

Section 8.08 Conflicting Interest of Trustee. If the Trustee has or shall acquire any conflicting interest within the meaning of the Trust Indenture Act of 1939, the Trustee shall either eliminate such conflicting interest or resign in the manner provided by, and subject to the provisions of, the Trust Indenture Act of 1939 and this Indenture.

Section 8.09 Eligibility of Trustee. There shall at all times be a Trustee with respect to each series of Notes hereunder which shall be a Person organized and doing business under the laws of the United States or any state or territory thereof or of the District of Columbia authorized under such laws to exercise trust powers, having a combined capital and surplus of at

 

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least $50,000,000, subject to supervision or examination by Federal, state, territorial, or District of Columbia authority and willing to act as Trustee hereunder. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 8.09, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee with respect to any series of Notes shall cease to be eligible in accordance with the provisions of this Section 8.09, such Trustee shall resign immediately in the manner and with the effect specified in Section 8.10.

Section 8.10 Resignation or Removal of Trustee. The Trustee may at any time resign with respect to any series of Notes by giving written notice by first class mail of such resignation to the Company and to the Holders of such series of Notes at their addresses as they shall appear on the Note Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee with respect to such series by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee with respect to such series shall have been so appointed and have accepted appointment within 45 days after the mailing of such notice of resignation to the Holders, the resigning Trustee may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor trustee, or any Holder of such series of Notes who has been a bona fide Holder of a Note or Notes of such series for at least six months may, subject to the provisions of Section 7.09, on behalf of such Holder and all others similarly situated, petition any such court for the appointment of a successor trustee with respect to such series. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint such successor trustee.

(a) In case at any time any of the following shall occur:

(1) the Trustee shall fail to comply with the provisions of Section 8.08 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Note or Notes of such series for at least six months, unless the Trustee’s duty to resign is stayed in accordance with the provisions of Section 310(b) of the Trust Indenture Act of 1939;

(2) the Trustee shall cease to be eligible in accordance with the provisions of Section 8.09 and shall fail to resign after written request therefor by the Company or by any such Holder of a Note of such series; or

(3) the Trustee shall become incapable of acting with respect to any series of Notes, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation

then, in any such case, the Company may remove the Trustee with respect to such series and appoint a successor trustee for such series by Company Order, one copy of which Company Order shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.09, any Holder who has been a bona fide Holder of a Note or Notes of such series for at least six months may, on behalf of such Holder and all others

 

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similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee with respect to such series. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove such Trustee and appoint such successor trustee.

(b) The Holders of a majority in aggregate principal amount of the Outstanding Notes of any series may at any time remove the Trustee with respect to such series by delivering to the Trustee so removed, to the successor trustee so appointed and to the Company the evidence provided for in Section 9.01 of the action in that regard taken by the Holders, and nominate a successor Trustee which shall be deemed appointed as successor Trustee unless within ten days after such nomination the Company objects thereto, in which case the Trustee so removed or any Holder of a Note or Notes of such series, upon the terms and conditions and otherwise as in paragraph (a) of this Section 8.10 provided, may petition any court of competent jurisdiction for an appointment of a successor Trustee with respect to such series.

(c) Any resignation or removal of the Trustee with respect to all or any series of Notes and any appointment of a successor Trustee pursuant to any of the provisions of this Section 8.10 shall become effective upon acceptance of appointment by the successor Trustee as provided in Section 8.11.

Section 8.11 Acceptance by Successor Trustee. Any successor Trustee appointed as provided in Section 8.10 shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective with respect to all or any series as to which it is resigning as Trustee, and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder with respect to all or any such series, with like effect as if originally named as Trustee herein with respect to all or any such series nevertheless, on the written request of the Company or of the successor Trustee, the Trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 8.06, execute and deliver an instrument transferring to such successor Trustee all the rights and powers of the Trustee with respect to all or any such series so ceasing to act. Upon request of any such successor Trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such Trustee with respect to all or any series as to which it is ceasing to act as Trustee, to secure any amounts, including indemnities, then due it pursuant to the provisions of Section 8.06.

No successor Trustee shall accept appointment as provided in this Section 8.11 unless at the time of such acceptance such successor Trustee shall be qualified under the provisions of Section 8.08 and eligible under the provisions of Section 8.09.

Upon acceptance of appointment by a successor Trustee with respect to all or any series of Notes as provided in this Section 8.11, the Company shall mail notice of the succession of such Trustee hereunder to the Holders of Notes of such series at their addresses as they shall appear on the Note Register. If the Company fails to mail such notice within ten days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Company.

 

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In case of the appointment hereunder of a successor Trustee with respect to the Notes of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Notes of any applicable series shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Notes of any series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee.

Section 8.12 Succession by Merger. Subject to Sections 8.08 and 8.09, any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto.

In case at the time any successor to the Trustee by merger, conversion or consolidation shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any such successor to the Trustee may authenticate such Notes either in the name of the predecessor Trustee or such successor Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have.

Section 8.13 Limitation on Rights of Trustee as a Creditor. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Notes), the Trustee shall be subject to the provisions of the Trust Indenture Act of 1939 regarding the collection of claims against the Company (or any such other obligor).

Section 8.14 Authenticating Agents. There may be an Authenticating Agent or Authenticating Agents appointed by the Trustee from time to time with power to act on its behalf and subject to its direction in the authentication and delivery of any series of Notes issued upon original issuance, exchange, transfer or redemption thereof as fully to all intents and purposes as though such Authenticating Agent (or Authenticating Agents) had been expressly authorized to authenticate and deliver such Notes, and Notes so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as though authenticated by the Trustee hereunder. For all purposes of this Indenture, the authentication and delivery of Notes by any Authenticating Agent pursuant to this Section 8.14 shall be deemed to be the authentication and delivery of such Notes “by the Trustee”, and whenever this Indenture provides that “the

 

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Trustee shall authenticate and deliver” Notes or that Notes “shall have been authenticated and delivered by the Trustee”, such authentication and delivery by any Authenticating Agent shall be deemed to be authentication and delivery by the Trustee. Any such Authenticating Agent shall at all times be a Person organized and doing business under the laws of the United States of America or of any state or territory thereof or the District of Columbia, with a combined capital and surplus of at least $50,000,000 and authorized under such laws to act as an authenticating agent, duly registered to act as such, if and to the extent required by applicable law and subject to supervision or examination by Federal or state authority. If such Person publishes reports of its condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 8.14 the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 8.14, or to be duly registered if and to the extent required by applicable law and regulations, it shall resign immediately in the manner and with the effect herein specified in this Section 8.14.

Whenever reference is made in this Indenture to the authentication and delivery of Notes of any series by the Trustee or the Trustee’s certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by its Authenticating Agent appointed with respect to the Notes of such series and a certificate of authentication executed on behalf of the Trustee by its Authenticating Agent appointed with respect to the Notes of such series.

Any Person into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any Person succeeding to the authenticating agency business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor Person is otherwise eligible under this Section 8.14, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent or such successor Person.

In case at the time such successor to any such agency shall succeed to such agency any of the Notes shall have been authenticated but not delivered, any such successor to such Authenticating Agent may adopt the certificate of authentication of any predecessor Authenticating Agent and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to any Authenticating Agent may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor Authenticating Agent; and in all cases such certificate shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the predecessor Authenticating Agent shall have such force; provided, however, that the right to adopt the certificate of authentication of any predecessor Authenticating Agent or to authenticate Notes in the name of any predecessor Authenticating Agent shall apply only to its successor or successors by merger, conversion or consolidation.

Any Authenticating Agent may at any time resign as Authenticating Agent with respect to any series of Notes by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent with respect to

 

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any series of Notes by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible under this Section 8.14, the Trustee may, and shall, upon request of the Company, promptly use its best efforts to appoint a successor Authenticating Agent.

Upon the appointment, at any time after the original issuance of any of the Notes, of any successor, additional or new Authenticating Agent, the Trustee shall give written notice of such appointment to the Company and shall at the expense of the Company mail notice of such appointment to all Holders of Notes of such series as the names and addresses of such Holders appear on the Note Register.

Any successor Authenticating Agent with respect to any series of Notes upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as though originally named as an Authenticating Agent herein with respect to such series. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 8.14 and duly registered if and to the extent required under applicable law and regulations.

Any Authenticating Agent by the acceptance of its appointment with respect to any series of Notes shall be deemed to have agreed with the Trustee that: (a) it will perform and carry out the duties of an Authenticating Agent as herein set forth with respect to such series, including the duties to authenticate and deliver Notes when presented to it in connection with exchanges, registrations of transfer or redemptions thereof; (b) it will keep and maintain, and furnish to the Trustee from time to time as requested by the Trustee appropriate records of all transactions carried out by it as Authenticating Agent and will furnish the Trustee such other information and reports as the Trustee may reasonably require; (c) it is eligible for appointment as Authenticating Agent under this Section 8.14 and will notify the Trustee promptly if it shall cease to be so qualified; and (d) it will indemnify the Trustee against any loss, liability or expense incurred by the Trustee and will defend any claim asserted against the Trustee by reason of any acts or failures to act of the Authenticating Agent with respect to such series but it shall have no liability for any action taken by it at the specific written direction of the Trustee.

The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation and expenses for its services, and the Trustee shall have no liability for such payments.

The provisions of Sections 8.02(a), (b), (c), (e) and (f), 8.03, 8.04, 8.06 (insofar as it pertains to indemnification), 3.09, 9.01 and 9.02 shall bind and inure to the benefit of each Authenticating Agent to the same extent that they bind and inure to the benefit of the Trustee.

If an appointment with respect to one or more series is made pursuant to this Section 8.14, the Notes of such series may have endorsed thereon, in addition to the Trustee’s certificate of authentication, an alternate certificate of authentication in the following form:

This is one of the Notes of the series designated therein issued under the within-mentioned Indenture.

 

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as Trustee

By:  

 

  Authorized Signatory

Section 8.15 Trustees Application for Instructions from the Company. Any application by the Trustee for written instructions from the Company may, at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any officer of the Company is deemed to receive such application in accordance with Section 15.03 (including the copy of such application required to be sent via e-mail thereunder), unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Trustee shall have received written instructions in response to such application specifying the action to be taken or omitted.

ARTICLE 9

CONCERNING THE HOLDERS

Section 9.01 Action by Holders. Whenever in this Indenture it is provided that the Holders of a specified percentage in aggregate principal amount of the Notes of any series may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action) the fact that at the time of taking any such action the Holders of such specified percentage of such series have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by Holders of such series in person or by agent or proxy appointed in writing, or (b) by the record of the Holders of such series voting in favor thereof at any meeting of such Holders duly called and held in accordance with the provisions of Article 9, or (c) by a combination of such instrument or instruments and any such record of such a meeting of Holders of such series. Such instrument or instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments or so voting at any such meeting.

Section 9.02 Proof of Execution by Holders. Subject to the provisions of Sections 8.01, 8.02 and 10.05, proof of the execution of any instrument by a Holder or such Holder’s agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The ownership of Notes shall be provided by the Note Register or by a certificate of the Note Registrar with respect to a series of Notes.

The record of any Holders’ meeting shall be proved in the manner provided in Section 10.06.

 

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Section 9.03 Company-Owned Notes Disregarded. In determining whether the Holders of the requisite aggregate principal amount of Notes of any series have given any request, demand, authorization, direction, notice, consent, or waiver under this Indenture, Notes of such series which are owned by the Company or any other obligor upon such Notes or any Affiliate of the Company or such other obligor (except in the case in which the Company or such other obligor or Affiliate owns all Notes Outstanding under the Indenture, or all Outstanding Notes of each such series, as the case may be, without regard to this proviso) shall be disregarded and deemed not to be Outstanding for the purpose of any such determinations; provided, however, that for the purposes of determining whether the Trustee shall be protected in relying on any such request, demand, authorization, direction, notice, consent, or waiver only such Notes which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding notwithstanding this Section 9.03 if the pledgee shall establish to the satisfaction of the Trustee the right of the pledgee to act with respect to such Notes and that the pledgee is not a Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. Upon request of the Trustee, the Company shall furnish to the Trustee promptly an Officer’s Certificate listing and identifying all Notes of a series, if any, known by the Company to be owned or held by or for the account of the Company or any other obligor on such Notes or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on such Notes; and, subject to the provisions of Section 8.01, the Trustee shall be entitled to accept such Officer’s Certificates as conclusive evidence of the facts therein set forth and of the fact that all such Notes not listed therein are Outstanding for the purpose of any such determination.

Section 9.04 Revocation of Consents; Future Holders Bound. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 9.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Notes of any series specified in this Indenture in connection with such action, any Holder of a Note which is shown by the evidence to be included in the Notes the Holders of which have consented to or are bound by consents to such action, may, by filing written notice with the Trustee at the Corporate Trust Office and upon proof of holding as provided in Section 9.02, revoke such action so far as concerns such Note. Except as aforesaid any such action taken by the Holder of any Note shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Note and of any Note issued on registration of transfer thereof or in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Note. Any action taken by the Holders of the percentage in aggregate principal amount of the Notes specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Trustee and the Holders of all of the Notes affected by such action.

ARTICLE 10

HOLDERS’ MEETINGS

Section 10.01 Purposes of Meetings. A meeting of Holders of the Notes of all or any series may be called at any time and from time to time pursuant to the provisions of this Article 10 for any of the following purposes:

 

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(a) to give any notice to the Company or to the Trustee with respect to such series, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Holders pursuant to any of the provisions of Article 7;

(b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article 8;

(c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 11.02; or

(d) to take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of the Notes of all or any series, as the case may be, under any other provision of this Indenture or under applicable law.

Section 10.02 Call of Meetings by Trustee. The Trustee may at any time call a meeting of Holders of Notes of all or any series to take any action specified in Section 10.01, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Holders of Notes of all or any series, setting forth the time and place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed by the Trustee to Holders of Notes of each series that may be affected by the action proposed to be taken at such meeting at their addresses as they shall appear on the Note Register. Such notice shall be mailed not less than 20 nor more than 90 days prior to the date fixed for the meeting.

Section 10.03 Call of Meetings by Company or Holders. In case at any time the Company, pursuant to a resolution by the Board of Directors, or the Holders of at least 10% in aggregate principal amount of the Notes then Outstanding of each series that may be affected by the action proposed to be taken shall have requested the Trustee to call a meeting of such Holders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or such Holders may determine the time and place for such meeting and may call such meeting to take any action authorized in Section 10.01, by mailing notice thereof as provided in Section 10.02.

Section 10.04 Qualifications for Voting. To be entitled to vote at any meeting of Holders of Notes a person shall (a) be a Holder of one or more Notes of a series affected by the action proposed to be taken or (b) be a Person appointed by an instrument in writing as proxy by a Holder of one or more such Notes. The rights of Holders of Notes to have their votes counted shall be subject to the provision in the definition of “Outstanding in Section 1.01. The only Persons who shall be entitled to be present or to speak at any meeting of Holders of Notes shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

Section 10.05 Regulations. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Notes, in regard to proof of the holding of Notes and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and

 

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examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit. Except as otherwise permitted or required by any such regulation, the holding of Notes shall be proved in the manner specified in Section 9.02 and the appointment of any proxy shall be proved in the manner specified in said Section 9.02 or by having the signature of the Person executing the proxy witnessed or guaranteed by any bank, broker or trust company.

The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders of Notes as provided in Section 10.03, in which case the Company or the Holders of Notes calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a secretary of the meeting shall be elected by vote of the Holders of a majority in aggregate principal amount of the Notes represented at the meeting and entitled to vote.

Subject to the provisions of Section 9.03, at any meeting each Holder of a Note of a series entitled to vote at such meeting or proxy shall be entitled to one vote for each $1,000 principal amount of Notes of such series held or represented by such Holder; provided, however, that no vote shall be cast or counted at any meeting in respect of any Note challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote except as a Holder of Notes of such series or proxy therefor. Any meeting of Holders of Notes duly called pursuant to the provisions of Section 10.02 or 10.03 may be adjourned from time to time and the meeting may be held as so adjourned without further notice.

At any meeting of Holders of Notes, the presence of Persons holding or representing Notes in an aggregate principal amount sufficient to take action upon the business for the transaction of which such meeting was called shall be necessary to constitute a quorum; but, if less than a quorum be present, the Persons holding or representing a majority of the Notes represented at the meeting may adjourn such meeting with the same effect, for all intents and purposes, as though a quorum had been present.

Section 10.06 Voting. The vote upon any resolution submitted to any meeting of Holders of Notes shall be by written ballots on which shall be subscribed the signatures of the Holders of Notes entitled to vote at such meeting or of their representatives by proxy, and the letter or letters, serial number or numbers or other distinguishing marks of the Notes held or represented by each such Holder. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Holders of Notes shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 10.02. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.

 

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Any record so signed and verified shall be conclusive evidence of the matters therein stated.

Section 10.07 No Delay of Rights by Meeting. Nothing contained in this Article Ten shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Holders of Notes of any or all series or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Holders of Notes under any of the provisions of this Indenture or of the Notes.

ARTICLE 11

SUPPLEMENTAL INDENTURES

Section 11.01 Supplemental Indentures without Consent of Holders. The Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of the execution thereof) for one or more of the following purposes:

(a) to evidence the succession of another Person to the Company, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Company pursuant to Articles 5 and 12 hereof;

(b) to add to the covenants of the Company such further covenants, restrictions, conditions or provisions as the Board of Directors shall consider to be for the protection of the Holders of Notes of any or all series, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions, conditions or provisions a default or an Event of Default with respect to such series permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant, restriction or condition, such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default;

(c) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture or to make any changes hereto that are required by law;

(d) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee;

(e) to make such other provisions in regard to matters or questions arising under this Indenture as shall not adversely affect the interests of the Holders of the Notes and to make any change that would provide additional rights or benefits to the Holders of Notes of any or all series or that does not adversely affect the legal rights under this Indenture of any such Holder of Notes;

 

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(f) to evidence and provide for the acceptance of appointment by another Person as a successor Trustee hereunder with respect to one or more series of Notes and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to Section 8.11;

(g) to modify, amend or supplement this Indenture in such a manner as to permit the qualification of any indenture supplemental hereto under the Trust Indenture Act of 1939 as then in effect, except that nothing herein contained shall permit or authorize the inclusion in any indenture supplemental hereto of the provisions referred to in Section 316(a)(2) of the Trust Indenture Act of 1939;

(h) to provide for the issuance under this Indenture of Notes in coupon form (including Notes registrable as to principal only) and to provide for exchangeability of such Notes with Notes of the same series issued hereunder in fully registered form and to make all appropriate changes for such purpose;

(i) to change or eliminate any of the provisions of this Indenture; provided, however, that any such change or elimination shall become effective only when there is no Note Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or

(j) to establish the form of the Notes of a series and to provide for the issuance of Notes of a series, as permitted by Section 3.01, and to set forth the terms thereof.

Subject to Section 11.05, the Trustee is hereby required to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

Any supplemental indenture authorized by the provisions of this Section 11.01 may be executed by the Company and the Trustee without the consent of the Holders of any of the Notes at the time Outstanding, notwithstanding any of the provisions of Section 11.02.

Section 11.02 Supplemental Indentures with Consent of Holders. With the consent (evidenced as provided in Section 9.01) of the Holders of greater than 50% in aggregate principal amount of the Outstanding Notes of each series affected by such supplemental indenture (each such series voting as a single and separate class), by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Notes of each series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holders of all of the Outstanding Notes of each series affected, (a) change the Stated Maturity of the principal of, or any premium or installment of interest on, any Note of such series or make the principal

 

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thereof or interest or premium thereon payable in any coin or currency other than that provided in the Notes of such series; (b) reduce the principal amount of, or the rate, or modify the calculation of such rate, of interest on, or any premium payable upon the redemption of, any Note of such series; (c) reduce the amount of the principal of any Original Issue Discount Note that would be due and payable upon a declaration of acceleration of the maturity thereof or the amount thereof provable in bankruptcy; (d) change the redemption provisions of any Note in a manner adverse to the rights of the Holders thereof or adversely affect the right of repayment at the option of any Holder of any Note of such series; (e) change the Place of Payment or the coin or currency in which the principal of, any premium or interest on any Note of such series is payable; (f) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity of any Note of such series or, in the case of redemption, on or after the Redemption Date or, in the case of repayment at the option of any Holder, on or after the repayment date; (g) make any change that adversely affects the right to convert or exchange any Note into or for ordinary shares or preferred shares or other securities, cash or property in accordance with its terms; (h) amend Sections 5.02, 5.03 and 5.04 in any manner that is materially adverse to the rights of Holders of any series of Notes; or (i) reduce the percentage of Notes of such series, the Holders of which are required to: (i) consent to any supplemental indenture, (ii) rescind and annul a declaration that the Notes of such series are due and payable as a result of the occurrence of an Event of Default, (iii) waive any past Event of Default and its consequences, or (iv) waive compliance with the provisions of this Indenture or with any additional covenant, agreement or condition contained in a Board Resolution or Officer’s Certificate establishing such series of Notes, any indenture supplemental hereto applicable to such series or any Note of such series.

Upon the Trustee’s receipt of a Company Request, accompanied by a copy of a Board Resolution certified by its Secretary or Assistant Secretary authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Holders of Notes as aforesaid, subject to Section 11.05, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.

A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Notes, or which modifies the rights of the Holders of Notes of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Notes of any other series.

It shall not be necessary for the consent of the Holders of Notes under this Section 11.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.

Section 11.03 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture pursuant to the provisions of this Article 11, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitation of rights, obligations, duties and immunities under this Indenture of the Trustee, the

 

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Company and the Holders of Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

Section 11.04 Notation on Notes. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article 11 may bear a notation as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Notes of any series so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee and delivered in exchange for the Outstanding Notes of such series.

Section 11.05 Evidence of Compliance of Supplemental Indenture to be Furnished Trustee. The Trustee, subject to the provisions of Sections 8.01 and 8.02, shall receive, and shall be fully protected in relying upon, an Officer’s Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article 11 and is authorized and permitted by this Indenture.

ARTICLE 12

CONSOLIDATION, MERGER, SALE AND CONVEYANCE

Section 12.01 Company May Consolidate on Certain Terms. Nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of the Company with or into any other Person (whether or not affiliated with the Company), or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance or lease of all or substantially all of the property of the Company to any other Person (whether or not affiliated with the Company) authorized to acquire and operate the same; provided, however, and the Company hereby covenants and agrees, that any such consolidation, merger, sale, conveyance or lease shall be upon the condition that (a) immediately after such consolidation, merger, sale, conveyance or lease, the Person (whether the Company or such other Person) formed by or surviving any such consolidation or merger, or to which such sale, conveyance or lease shall have been made, shall not be in default in the performance or observance of any of the terms, covenants and conditions of this Indenture to be kept or performed by the Company; and (b) the due and punctual payment of the principal of and premium, if any, and interest on all of the Notes, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, shall be expressly assumed, by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee by the Person (if other than the Company) formed by such consolidation, or into which the Company shall have been merged, or by the Person which shall have acquired or leased such property.

Section 12.02 Successor Entity to be Substituted. In case of any such consolidation, merger, sale, conveyance or lease and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and premium, if any, and interest on all of the Notes and the due and punctual performance and observance of all of the covenants and

 

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conditions of this Indenture to performed or observed by the Company, such successor Person shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the party of the first part, and (except in the event of a conveyance by way of lease) the predecessor Person shall be relieved of any further obligation under this Indenture and the Notes.

In case of any such consolidation, merger, sale, conveyance or lease such changes in phraseology and form (but not in substance) may be made in the Notes thereafter to be issued as may be appropriate.

Section 12.03 Opinion of Counsel to Be Given to the Trustee. The Trustee, subject to Sections 8.01 and 8.02, shall receive an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale conveyance or lease and any such assumption complies with the provisions of this Article 12 and that all conditions precedent herein provided relating to such transactions have been complied with.

ARTICLE 13

SATISFACTION, DISCHARGE AND DEFEASANCE OF INDENTURE

Section 13.01 Satisfaction, Discharge and Legal Defeasance of Notes of any Series. The Company shall be deemed to have paid and discharged the entire indebtedness on all the Notes of a series, the provisions of this Indenture (except as to (x) the rights of Holders of Notes of such series to receive, from the money, in the currency required, and Government Obligations deposited with the Trustee pursuant to Section 13.02(a) or the interest and principal received by the Trustee in respect of such Government Obligations, payment of the principal of (and premium, if any) and any installment of principal of (and premium, if any) or interest on such Notes on the Stated Maturities thereof or upon the Redemption Dates for Notes required to be redeemed pursuant to any mandatory sinking fund or analogous provisions relating to Notes of that series or pursuant to any call for redemption relating to Notes of that series, (y) the Company’s rights and obligations with respect to such Notes under Sections 3.06, 3.07, 5.01, 5.02, 5.03, 5.04, 8.06, 8.10, 8.11, 13.03 and 13.04, and (z) the rights, powers, trusts, duties and immunities of the Trustee with respect to the Notes of such series) as it relates to such Notes shall no longer be in effect on the 91st day after it has made the deposit referred to in Section 13.01(a)(2), and the Trustee, at the expense of the Company, shall, upon Company Request, execute proper instruments acknowledging the same if:

(a) (1) all Notes of such series therefor authenticated and delivered (other than (A) Notes which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.07 and (B) Notes for whose payment money has theretofor been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Sections 13.03 and 13.04) have been delivered to the Trustee for cancellation;

      (2) the Company has paid or caused to be paid in the currency required all other sums payable under this Indenture in respect of the Notes of such series, including all amounts owing to the Trustee under Section 8.06; and

 

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      (3) the Company has delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction of the entire indebtedness of all Notes of any such series and the discharge of the Indenture as it relates to such Notes have been complied with; or

(b) (1) all such Notes of such series not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity within one year, or (C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense of the Company; and

      (2) the condition described in paragraphs (a) and (b) of Section 13.02 has been satisfied; and the conditions described in paragraphs (a)(2) and (a)(3) of this Section 13.01 have been satisfied; or

(c) (1) the conditions referred to in Section 13.02 and paragraph (a)(2) of this Section 13.01 have been satisfied; and

      (2) the Company has delivered to the Trustee (x) an opinion of a nationally-recognized independent tax counsel confirming that the Company shall have received from, or there shall have been published by, the United States Internal Revenue Service a ruling, or since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case, to the effect that, and based thereon such opinion of counsel will confirm that, Holders of the Notes of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and the defeasance contemplated by this paragraph (c) of this Section 13.01 and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred, and (y) an Opinion of Counsel stating that the defeasance trust does not constitute an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and, after the passage of 91 days following the deposit described in Section 13.01(a)(2), the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors rights’ generally.

Section 13.02 Covenant Defeasance of Notes of any Series. The provisions of this Indenture (except as to (x) the rights of Holders of Notes of any series to receive, from the money, in the currency required, and Government Obligations deposited with the Trustee pursuant to paragraph (a) below or the interest and principal received by the Trustee in respect of such Government Obligations, payment of the principal of (and premium, if any) and any installment of principal of (and premium, if any) or interest on such Notes on the Stated Maturities thereof or upon the Redemption Dates for Notes required to be redeemed pursuant to any mandatory sinking or analogous provisions relating to Notes of that series or pursuant to any call for redemption relating to Notes of that series; (y) the Company’s rights and obligations with respect to such Notes under Sections 3.06, 3.07, 5.01, 5.02, 5.03, 5.04, 6.01, Article 7 (other than paragraph (d) of Section 7.01, to the extent relating to the covenants defeased hereby), Sections 8.06, 8.10, 8.11, 13.03, and 13.04; and (z) the rights, powers, trusts, duties and immunities of the Trustee with respect to the Notes of such series) as it relates to Notes of any series shall no longer be in effect, and the Trustee, at the expense of the Company shall, upon Company Request, execute proper instruments acknowledging the same if:

 

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(a) the Company has irrevocably (subject to Section 13.04) deposited or caused to be deposited with the Trustee as trust funds in trust and specifically pledged as security for, and dedicated solely to, the benefit of the Holders of Notes of such series (1) Dollars or Foreign Currency, as applicable, in an amount, or (2) Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide on or before the due date of any payment in respect of such series of Notes funds in an amount, or (3) a combination thereof, sufficient, after payment of all Federal, state and local taxes in respect thereof payable by the Trustee, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, which opinion need only be provided if Government Obligations shall have been deposited, to pay and discharge the principal of (and premium, if any) and each installment of principal (and premium, if any) and interest on the Outstanding Notes of that series to the Stated Maturity of such principal or installment of principal or interest or to the Redemption Dates for Notes required to be redeemed pursuant to any mandatory sinking fund or analogous provisions relating to Notes of that series or pursuant to any call for redemption relating to Notes of that series on each day on which such payments are due and payable in accordance with the terms of the Indenture and such Notes;

(b) no Event of Default or event which with notice or lapse of time would become an Event of Default shall have occurred and be continuing on the date of the deposit referred to in paragraph (a) of this Section 13.02 or, insofar as an Event of Default described in paragraph (g) or (h) of Section 7.01 are concerned, at any time during the period ending on the 91st day after the date of such deposit or, if longer, ending on the day following the expiration date of the longest preference period applicable to the Company in respect of the deposit (and this condition will not be deemed satisfied until the expiration of such period; provided, however, that should this condition fail to be satisfied on or before such 91st day, the Trustee shall promptly, upon satisfactory receipt of evidence of such failure, return such deposit to the Company);

(c) the interest of the Holders in such deposit shall have been duly perfected under the applicable provisions of the applicable Uniform Commercial Code;

(d) such defeasance shall not (A) cause the Trustee to have a conflicting interest as defined in Section 8.08 or for purposes of the Trust Indenture Act of 1939 with respect to any securities of the Company or (B) result in the trust arising from such deposit to constitute, unless it is qualified as, a regulated investment company under the Investment Company Act of 1940, as amended;

(e) such defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound;

(f) the Company has delivered to the Trustee (x) an opinion of counsel of a nationally-recognized independent tax counsel confirming that the Holders of the Notes of such

 

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series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and the defeasance contemplated by this Section 13.02 and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred, and (y) an Opinion of Counsel stating that the defeasance trust does not constitute an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and, after the passage of 91 days following the deposit described in Section 13.01(a)(2), the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors rights’ generally; and

(g) the Company has delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided relating to the defeasance contemplated by this Section have been complied with.

Section 13.03 Application of Trust Funds; Indemnification. Section 13.04 Subject to the provisions of Section 13.04, all money and Government Obligations deposited with the Trustee pursuant to Sections 13.01 or 13.02, and all money received by the Trustee in respect of Government Obligations deposited with the Trustee, shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any paying agent (including the Company acting as its own paying agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money and Government Obligations have been deposited with or received by the Trustee as contemplated by Sections 13.01 or 13.02.

(a) The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against Government Obligations deposited pursuant to Sections 13.01 or 13.02 or the interest and principal received in respect of such obligations, other than any such tax, fee or other charge payable by or on behalf of Holders. The Company shall be entitled to prompt notice of an assessment or the commencement of any proceeding for which indemnification may be sought hereunder and, at its election, to contest such assessment or to participate in, assume the defense of, or settle such proceeding.

(b) The Trustee shall deliver or pay to the Company from time to time upon Company Request any Government Obligations or money held by it as provided in Sections 13.01 or 13.02 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, which opinion need only be provided if Government Obligations shall have been deposited, are then in excess of the amount thereof which then would have been required to be deposited for the purpose for which such obligations or money were deposited or received.

Section 13.05 Return of Unclaimed Moneys. Any moneys deposited with or paid to the Trustee or any paying agent for payment of the principal of and premium, if any, or interest on Notes and not applied but remaining unclaimed by the Holders of Notes for two years after the date upon which the principal of and premium, if any, or interest on such Notes, as the case may be, shall have become due and payable, shall be repaid to the Company by the Trustee or such paying agent on Company Request; and the Holder of any of the Notes entitled to receive such payment shall thereafter look only to the Company for any payment thereof and all liability of the Trustee or such paying agent with respect to such moneys shall thereupon cease.

 

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Section 13.06 Reinstatement. If the Trustee is unable to apply any money or Government Obligations in accordance with Sections 13.01 or 13.02 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Sections 13.01 or 13.02 until such time as the Trustee is permitted to apply all such money or Government Obligations in accordance with Sections 13.01 or 13.02; provided that, if the Company has made any payment of principal of or interest on the Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Obligations held by the Trustee.

ARTICLE 14

IMMUNITY OF INCORPORATORS, STOCKHOLDERS,

OFFICERS AND DIRECTORS

Section 14.01 Indenture and Notes Solely Obligations of the Company. No recourse under or upon any obligation, covenant or agreement of this Indenture, any supplemental indenture, or of any Note, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, organizer, stockholder, member, owner, officer, director, manager or employee, as such, past, present or future, of the Company or any Subsidiary or of any predecessor or successor Person, either directly or through the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued hereunder are solely obligations of the Company, and that no such personal liability whatever shall attach to, or is or shall be incurred by, any incorporator, organizer, stockholder, member, owner, officer, director, manager or employee, as such, of the Company or of any predecessor or successor Person, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture, or in any of the Notes or implied thereby; and that any and all such personal liability, either at common law or in equity or by constitution or statute of, and any and all such rights and claims against, every such incorporator, organizer, stockholder, member, owner, officer, director, manager or employee, as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Notes or implied thereby, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of such Notes.

ARTICLE 15

MISCELLANEOUS PROVISIONS

Section 15.01 Provisions Binding on Successors of the Company. All of the covenants, stipulations, promises and agreements in this Indenture contained by the Company shall bind its successors and assigns whether so expressed or not.

 

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Section 15.02 Indenture for Sole Benefit of Parties and Holders of Notes. Nothing in this Indenture or in the Notes, expressed or implied, shall give or be construed to give to any Person, firm or corporation, other than the parties hereto, any agent of the Trustee or the Company under this Indenture and the Holders of the Notes, any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision herein contained; all such covenants, conditions and provisions being, subject to the provisions of Articles 12 and 14, for the sole benefit of the parties hereto, any agent of the Trustee or the Company under this Indenture and the Holders of the Notes.

Section 15.03 Addresses for Notices. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders of Notes on the Company may be given or served by being deposited, registered or certified mail postage prepaid, in a post office letter box in the United States addressed (until another address is filed by the Company with the Trustee) to the Company, Conifer Holdings, Inc., 550 West Merrill Street, Suite 200, Birmingham, Michigan 48009, Telecopier No.:         , Attention: Richard J. Fiato, Corporate Counsel, with a copy to Honigman Miller Schwartz and Cohn LLP, 2290 First National Building, 660 Woodward Avenue, Detroit, Michigan 48226, Attention: Donald J. Kunz, Telecopier No.: 313-465-7455, and, solely with respect to Section 8.15, via e-mail to                     . Any notice, direction, request or demand by any Holder of a Note or the Company to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the Corporate Trust Office of the Trustee, addressed to the attention of the Conifer Holdings, Inc. Administrator. Any notice, report or other instrument required by any of the provisions of this Indenture to be given by the Trustee to the Holders of Notes of any or all series shall be deemed to have been sufficiently given, for all purposes, when mailed by first class mail, or in the case of Global Notes, delivered electronically to the Depository.

The Trustee agrees to accept and act upon instructions or directions pursuant to this Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods provided, however, that (a) the party providing such electronic instructions or directions, subsequent to the transmission thereof, shall provide the originally executed instructions or directions to the Trustee in a timely manner and (b) such originally executed instructions or directions shall be signed by an authorized representative of the party providing such instructions or directions. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions or directions notwithstanding that such instructions or directions conflict or are inconsistent with a subsequent written instruction or direction or if the subsequent written instruction or direction is never received. The party providing instructions or directions by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, as aforesaid, agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties.

Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Note Register, not later than the latest date (if any), and not earlier than the earliest date (if any),

 

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prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Whenever in this Indenture notice is to be given to Holders of Global Notes, notice shall be sufficiently given if given to the Depository.

Section 15.04 Contract; Waiver of Trial by Jury. This Indenture and the Notes shall for all purposes be construed in accordance with and governed by the laws of the State of New York. EACH OF THE COMPANY, THE TRUSTEE, AND THE HOLDERS HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 15.05 Evidence of Compliance with Conditions Precedent. Upon any request to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officer’s Certificate stating that all conditions precedent, if any (including any covenant, compliance with which constitutes a condition precedent) provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such document is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished.

Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the Person making such certificate or opinion 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 certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she 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 (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.

Section 15.06 Legal Holidays. In any case where the date of maturity of interest on or principal of or premium, if any, on any series of Notes or the date fixed for redemption or repayment of any Note or Notes will be a legal holiday or a day on which banking institutions are legally authorized or obligated to close in New York, New York or any other location where a paying agent appointed pursuant to Section 5.02 is located, then payment of such interest on or principal of and premium, if any, on such Notes need not be made by such paying agent on such date but may be made by such paying agent on the next succeeding day that is not a day in such location that is either a legal holiday or a day on which banking institutions are legally authorized or obligated to close, with the same force and effect as if made on such date of maturity or the date fixed for redemption or repayment and no interest shall accrue on such payment for the period from and after such prior date.

 

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Section 15.07 Trust Indenture Act of 1939 to Control. If any provision hereof limits, qualifies or conflicts with the duties imposed by any of Sections 310 through 317 of the Trust Indenture Act of 1939, by the operation of Section 318(c) thereof, such imposed duties shall control, except as, and to the extent, expressly excluded from this Indenture, as permitted by the Trust Indenture Act of 1939. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act of 1939 that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be.

Section 15.08 Table of Contents. Headings. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

Section 15.09 Determination of Principal Amount. In determining whether the Holders of the requisite principal amount of Outstanding Notes of any series have given any request, demand, authorization, direction, notice, consent or waiver hereunder, or whether sufficient funds are available for redemption or for any other purpose, (a) the principal amount of an Original Issue Discount Note that shall be deemed to be Outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the maturity thereof pursuant to Section 7.01, (b) the principal amount of any Notes denominated in a Foreign Currency that shall be deemed to be Outstanding for such purposes shall be determined by converting the Foreign Currency into Dollars at the Market Exchange Rate as of the date of such determination and (c) the principal amount of any Indexed Note that shall be deemed to be Outstanding for such purposes shall be the amount of the principal face amount of such Indexed Note at original issuance, unless otherwise provided in or pursuant to this Indenture.

Section 15.10 Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original and such counterparts shall together constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Indenture by telecopier, facsimile or other electronic transmission (i.e. a “pdF or “tif’) shall be effective as delivery of a manually executed counterpart hereof.

[Signature pages follow]

 

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IN WITNESS WHEREOF, CONIFER HOLDINGS, INC. has caused this Indenture to be executed by its , and has caused this Indenture to be executed by one of its officers, as of the day and year first written above.

 

CONIFER HOLDINGS, INC.,
By:  

 

  Name:
  Title:
WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee
By:  

 

  Name:
  Title:

[Signature Page to Indenture]

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Section 4: EX-4.3 (EX-4.3)

EX-4.3

Exhibit 4.3

FIRST SUPPLEMENTAL INDENTURE

Dated as of                     , 2018

between

CONIFER HOLDINGS, INC.,

as Issuer,

and

WILMINGTON TRUST, NATIONAL ASSOCIATION,

as Trustee

to

Indenture

Dated as of                     , 2018

    % Senior Unsecured Notes due 20    

 


TABLE OF CONTENTS

 

              Page  

ARTICLE I SENIOR NOTES

     2  
  SECTION 1.01    Definitions.      2  
  SECTION 1.02    Establishment.      3  
  SECTION 1.03    Payment of Principal and Interest.      4  
  SECTION 1.04    Denominations.      5  
  SECTION 1.05    Global Notes.      5  
  SECTION 1.06    Transfer.      6  
  SECTION 1.07    Defeasance.      6  
  SECTION 1.08    Redemption at the Option of the Company.      6  
  SECTION 1.09    No Sinking Fund or Repurchase at the Option of Holders.      6  
  SECTION 1.10    No Conversion or Exchange Rights.      6  
  SECTION 1.11    Material Subsidiaries.      6  

ARTICLE II MISCELLANEOUS PROVISIONS

     8