-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HrnxdMZYRGz9xAaO0ky/0GgXfaUycbWl2NPeWMXtmuOfKwYmyVg61dz8sNtki2yt 5eq/AFG8Zd6hLmq0IUiPiA== 0000950152-03-009655.txt : 20031113 0000950152-03-009655.hdr.sgml : 20031113 20031113112543 ACCESSION NUMBER: 0000950152-03-009655 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANCINSURANCE CORP CENTRAL INDEX KEY: 0000276400 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 310790882 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08738 FILM NUMBER: 03996386 BUSINESS ADDRESS: STREET 1: 250 EAST BROAD STREET STREET 2: 10TH FLOOR CITY: COLUMBUS STATE: OH ZIP: 43215 BUSINESS PHONE: 6142282800 MAIL ADDRESS: STREET 1: 250 EAST BROAD STREET STREET 2: 10TH FLOOR CITY: COLUMBUS STATE: OH ZIP: 43215 10-Q 1 l03799ae10vq.txt BANCINSURANCE CORPROATION 10-Q/QTR END 9-30-03 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2003 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------- ---------------------------- Commission file number 0-8738 BANCINSURANCE CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 31-0790882 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 250 East Broad Street, Columbus, Ohio 43215 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (614) 228-2800 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X] The number of outstanding Common Shares, without par value, of the registrant as of October 31, 2003 was 4,920,050. BANCINSURANCE CORPORATION AND SUBSIDIARIES INDEX
Page No. --------- PART I - FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 2003 (unaudited) and December 31, 2002........................................... 3 Consolidated Statements of Income for the three months and nine months ended September 30, 2003 and 2002 (unaudited)......................... 5 Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2003 and 2002 (unaudited)......... 6 Consolidated Statements of Cash Flows for the nine months ended September 30, 2003 and 2002 (unaudited).................... 7 Notes to Consolidated Financial Statements (unaudited)............................... 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................ 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................................................. 23 Item 4. Controls and Procedures............................................................ 23 PART II - OTHER INFORMATION AND SIGNATURES Item 1. Legal Proceedings.................................................................. Not Applicable Item 2. Changes in Securities and Use of Proceeds.......................................... Not Applicable Item 3. Defaults Upon Senior Securities.................................................... Not Applicable Item 4. Submission of Matters to a Vote of Security Holders ............................... Not Applicable Item 5. Other Information.................................................................. Not Applicable Item 6. Exhibits and Reports on Form 8-K................................................... 24 Signatures................................................................................. 25
PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements BANCINSURANCE CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets
September 30, December 31, Assets 2003 2002 ------ ------------- ------------ (Unaudited) (Note 2) Investments: Held to maturity: Fixed maturities, at amortized cost (fair value $5,094,318 in 2003 and $4,691,903 in 2002) .......................... $ 4,881,357 $ 4,487,749 Available for sale: Fixed maturities, at fair value (amortized cost $23,927,854 in 2003 and $15,557,400 in 2002) ........................ 24,086,679 15,912,650 Common stock, at fair value (cost $4,938,804 in 2003 and $4,841,903 in 2002) ..................................... 6,680,826 5,952,213 Preferred stock, at fair value (cost $11,625,004 in 2003 and $875,003 in 2002) ....................................... 11,723,351 917,300 Short-term investments, at cost which approximates fair value ............................................... 26,640,695 25,135,305 Other invested assets ................................................... 1,049,137 582,137 ------------ ------------ Total investments .............................................. 75,062,045 52,987,354 ------------ ------------ Cash ......................................................................... 3,218,666 4,306,007 Premiums receivable .......................................................... 7,682,603 5,910,719 Accounts receivable, net ..................................................... 625,695 844,059 Reinsurance recoverables ..................................................... 1,425,069 283,417 Prepaid reinsurance premiums ................................................. 6,500,382 1,228,632 Deferred policy acquisition costs ............................................ 4,914,880 2,653,826 Estimated earnings in excess of billings on uncompleted codification contracts 336,868 224,837 Loans to affiliates .......................................................... 772,059 685,856 Current federal income taxes ................................................. 330,314 295,235 Excess of investment over net assets of subsidiaries, net .................... 753,737 753,737 Intangible assets, net ....................................................... 938,677 994,566 Accrued investment income .................................................... 571,908 328,751 Other assets ................................................................. 1,787,779 1,206,208 ------------ ------------ Total assets ................................................... $104,920,682 $ 72,703,204 ============ ============
3 BANCINSURANCE CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets, Continued
September 30, December 31, Liabilities and Shareholders' Equity 2003 2002 ------------------------------------ ------------- ------------ (Unaudited) (Note 2) Reserve for unpaid losses and loss adjustment expenses .............................. $ 14,861,794 $ 7,559,503 Unearned premiums ................................................................... 22,512,777 10,304,769 Experience rating adjustments payable ............................................... 6,864,530 4,764,329 Retrospective premium adjustments payable ........................................... 4,127,391 3,951,898 Funds held under reinsurance treaties ............................................... 1,764,922 1,513,297 Contract funds on deposit ........................................................... 1,752,865 1,317,663 Taxes, licenses, and fees payable ................................................... 936,058 297,418 Deferred federal income taxes ....................................................... 747,170 82,027 Commissions payable ................................................................. 2,221,119 1,990,436 Billings in excess of estimated earnings on uncompleted codification contracts ...... 133,067 93,894 Notes payable ....................................................................... 52,796 2,166,355 Other liabilities ................................................................... 1,701,473 1,511,777 Trust preferred debt issued to affiliates ........................................... 15,465,000 8,248,000 ------------ ------------ Total liabilities ..................................................... 73,140,962 43,801,366 ------------ ------------ Shareholders' equity: Non-voting preferred shares: Class A Serial Preference Shares without par value; authorized 100,000 shares; no shares issued or outstanding ................................... -- -- Class B Serial Preference Shares without par value; authorized 98,646 shares; no shares issued or outstanding ................................... -- -- Common Shares without par value; authorized 20,000,000 shares; 6,170,341 shares issued at September 30, 2003 and December 31, 2002, 4,920,050 shares outstanding at September 30, 2003 and 5,000,291 shares outstanding at December 31, 2002 ........................................... 1,794,141 1,794,141 Additional paid-in capital ..................................................... 1,337,138 1,337,138 Accumulated other comprehensive income ......................................... 1,319,468 995,186 Retained earnings .............................................................. 33,354,820 30,429,515 ------------ ------------ 37,805,567 34,555,980 Less: Treasury shares, at cost (1,250,291 common shares at September 30, 2003 and 1,170,050 common shares at December 31, 2002) ..................... (6,025,847) (5,654,142) ------------ ------------ Total shareholders' equity ............................................ 31,779,720 28,901,838 ------------ ------------ Total liabilities and shareholders' equity ............................ $104,920,682 $ 72,703,204 ============ ============
See accompanying notes to consolidated financial statements. 4 BANCINSURANCE CORPORATION AND SUBSIDIARIES Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Income: Net premiums earned ..................................... $ 15,770,717 $ 11,598,795 $ 42,027,483 $ 30,683,481 Net investment income ................................... 412,290 351,881 1,217,287 1,000,632 Net realized gain (loss) on investments ................. 371,948 (248,844) 839,008 (398,529) Codification and subscription fees ...................... 913,121 745,017 2,669,797 2,259,726 Management fees ......................................... 45,319 178,826 244,742 638,692 Other income ............................................ 3,299 3,725 60,148 171,860 ------------ ------------ ------------ ------------ Total revenue ..................................... 17,516,694 12,629,400 47,058,465 34,355,862 ------------ ------------ ------------ ------------ Losses and operating expenses: Losses and loss adjustment expenses ..................... 11,997,823 8,979,573 27,931,640 20,922,965 Experience rating adjustments ........................... (56,140) (1,013,276) 2,100,201 (798,689) Commission expense ...................................... 2,094,468 2,086,527 5,419,756 5,370,829 Other insurance operating expenses ...................... 1,259,660 1,208,280 3,953,085 2,961,806 Codification and subscription expenses .................. 904,483 678,079 2,530,466 1,886,995 General and administrative expenses ..................... 271,425 365,290 798,692 875,473 Goodwill impairment ..................................... -- 179,000 -- 179,000 Interest expense ........................................ 117,119 31,304 336,310 71,167 ------------ ------------ ------------ ------------ Total expenses .................................... 16,588,838 12,514,777 43,070,150 31,469,546 ------------ ------------ ------------ ------------ Income before federal income taxes and cumulative effect of change in accounting principle ...................................... 927,856 114,623 3,988,315 2,886,316 Federal income tax expense ................................. 177,681 21,953 1,063,009 822,211 ------------ ------------ ------------ ------------ Income before cumulative effect of change in accounting principle ........................... 750,175 92,670 2,925,306 2,064,105 Cumulative effect of change in accounting principle ........ -- -- -- (1,481,858) ------------ ------------ ------------ ------------ Net income ........................................ $ 750,175 $ 92,670 $ 2,925,306 $ 582,247 ============ ============ ============ ============ Basic net income per share: Before cumulative effect of change in accounting principle ............................................. $ .15 $ .02 $ .58 $ .37 Cumulative effect of change in accounting principle ..... -- -- -- (.26) ------------ ------------ ------------ ------------ Basic net income per share .............................. $ .15 $ .02 $ .58 $ .11 ============ ============ ============ ============ Diluted net income per share: Before cumulative effect of change in accounting principle ............................................. $ .15 $ .02 $ .58 $ .36 Cumulative effect of change in accounting principle ..... -- -- -- (.25) ------------ ------------ ------------ ------------ Diluted net income per share ............................ $ .15 $ .02 $ .58 $ .11 ============ ============ ============ ============
See accompanying notes to consolidated financial statements. 5 BANCINSURANCE CORPORATION AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Net income ................................................. $ 750,175 $ 92,670 $ 2,925,306 $ 582,247 Other comprehensive income: Unrealized holding gain (loss) on securities arising during period, net of tax and reclassification adjustment ........................... (117,006) (109,924) 324,282 (91,137) ------------ ------------ ------------ ------------ Comprehensive income (loss) ................................ $ 633,169 $ (17,254) $ 3,249,588 $ 491,110 ============ ============ ============ ============
See accompanying notes to consolidated financial statements. 6 BANCINSURANCE CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2003 2002 ------------ ------------ Cash flows from operating activities: Net income ...................................................................... $ 2,925,306 $ 582,247 Adjustments to reconcile net income to net cash provided by operating activities: Net realized loss on goodwill impairment ..................................... -- 1,660,858 Net realized (gain) loss on investments ...................................... (839,008) 398,529 Net realized loss on disposal of property and equipment ...................... -- 1,073 Depreciation and amortization ................................................ 296,180 232,476 Deferred federal income tax expense .......................................... 498,089 58,639 Change in assets and liabilities: Premiums receivable ....................................................... (1,771,884) (450,689) Accounts and reinsurance receivable, net .................................. (6,195,038) (342,889) Deferred policy acquisition costs ......................................... (2,261,054) (1,037,404) Other assets, net ......................................................... (1,058,041) (289,755) Reserve for unpaid losses and loss adjustment expenses .................... 7,302,291 1,642,895 Unearned premiums ......................................................... 12,208,008 3,845,532 Funds held under reinsurance treaties ..................................... 251,625 392,423 Experience rating adjustments payable ..................................... 2,100,201 (798,688) Retrospective premium adjustments payable ................................. 175,493 (1,208,153) Contract funds on deposit ................................................. 435,202 (1,157,031) Other liabilities, net .................................................... 1,657,297 (450,830) ------------ ------------ Net cash provided by operating activities ............................... 15,724,667 3,079,233 ------------ ------------ Cash flows from investing activities: Proceeds from held to maturity fixed maturities due to redemption or maturity ... 1,100,000 1,245,400 Proceeds from available for sale fixed maturities sold, redeemed or matured ..... 7,852,441 4,554,438 Proceeds from available for sale equity securities sold ......................... 16,255,862 14,599,850 Cost of investments purchased: Held to maturity fixed maturities ............................................ (1,509,145) (1,102,131) Available for sale fixed maturities .......................................... (16,238,773) (5,300,325) Available for sale equity securities ......................................... (26,368,631) (15,525,770) Net change in short-term investments and other invested assets .................. (1,972,390) (10,945,315) Purchase of land, property and leasehold improvements ........................... (459,667) (133,731) Cash used in acquisition of assets .............................................. -- (25,000) ------------ ------------ Net cash used in investing activities ................................... (21,340,303) (12,632,584) ------------ ------------ Cash flows from financing activities: Proceeds from note payable to bank .............................................. 5,900,000 12,590,000 Repayments of note payable to bank .............................................. (8,000,000) (15,190,000) Proceeds from issuance of trust preferred debt to an affiliate .................. 7,000,000 -- Acquisition of treasury shares .................................................. (371,705) (3,496,257) ------------ ------------ Net cash provided by (used in) financing activities .................... 4,528,295 (6,096,257) ------------ ------------ Net decrease in cash ............................................................... (1,087,341) (15,649,608) ------------ ------------ Cash at December 31 ................................................................ 4,306,007 19,547,132 ------------ ------------ Cash at September 30 ............................................................... $ 3,218,666 $ 3,897,524 ============ ============ Supplemental disclosures of cash flow information: Cash paid during the period for: Interest ...................................................................... $ 336,937 $ 67,704 ============ ============ Income taxes .................................................................. $ 600,000 $ 1,288,102 ============ ============
See accompanying notes to consolidated financial statements. 7 BANCINSURANCE CORPORATION AND SUBSIDIARIES Notes To Consolidated Financial Statements (Unaudited) 1. We prepared the Consolidated Balance Sheet as of September 30, 2003, the Consolidated Statements of Income for the three and nine months ended September 30, 2003 and 2002, the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2003 and 2002, and the Consolidated Statements of Cash Flows for the nine months ended September 30, 2003 and 2002, without an audit. In the opinion of management, all adjustments necessary to fairly present the financial position, results of operations and cash flows at September 30, 2003 and for all periods presented have been made. We prepared the accompanying unaudited Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. 2. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted. We recommend that you read these unaudited Consolidated Financial Statements together with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2002. The results of operations for the period ended September 30, 2003 are not necessarily indicative of the results of operations for the full year. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Effective January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). Under SFAS 142, we no longer amortize goodwill and intangibles which have indefinite lives. SFAS 142 requires that we assess goodwill and intangibles with indefinite lives for impairment at least annually, based on the fair value of the related reporting segment. Our annual impairment assessment will be performed in the fourth quarter on an on-going basis, or earlier if deemed necessary. As an initial step in the SFAS 142 implementation process, we assigned goodwill and intangibles to our property/casualty insurance, insurance agency and municipal code publishing reporting segments. Following such assignment, the fair value of each reporting segment was compared to its carrying value. Fair values were determined by discounting estimated future cash flows. Based on our impairment testing, a net after-tax impairment charge of $1,481,858 was recognized as a cumulative effect of change in accounting principle in the first quarter of 2002. The impairment charge was associated with the August 1999 acquisition of Paul Boardway and Associates, Inc. We dissolved Paul Boardway and Associates, Inc. in 2002. As a result of the then pending dissolution, the remaining goodwill of $179,000 was recorded as a pre-tax impairment charge to income in the third quarter of 2002. Intangible assets as of September 30, 2003 and December 31, 2002 were as follows:
As of September 30, 2003 As of December 31, 2002 ---------------------------------------------- ---------------------------------------------- Accumulated Accumulated Cost Amortization Net Cost Amortization Net ---------- ------------ ---------- ---------- ------------ ---------- Amortization Intangibles: Databases ................ $1,008,773 $ 140,431 $ 868,342 $1,008,773 $ 102,562 $ 906,211 Noncompete agreement ..... 120,394 50,059 70,335 120,394 32,039 88,355 ---------- ---------- ---------- ---------- ---------- ---------- Total intangible assets ...... $1,129,167 $ 190,490 $ 938,677 $1,129,167 $ 134,601 $ 994,566 ========== ========== ========== ========== ========== ==========
8 BANCINSURANCE CORPORATION AND SUBSIDIARIES Amortization expense related to amortizable intangible assets was $18,629 and $55,888 for the three and nine months ended September 30, 2003, respectively, and $18,629 and $61,611 for the three and nine months ended September 30, 2002, respectively. The estimated amortization expense of intangible assets for the next five fiscal years ending December 31 is as follows: 2003 $ 74,518 2004 74,518 2005 74,518 2006 66,518 2007 50,477
4. Supplemental Disclosure For Earnings Per Share:
Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Net income ............................... $ 750,175 $ 92,670 $2,925,306 $ 582,247 ---------- ---------- ---------- ---------- Weighted average common shares outstanding 4,920,061 5,145,006 4,949,037 5,479,499 Dilutive effect of outstanding options.. 139,168 229,269 79,579 178,705 ---------- ---------- ---------- ---------- Diluted common shares .................... 5,059,229 5,374,275 5,028,616 5,658,204 ========== ========== ========== ========== Basic and diluted earnings per share ..... $ .15 $ .02 $ .58 $ .11 ========== ========== ========== ==========
5. On April 25, 2002, the Board of Directors adopted a common share repurchase program. On May 23, 2002, the Board of Directors increased the aggregate number of common shares available for repurchase under the repurchase program to 700,000 common shares from 600,000 common shares previously approved. The repurchase program expires on December 31, 2003. Through September 30, 2003, we have repurchased 699,465 common shares at an average price per share of $5.00 under this program. Repurchases were funded by cash flows from operations. 6. We have three reportable business segments: property/casualty insurance, insurance agency and municipal code publishing. The following provides financial information regarding our reportable segments. There are intersegment management and commission fees. The allocations of certain general expenses within segments are based on a number of assumptions, and the reported operating results would change if different assumptions were applied. Depreciation and capital expenditures are not considered material.
September 30, 2003 ----------------------------------------------------------------------------------------------- Municipal Property/Casualty Insurance Code All Consolidated Insurance Agency Publishing Other Totals ----------------------------------------------------------------------------------------------- Revenues from external customers $ 42,953,375 $ 350,175 $ 2,669,797 $ 227,112 $ 46,200,459 Intersegment revenues .......... 4,410 300,657 -- 74,430 379,497 Interest revenue ............... 1,210,274 7 -- 27,222 1,237,503 Interest expense ............... 443 -- 1,521 334,346 336,310 Depreciation and amortization .. 133,393 -- 67,490 95,297 296,180 Segment profit (loss) .......... 4,451,426 260,682 137,823 (482,119) 4,367,812 Income tax expense (benefit) ... 1,275,109 89,570 82,221 (383,891) 1,063,009 Segment assets ................. 94,749,527 499,128 2,261,232 7,987,551 105,497,438
9 BANCINSURANCE CORPORATION AND SUBSIDIARIES
September 30, 2002 ----------------------------------------------------------------------------------------------- Municipal Property/Casualty Insurance Code All Consolidated Insurance Agency Publishing Other Totals ----------------------------------------------------------------------------------------------- Revenues from external customers $ 31,364,820 $ 7,716 $ 2,259,726 $ 2,008 $ 33,634,270 Intersegment revenues .......... 4,410 151,431 -- 83,430 239,271 Interest revenue ............... 942,467 102 -- 18,294 960,863 Interest expense ............... 15,359 -- 3,642 52,166 71,167 Depreciation and amortization .. 85,788 26,000 74,392 46,296 232,476 Segment profit (loss) .......... 3,392,171 (120,563) 368,016 (514,037) 3,125,587 Income tax expense (benefit) ... 910,045 20,265 138,600 (246,699) 822,211 Segment assets ................. 61,344,048 1,029,896 3,004,891 2,033,690 67,412,525
September 30, September 30, 2003 2002 ----------------------------------- Revenue Total revenue for reportable segments ............................ $ 46,200,459 $ 33,634,270 Interest revenue ................................................. 1,237,503 960,863 Elimination of intersegment revenue .............................. (379,497) (239,271) ------------- ------------- Total consolidated revenue ....................................... $ 47,058,465 $ 34,355,862 ============= ============= Profit Total profit for reportable segments ............................. $ 4,849,931 $ 3,639,624 Other loss ....................................................... (482,119) (514,037) Elimination of intersegment profit ............................... (379,497) (239,271) ------------- ------------- Income before federal income tax expense and cumulative effect of change in accounting principle ................................. $ 3,988,315 $ 2,886,316 ============= ============= Assets Total assets for reportable segments ............................. $ 97,509,887 $ 65,378,835 Other assets ..................................................... 7,987,551 2,033,690 Elimination of intersegment receivables .......................... (576,756) (6,003,762) ------------- ------------- Consolidated assets .............................................. $ 104,920,682 $ 61,408,763 ============= =============
7. We have three equity incentive plans which allow for granting options to certain employees and directors of the Company. We account for compensation expense related to such transactions using the "intrinsic value" based method under the provisions of the Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and its related interpretations. In December 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123, to provide alternative methods for transitioning (on a voluntary basis) to the "fair value" based method of accounting for stock-based compensation and to require prominent disclosures about the method of accounting used for stock-based employee compensation and the effect of the method used on reported results. The "fair value" of the third quarter 2002 option grants (no options were granted in the third quarter of 2003) and year to date 2003 and 2002 option grants were estimated on the date of the grant using the Black Scholes option-pricing model with the following weighted average assumptions:
For the three months For the nine months ended ended September 30, September 30, 2003 2002 2003 2002 ----- ------ ------- ------ Fair value of options granted........................... - $ 4.50 $ 5.23 $ 4.63 Expected volatility..................................... - 28.97% 27.70% 28.97% Risk free interest rate................................. - 3.86% 2.75% 4.04% Expected life (in years)................................ - 6 6 6
10 BANCINSURANCE CORPORATION AND SUBSIDIARIES As we account for stock options using the "intrinsic value" based method, no compensation cost has been recognized in net income for the equity incentive plans. Had we accounted for all stock-based employee compensation under the "fair value" based method (SFAS No. 123), net income would have been reduced as follows:
For the three months ended For the nine months ended September 30, September 30, 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Net income, as reported .................. $ 750,175 $ 92,670 $2,925,306 $ 582,247 Deduct: Total stock-based employee compensation expense determined under "fair value" based method for all awards, net of related tax effects.. -- 9,510 17,807 13,190 ---------- ---------- ---------- ---------- Pro forma net income ..................... $ 750,175 $ 83,160 $2,907,499 $ 569,057 ========== ========== ========== ==========
Basic and diluted earnings per share would not be impacted if the "fair value" based method had been applied to all awards. Compensation expense in the pro forma disclosure is not indicative of future amounts as options vest over several years and additional grants are generally made each year. 8. In December 2002, we organized BIC Statutory Trust I ("BIC Trust I"), a Connecticut special purpose business trust, which issued $8,000,000 of floating rate trust preferred capital securities in an exempt private placement transaction. In September 2003, we organized BIC Statutory Trust II ("BIC Trust II"), a Delaware special purpose business trust, which issued $7,000,000 of floating rate trust preferred capital securities in an exempt private placement transaction. BIC Trust I and BIC Trust II were formed for the sole purpose of issuing and selling the floating rate trust preferred capital securities and investing the proceeds from such securities in junior subordinated debentures of the Company. In connection with the issuance of the trust preferred capital securities, the Company issued junior subordinated debentures of $8,248,000 and $7,217,000 to BIC Trust I and BIC Trust II, respectively. The floating rate trust preferred capital securities and the junior subordinated debentures have substantially the same terms and conditions. BIC Trust I and BIC Trust II distribute the interest received from the Company on the junior subordinated debentures to the holders of their floating rate trust preferred capital securities to fulfill their dividend obligations with respect to such trust preferred securities. BIC Trust I's floating rate trust preferred capital securities, and the junior subordinated debentures issued in connection therewith, pay dividends and interest, as applicable, on a quarterly basis at a rate equal to three month LIBOR plus four hundred basis points (5.14% at September 30, 2003), are redeemable at par on or after December 4, 2007 and mature on December 4, 2032. BIC Trust II's floating rate trust preferred capital securities, and the junior subordinated debentures issued in connection therewith, pay dividends and interest, as applicable, on a quarterly basis at a rate equal to three month LIBOR plus four hundred and five basis points (5.19% at September 30, 2003), are redeemable at par on or after September 30, 2008 and mature on September 30, 2033. Interest on the junior subordinated debentures is charged to income as it accrues. Interest expense related to the junior subordinated debentures for the three and nine months ended September 30, 2003 was $111,471 and $333,735, respectively. There was no interest expense related to the junior subordinated debentures for the three and nine months ended September 30, 2002. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"), which requires the consolidation of certain entities considered to be variable interest entities ("VIEs"). An entity is considered to be a VIE when it has equity investors who lack the characteristics of having a controlling financial interest, or its capital is insufficient to permit it to finance its activities without additional subordinated financial support. Consolidation of a VIE by an investor is required when it is determined that the investor will absorb a majority of the VIE's expected losses if they occur, receive a majority of the VIE's expected residual returns if they occur, or both. The Company adopted FIN 46 on July 1, 2003. Upon adoption, BIC Trust I was deconsolidated effective July 1, 2003 with prior periods reclassified in the consolidated financial statements. The deconsolidation did not have any impact on net income. In accordance with FIN 46, BIC Trust II was not consolidated upon formation in September 2003. In May 2003, the FASB issued No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which provides standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The statement is effective for financial instruments entered into or modified after May 31, 2003 and for pre-existing instruments at the beginning of the first interim period beginning after June 15, 2003. The Company adopted SFAS No. 150 on July 1, 2003, with no impact on the consolidated financial statements. 11 BANCINSURANCE CORPORATION AND SUBSIDIARIES Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Bancinsurance is a specialty property insurance holding company. We have three reportable business segments: property/casualty insurance, municipal code publishing and insurance agency. Property/Casualty Insurance. Our wholly owned subsidiary, Ohio Indemnity Company ("Ohio Indemnity"), is a specialty property insurance company. Our principal sources of revenue are premiums paid by insureds for insurance policies written by Ohio Indemnity. Ohio Indemnity, an Ohio corporation, is licensed in 47 states, the District of Columbia and for surplus lines in Texas. As such, Ohio Indemnity is subject to the regulations of the Department of Insurance of the State of Ohio (the "Department") and the regulations of each state in which it operates. The majority of Ohio Indemnity's premiums are derived from two distinct lines of business: (1) products designed for automobile lenders/dealers and (2) unemployment insurance protection and bail bond products. Our automobile lender/dealer group offers three types of products. First, ultimate loss insurance, a blanket vendor single interest coverage, is the primary product we offer to financial institutions nationwide. This product insures banks and financial institutions against damage to pledged collateral in cases where the collateral is not otherwise insured. An ultimate loss insurance policy is generally written to cover a lender's complete portfolio of collateralized personal property loans, typically automobiles. Second, creditor placed insurance is an alternative to our traditional blanket vendor single interest product. While both products cover the risk of damage to uninsured collateral in a lender's automobile loan portfolio, creditor placed insurance covers the portfolio through tracking individual borrower's insurance coverage. The lender purchases physical damage coverage for loan collateral after a borrower's insurance has lapsed. Third, our guaranteed auto protection insurance ("GAP") pays the difference or gap between the amount owed by the customer on a lease or loan contract and the amount of primary insurance company coverage in the event a vehicle is damaged beyond repair or stolen and never recovered. The GAP product is sold to automobile dealers, lenders and lessors who then sell coverage directly to the borrower at the time of purchasing or leasing an automobile. We offer three types of unemployment insurance protection products: (1) bonded service, (2) excess of loss and (3) mandated bonds. Our unemployment insurance protection products are utilized by not-for-profit entities which elect not to pay the unemployment compensation tax and instead reimburse the state unemployment agencies for benefits paid by the agencies to the entities' former employees. Certain national cost containment firms provide programs to ensure that reimbursing employers discharge their unemployment compensation commitments. Through its bonded service products, Ohio Indemnity bonds these national cost containment firms for their program service responsibilities. Ohio Indemnity also provides excess of loss coverage, under trust arrangements, to groups of not-for-profit entities that want to declare reimbursing status for their unemployment insurance obligations. We also underwrite state mandated surety bonds. Certain states require that reimbursing employers post a bond as a security for the performance of their reimbursing obligations. Ohio Indemnity provides this mandated bond on behalf of employers enrolled in the bonded service program. In addition to the unemployment insurance protection products, we provide bail bond coverage through an assumed reinsurance agreement for 15% participation, with other insurers assuming the remaining exposure. This agreement insures a bail bond company against losses arising from the nonperformance of bail requirements. Insurance Agency. In July 2002, we formed Ultimate Services Agency, LLC, an Ohio limited liability company ("USA"). We formed USA to act as an agency for placing property and casualty insurance policies offered and underwritten by Ohio Indemnity and by other property and casualty insurance companies. In the fourth quarter of 2002, we dissolved our wholly owned subsidiary, Paul Boardway and Associates, Inc., which previously acted as a property/casualty insurance agency. Municipal Code Publishing. Our wholly owned subsidiary, American Legal Publishing Corporation ("ALPC"), codifies, publishes and distributes ordinances for over 1,500 municipalities and counties nationwide in addition to state governments. Ordinance codification is the process of collecting, organizing and publishing legislation for state and local governments. 12 BANCINSURANCE CORPORATION AND SUBSIDIARIES SUMMARY RESULTS The following table sets forth period-to-period changes in selected financial data:
PERIOD TO PERIOD INCREASE (DECREASE) NINE MONTHS ENDED SEPTEMBER 30, 2002-2003 ----------------------------------- Amount % Change ----------------------------------- Net premiums earned .................................... $11,344,002 37.0% Net investment income .................................. 216,655 21.7% Net realized gain on investments ....................... 1,237,537 310.5% Total revenue .......................................... 12,702,603 37.0% Losses and loss adjustment expenses, net of reinsurance recoveries ........................................... 7,008,675 33.5% Operating expenses ..................................... 4,505,786 43.8% Interest expense ....................................... 265,143 372.6% Income before federal income taxes and cumulative effect of change in accounting principle ................... 1,101,999 38.2% Cumulative effect of change in accounting principle .... 1,481,858 100.0% Net income ............................................. 2,343,059 402.4%
The combined ratio, which is the sum of the loss ratio and the expense ratio, is the traditional measure of underwriting experience for insurance companies. The statutory combined ratio is the sum of the ratio of losses to premiums earned plus the ratio of statutory underwriting expenses to premiums written after reducing both premium amounts by dividends to policyholders. Statutory accounting principles differ in certain respects from accounting principles generally accepted in the United States ("GAAP"). Under statutory accounting principles, policy acquisition costs and other underwriting expenses are recognized immediately, not at the same time premiums are earned. To convert underwriting expenses to a GAAP basis, policy acquisition expenses are deferred and recognized over the period in which the related premiums are earned. Therefore, the a GAAP combined ratio is the sum of the ratio of losses to premiums earned plus the ratio of underwriting expenses to premiums earned. The following table reflects Ohio Indemnity's loss, expense and combined ratios on both a statutory and a GAAP basis for the nine months ended September 30:
2003 2002 ---- ---- Statutory: Loss ratio ...................... 70.0% 66.5% Expense ratio ................... 24.2% 28.7% ---- ---- Combined ratio .................. 94.2% 95.2% ==== ==== GAAP: Loss ratio ...................... 66.5% 68.2% Expense ratio ................... 27.9% 24.9% ---- ---- Combined ratio .................. 94.4% 93.1% ==== ====
RESULTS OF OPERATIONS SEPTEMBER 30, 2003 AS COMPARED TO SEPTEMBER 30, 2002 Premiums. Net premiums earned for the third quarter of 2003 increased 36.0% to $15,770,717 from $11,598,795 for the same quarter of 2002. On a year-to-date basis, net premiums earned increased 37.0% to $42,027,483 from $30,683,481 in the same nine-month period of 2002. We attribute these increases in net premiums earned primarily to growth in our lender/dealer business. 13 BANCINSURANCE CORPORATION AND SUBSIDIARIES Net premiums earned related to our ultimate loss and creditor placed insurance products increased 34.0% to $13,781,161 in the third quarter of 2003 from $10,284,910 in the third quarter of 2002. This increase included net premiums earned of $993,178 for creditor placed insurance products, which were introduced in the fourth quarter of 2002. On a year-to-date basis, net premiums earned for our ultimate loss and creditor placed insurance products increased 35.4% to $36,043,359 from $26,620,977 in the same period of 2002, including $3,895,719 for creditor placed insurance products for the nine months ended September 30, 2003. We attribute these increases primarily to new business growth in our creditor placed insurance products, new ultimate loss policies added during 2003, rate increases with existing ultimate loss customers and volume increases with existing ultimate loss customers. The increased volume in ultimate loss insurance was primarily caused by an increase in automobile lending by some of our large financial institution customers, driven by aggressive financing offers. Net premiums earned related to our GAP insurance products increased 143.9% to $621,616 in the third quarter of 2003 from $254,853 in the same period of 2002. On a year-to-date basis, GAP net premiums earned increased 187.0% to $1,730,329 from $602,909 in the same period of 2002. We attribute this growth to two existing large financial institution customers purchasing GAP coverage during 2003. Net premiums earned related to our unemployment insurance protection and bail bond products increased 29.2% to $1,367,940 in the third quarter of 2003 compared to $1,059,032 in the same period of 2002. On a year-to-date basis, unemployment insurance protection and bail bond net premiums earned increased 23.0% to $4,253,795 from $3,459,595 in the same period of 2002. We attribute this growth primarily to rate increases with existing customers and a new customer added during 2003. Net Investment Income. At September 30, 2003, our $75,062,045 investment portfolio is allocated among fixed income securities, common stock, preferred stock, short-term investments and other invested assets. We seek to invest in investment-grade obligations of states and political subdivisions because the majority of the interest income from such investments is tax-exempt and such investments have generally resulted in more favorable net yields. Net investment income increased 17.2% to $412,290 in the third quarter of 2003 from $351,881 in the third quarter of 2002. On a year-to-date basis, net investment income increased 21.7% to $1,217,287 from $1,000,632 during the same period of 2002. These increases were primarily the result of an increase in invested assets, which were partially offset by lower interest rates and investment yields. The effective duration of our fixed income portfolio at September 30, 2003 was 6.0 years. During the third quarter of 2003, we recorded a net realized gain on investments of $371,948 compared with a net realized loss on investments of $248,844 during the third quarter of 2002. On a year-to-date basis, we recorded a net realized gain on investments of $839,008 compared with net realized loss on investments of $398,529 during the same period of 2002. These increases in net realized gain on investments were primarily caused by the timing of the sale of individual securities. We generally decide whether to sell securities based upon investment opportunities and tax consequences. We regularly evaluate the quality of our investment portfolio. When we believe that a specific security has suffered an other-than-temporary decline in value, the difference between cost and estimated fair value is charged to income as a realized loss on investments. There were $13,238 and $62,566 in impairment charges included in net realized gain on investments for the three and nine months ended September 30, 2003, respectively. There were no impairment charges included in net realized loss on investments for the three and nine months ended September 30, 2002. For more information concerning impairment charges, see "Other-Than-Temporary Impairment of Debt and Equity Securities" below. Codification and subscription fees. ALPC's codification and subscription fees accounted for $913,121 of our revenues in the third quarter of 2003 and $745,017 of our revenues in the third quarter of 2002, an increase of 22.6%. On a year-to-date basis, codification and subscription fees increased 18.1% to $2,669,797 from $2,259,726 for the nine months ended September 30, 2002. These increases were primarily the result of new state, city and municipal customers added during the second half of 2002 and the provision of additional services, including specialized codification and integrated product offerings. Management Fees. We have an agreement with a cost containment service firm to control the unemployment compensation costs of certain non-profit employers. Pursuant to this agreement, we have issued a surety bond insuring the payment of certain reimbursable unemployment compensation benefits on behalf of the employers enrolled in this program. We hold certain monies allocated toward the payment of these benefits. Together with the cost containment service firm, we share any residual resulting from the development of benefits to be paid from the contract funds held on deposit. We record management fees in the period that the residual is shared with the cost containment service firm. Our management fees in the third quarter of 2003 decreased 74.7% to $45,319 from $178,826 in the third quarter of 2002. Management fees decreased 61.7% to $244,724 for the nine months ended September 30, 2003 from $638,692 a year ago. We attribute this decrease primarily to rising unemployment insurance protection obligations related to the increased level of unemployment. We expect management fees to vary from period to period depending on unemployment levels and claims experience. 14 BANCINSURANCE CORPORATION AND SUBSIDIARIES Other Income. Other income decreased 11.4% to $3,299 in the third quarter of 2003 from $3,725 in the third quarter of 2002. On a year-to-date basis, other income decreased 65.0% to $60,148 from $171,860 during the same period last year. The year-to-date decrease was primarily the result of releasing a $100,000 reserve during the first quarter of 2002, related to the dismissal of a dispute with an unaffiliated party. Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses represent claims associated with insured loss events and expenses associated with adjusting and recording policy claims, respectively. Losses and loss adjustment expenses increased 33.6% to $11,997,823 in the third quarter of 2003 from $8,979,573 in the same period of 2002. On a year-to-date basis, losses and loss adjustment expenses increased 33.5% to $27,931,640 from $20,922,965 in the same nine-month period of 2002. We attribute these increases in losses and loss adjustment expenses primarily to our lender/dealer business. Losses and loss adjustment expenses related to our ultimate loss and creditor placed insurance products increased 22.1% to $10,412,027 in the third quarter of 2003 from $8,525,313 in the third quarter of 2002. On a year-to-date basis, losses and loss adjustment expenses for our ultimate loss and creditor placed insurance products increased 25.8% to $24,613,889 from $19,567,494 in the same period of 2002. We attribute these increases primarily to our growth in premiums combined with higher frequency of losses and loss adjustment experience. With the continued slowdown in the U.S. economy and high consumer debt, financial institutions are experiencing a rise in delinquency dollars. As loan defaults, bankruptcies and automobile repossessions increased, we experienced a higher frequency of losses and loss adjustment experience. However, the increased frequency of losses and loss adjustment experience has been partially offset by a decrease in the severity of losses and loss adjustment experience. In 2003, prices for used cars have declined compared to 2002 because of large dealer/manufacturer incentives offered on new cars. As used car prices have declined, the severity of losses and loss adjustment experience decreased. Losses and loss adjustment expenses related to our GAP insurance products rose 453.1% to $1,088,842 in the third quarter of 2003 from $196,844 in the same period of 2002. On a year-to-date basis, GAP losses and loss adjustment expenses increased 173.4% to $1,932,133 from $706,660 in the same period of 2002. We attribute these increases in GAP losses and loss adjustment expenses primarily to our growth in GAP premiums combined with increased severity of GAP claims. The lower residual value for used automobiles contributed to the increased security of claims by creating a larger difference between the outstanding balance of a customer's loan or lease and the amount of primary insurance coverage. Losses and loss adjustment expenses related to our unemployment insurance protection and bail bond products increased 93.1% to $496,954 in the third quarter of 2003 from $257,416 in the same period of 2002. On a year-to-date basis, unemployment insurance protection and bail bond losses and loss adjustment expenses increased 113.6% to $1,385,618 from $648,811 in the same period of 2002. We attribute these increases in losses and loss adjustment expenses primarily to reserve strengthening and increased benefit payments associated with rising unemployment insurance obligations. We strengthened loss adjustment expense reserves due to persistent weakness in the national economy. For more information concerning losses and loss adjustment expenses, see "Losses and Loss Adjustment Expense Reserves" below. Operating Expenses. Our operating expenses consist of experience rating adjustments, commission expense, other insurance operating expenses, codification and subscription expenses and general and administrative expenses. Experience rating adjustments increased 94.5% in the third quarter of 2003 to $(56,140) from $(1,013,276) in the same quarter of 2002. On a year-to-date basis, experience rating adjustments increased 363.0% to $2,100,201 from $(798,689) in the same nine month period of 2002. These increases were primarily related to loss development in our lender/dealer products line. Experience rating adjustments are calculated and adjusted from period to period based on policy experience to date and premium growth. Management anticipates that experience rating adjustments may fluctuate in future quarters based upon this calculation. On both a quarterly and year-to-date basis, commission expense remained relatively constant compared to 2002 primarily due to ceding commissions associated with our creditor placed insurance product and commission rate adjustments. Other insurance operating expenses increased 4.3% to $1,259,660 in the third quarter of 2003 from $1,208,280 in the third quarter of 2002. Other insurance operating expenses increased 33.5% to $3,953,085 for the nine months ended September 30, 2003 from $2,961,806 for the same nine month period of 2002. We attribute these increases to higher premium taxes, salaries and benefits. Codification and subscription expenses incurred by ALPC increased 33.4% to $904,483 during the third quarter of 2003 from $678,079 in the same period of 2002. Codification and subscription expenses increased 34.1% to $2,530,466 during the first nine months of 2003 from $1,886,995 during the same nine month period of 2002. These increases were consistent with growth in codification and subscription revenues and were primarily attributable to increases in salaries, outside printing, supplies and consulting fees. General and administrative expenses decreased 25.7% to $271,425 in the third quarter of 2003 from $365,290 in the third quarter of 2002. General and administrative expenses decreased 8.8% to $798,692 in the first nine months of 2003 from $875,473 in the first nine months of 2002. This decrease was primarily attributable to decreases in auditing and consulting expenses which were partially offset by an increase in salaries and related benefits. 15 BANCINSURANCE CORPORATION AND SUBSIDIARIES Interest expense. Interest expense increased 274.1% to $117,119 for the three months ended September 30, 2003 from $31,304 for the three months ended September 30, 2002. Interest expense increased 372.6% to $336,310 for the nine months ended September 30, 2003 from $71,167 for the nine months ended September 30, 2002. These increases were primarily attributable to interest expense in 2003 related to the junior subordinated debentures that we issued in December 2002 in connection with our participation in a trust preferred securities transaction. See "Liquidity and Capital Resources." The increase in interest expense from the junior subordinated debentures was partially offset by lower borrowing levels on the Company's revolving credit line. Cumulative Effect of Change in Accounting Principle. Effective January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). Under SFAS 142, we no longer amortize goodwill and intangibles which have indefinite lives. SFAS 142 requires that we assess goodwill and intangibles with indefinite lives for impairment at least annually based on the fair value of the related reporting segment. We will perform our annual impairment assessment in the fourth quarter on an on-going basis, or earlier, if deemed necessary. As an initial step in the SFAS 142 implementation process, we assigned goodwill and intangibles to our property/casualty insurance, insurance agency and municipal code publishing business segments. Following such assignment, the fair value of each business segment was compared to its carrying value. Fair values were determined by discounting estimated future cash flows. Based on our impairment testing, a net after-tax impairment charge of $1,481,858 was recognized as a cumulative effect of the change in accounting principle in the first quarter of 2002. The impairment charge was associated with the August 1999 acquisition of Paul Boardway and Associates, Inc. We dissolved Paul Boardway and Associates, Inc. in the fourth quarter of 2002. As a result of the then pending dissolution, the remaining goodwill of $179,000 was recorded as a pre-tax impairment charge to income in the third quarter of 2002. Amortization expense related to definite-lived intangible assets was $18,629 and $55,888 in the third quarter and first nine months of 2003, respectively, compared with $18,629 and $61,611 in the third quarter and first nine months of 2002, respectively. Federal Income Taxes. In the third quarter of 2003, we recorded a provision of $177,681 for income taxes, as compared to a provision for income taxes of $21,953 in the third quarter of 2002. On a year-to-date basis, federal income tax expense increased 29.3% to $1,063,009 from $822,211 in the same nine-month period of 2002. The effective consolidated income tax rate was 19.1% and 19.2% in the third quarters of 2003 and 2002, respectively, and 26.7% and 28.5% for the first nine months of 2003 and 2002, respectively. GAAP Combined Ratio. Ohio Indemnity underwrites the Company's specialty insurance products. Our combined ratio was 94.4% for the nine months ended September 30, 2003 and 93.1% for the same nine month period of 2002. Our loss ratio declined to 66.5% for the nine months ended September 30, 2003 from 68.2% for the same nine month period of 2002, primarily because of the substantial growth in premiums and a decrease in the severity of losses associated with our ultimate loss and creditor placed insurance products. This decrease was partially offset by reserve strengthening in anticipation of higher losses in future quarters as a result of prolonged weakness in the national economy and recent automobile credit experience of Ohio Indemnity's customers. Our expense ratio increased to 27.9% for the nine months ended September 30, 2003 from 24.9% for the same nine month period of 2002, primarily as a result of the increase in the experience rating adjustment which was partially offset by the decrease in commission expense as a percentage of earned premium. LIQUIDITY AND CAPITAL RESOURCES Liquidity is a measure of our ability to generate sufficient cash flows to meet the short and long-term cash requirements of our business operations. The short-term cash requirements of our property/casualty business primarily consist of paying losses and loss adjustment expenses and day-to-day operating expenses. Those requirements are met through cash receipts from operations, which consist primarily of insurance premiums collected and investment income. Our investment portfolio is a source of additional liquidity through the sale of readily marketable fixed maturities, equity securities and short-term investments. After satisfying our cash requirements, excess cash flows from these underwriting and investment activities are used to build the investment portfolio and thereby increase future investment income. Cash flows provided by operating activities totaled $15,724,667 for the nine months ended September 30, 2003 compared to $3,079,233 during the same period of 2002. The increase was primarily the result of net premiums collected of $47,426,025 in the first nine months of 2003 which were 54.6% higher than the $30,675,327 of net premiums collected in the nine months ended September 30, 2002. 16 BANCINSURANCE CORPORATION AND SUBSIDIARIES We maintain a level of cash and liquid short-term investments which we believe will be adequate to meet our anticipated cash needs without being required to liquidate intermediate-term and long-term investments through the end of 2003. Because of the nature of the risks we insure, losses and loss adjustment expenses emanating from the insurance policies that we issue are characterized by relatively short settlement periods and quick development of ultimate losses compared to claims emanating from other types of insurance products. Therefore, we believe that we can estimate our cash needs to meet our losses and expenses through the end of 2003. Our investment portfolio is allocated among investment-grade fixed income securities, common stock, preferred stock, short-term investments and other invested assets. Fixed income securities constitute the largest allocation of our investment portfolio followed by short-term investments. At September 30, 2003, cash and short-term investments amounted to $29,859,361 or 38.1% of our total cash and invested assets. The fair values of our held to maturity fixed income securities are subject to market fluctuations but are carried on our balance sheet at amortized cost because we have the ability and intent to hold held to maturity fixed income securities to maturity date. Available for sale fixed income securities and equity securities are reported at fair value with unrealized gains or losses, net of applicable deferred taxes, reflected in accumulated other comprehensive income. Short-term investments are reported at cost, which approximates fair value. Interest rate risk is the risk that interest rates will change and cause a decrease in the value of an insurer's investments. We mitigate this risk by attempting to ladder the maturity schedule of our investments with the expected payouts of our liabilities. To the extent that liabilities come due more quickly than assets mature, we may have to sell assets prior to maturity and recognize a gain or loss. In December 2002, we organized BIC Statutory Trust I ("BIC Trust I"), a Connecticut special purpose business trust, which issued $8,000,000 of floating rate trust preferred capital securities in an exempt private placement transaction. In September 2003, we organized BIC Statutory Trust II ("BIC Trust II"), a Delaware special purpose business trust, which issued $7,000,000 of floating rate trust preferred capital securities in an exempt private placement transaction. BIC Trust I and BIC Trust II were formed for the sole purpose of issuing and selling the floating rate trust preferred capital securities and investing the proceeds from such securities in junior subordinated debentures of the Company. In connection with the issuance of the trust preferred capital securities, the Company issued junior subordinated debentures of $8,248,000 and $7,217,000 to BIC Trust I and BIC Trust II, respectively. The floating rate trust preferred capital securities and the junior subordinated debentures have substantially the same terms and conditions. BIC Trust I and BIC Trust II distribute the interest received from the Company on the junior subordinated debentures to the holders of their floating rate trust preferred capital securities to fulfill their dividend obligations with respect to such trust preferred securities. BIC Trust I's floating rate trust preferred capital securities, and the junior subordinated debentures issued in connection therewith, pay dividends and interest, as applicable, on a quarterly basis at a rate equal to three month LIBOR plus four hundred basis points (5.14% at September 30, 2003), are redeemable at par on or after December 4, 2007 and mature on December 4, 2032. BIC Trust II's floating rate trust preferred capital securities, and the junior subordinated debentures issued in connection therewith, pay dividends and interest, as applicable, on a quarterly basis at a rate equal to three month LIBOR plus four hundred and five basis points (5.19% at September 30, 2003), are redeemable at par on or after September 30, 2008 and mature on September 30, 2033. Interest on the junior subordinated debentures is charged to income as it accrues. As of September 30, 2003, we have a $13,000,000 unsecured revolving line of credit with a maturity date of June 30, 2006 with no outstanding balance. Effective October 20, 2003, the unsecured revolving line of credit was decreased to $10,000,000. The revolving line of credit provides for interest payable quarterly at an annual rate equal to 0.75% less than the prime rate. Under the terms of the revolving credit agreement our consolidated shareholders' equity must not fall below $20,000,000 and Ohio Indemnity's ratio of net premiums written to policyholders surplus must exceed 3:1. We do not anticipate receiving any cash dividends from Ohio Indemnity in 2003. As of September 30, 2003, we have sufficient capital resources available to fund interest payments and other administrative expenses. Our line of credit provides us with additional liquidity that could be used for short-term cash requirements if cash from operations and investments is not sufficient. All of our material capital commitments and financial obligations are reflected in our financial statements, except our risk on surety bonds and state mandated performance bonds, which are written in connection with our unemployment insurance protection products. Our financial statements include reserves for losses on this business for any claims filed and for an estimate of incurred but not reported losses. Such reserves were $1,057,000 and $888,000 at September 30, 2003 and December 31, 2002, respectively. Under applicable insurance statutes and regulations, Ohio Indemnity is required to maintain prescribed amounts of capital and surplus as well as statutory deposits with the appropriate insurance authorities. Ohio Indemnity is in compliance with all applicable statutory capital and surplus requirements. Ohio Indemnity's investments consist only of permitted investments under Ohio insurance laws. 17 BANCINSURANCE CORPORATION AND SUBSIDIARIES ALPC derives its funds principally from codification and subscription fees which are currently sufficient to meet its operating expenses. USA derives its funds principally from commission fees which are currently sufficient to meet its operating expenses. DISCLOSURE ABOUT MARKET RISK Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, commodity prices and other relevant market rate or price changes. Market risk is influenced by the volatility and liquidity in the markets in which the related underlying assets are traded. The following is a discussion of our primary market risk exposures and how we manage those exposures as of September 30, 2003. Our market risk sensitive instruments are entered into for purposes other than trading. The carrying value of our investment portfolio at September 30, 2003 was $75,062,045, 38.6% of which is invested in fixed income securities, 8.9% in common stock, 15.6% in preferred stock, 35.5% in short-term investments and 1.4% in other invested assets. At September 30, 2003, $11,000,000 or 93.8% of total preferred stock is invested in variable rate preferred stock with reset provisions at par. The primary market risks to the investment portfolio are equity price risk associated with investments in common stock and non-variable rate preferred stock and interest rate risk associated with investments in fixed income securities and fixed-rate short-term investments. We have no foreign exchange risk or direct commodity risk. For fixed income securities, our short-term liquidity needs and the potential liquidity needs of our business are key factors in managing our portfolio. The portfolio duration relative to the liabilities' duration is primarily managed through cash market transactions. With respect to our investment portfolio, during the quarter ended September 30, 2003, there were no material changes in our primary market risk exposures or in how these exposures were managed compared to the year ended December 31, 2002. We do not anticipate material changes in our primary market risk exposures or in how these exposures are managed in future reporting periods based upon what is known or expected to be in effect during future reporting periods. TRENDS The Company's results of operations have historically varied from quarter to quarter principally because of fluctuations in underwriting results, and we expect this trend to continue. The majority of our revenues are dependent on the demand for our customers' automobile financing programs. Increased automobile sales generally cause increased demand for automobile financing and our products. An increase in automobile lending, driven by continued aggressive financing offers by some of our larger financial institution customers, helped lender/dealer premium growth during the first three quarters of 2003. We anticipate that as financing incentives are phased-out, consumer spending on automobiles may decline. In such event, we would anticipate that automobile lending may also decrease and cause a decline in the demand for our automobile lender/dealer products. Although the economy has shown signs of recovery in the third quarter of 2003, financial institutions are continuing to experience a rise in delinquency dollars due to continued corporate downsizing and high consumer debt. Increased incentives being offered on new cars by dealers and manufacturers have depressed the value of the used car market, although there were signs late in the third quarter of 2003 that used car prices are stabilizing. If used car prices continue to decline, we would anticipate an increase in the severity of losses and loss adjustment experience for our GAP product and a decrease in the severity of loss and loss adjustment experience for our ultimate loss insurance and creditor placed insurance products. If loan defaults, bankruptcies and automobile repossessions continue to increase in frequency and benefit charges associated with rising unemployment insurance protection obligations increase, we would anticipate an increase in the frequency of losses and loss adjustment experience in the fourth quarter of 2003. In addition, ALPC's municipal code publishing fees may decline due to state and local government budget reductions associated with current economic conditions. Our outlook for the remainder of 2003 remains cautious. FORWARD-LOOKING INFORMATION Certain statements made in this report are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These statements include certain discussions relating to future revenue, underwriting income, premium volume, investment income and other investment results, business strategies, profitability, liquidity, capital adequacy, anticipated capital expenditures and business relationships, as well as any other statements concerning the year 2003 and beyond. The forward-looking statements involve risks and uncertainties that may cause results to differ materially from those anticipated in those statements. Factors that might cause results to differ from those anticipated include, without limitation, changes in underwriting results affected by adverse economic conditions, fluctuations in the investment markets, changes in the retail marketplace, changes in the laws of regulations affecting the operations of the company, changes in the business tactics or strategies of the company, the financial condition of the 18 BANCINSURANCE CORPORATION AND SUBSIDIARIES company's business partners, changes in market forces, litigation and the other risk factors that have been identified in the company's filing with the SEC, any one of which might materially affect the operations of the company. Any forward-looking statements speak only as of the date made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made. INFLATION We do not consider the impact of inflation to be material in the analysis of our overall operations. INSURANCE REGULATORY MATTERS The NAIC has developed a risk-based capital measurement formula to be applied to all property/casualty insurance companies. The risk-based capital measurement formula has been enacted into the Ohio Revised Code. This formula calculates a minimum required statutory net worth based on the underwriting, investment, credit, loss reserve and other business risks inherent in an individual company's operations. Under the current formula, any insurance company which does not meet the applicable risk-based capital measurement threshold could be forced to reduce the scope of its operations and ultimately could become subject to statutory receivership proceedings. Based on our analysis, our statutory net worth is in excess of the applicable thresholds and no corrective action is necessary. CRITICAL ACCOUNTING POLICIES Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, revenues, liabilities and expenses and related disclosures of contingent assets and liabilities. We regularly evaluate these estimates, assumptions and judgments, including those related to insurance revenue and expense recognition, asset impairment, loss reserves and valuation and impairment of intangible assets and goodwill. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies require significant judgments and estimates in the preparation of our consolidated financial statements. OTHER-THAN-TEMPORARY IMPAIRMENT OF DEBT AND EQUITY SECURITIES We continually monitor the difference between our cost and the estimated fair value of our investments, which involves uncertainty as to whether declines in value are temporary in nature. If we believe a decline in the value of a particular available for sale investment is temporary, we record the decline as an unrealized loss in our shareholders' equity. If we believe the decline in any investment is "other-than-temporarily impaired," we write down the carrying value of the investment and record a realized loss on our consolidated statement of income. Our assessment of a decline in value includes our current judgment as to the financial position and future prospects of the entity that issued the investment security. If that judgment changes in the future, we may ultimately record a realized loss after having originally concluded that the decline in value was temporary. The following table summarizes the total pre-tax gross unrealized loss recorded in our shareholders' equity, by invested asset class, at September 30, 2003 and December 31, 2002.
September 30, December 31, 2003 2002 ----------------------------- Fixed maturities: U.S. Treasury securities and obligations of U.S. Government corporations and agencies ............................................ $ 13,241 $ -- Obligations of states and political subdivisions ........................ 130,536 37,918 Asset-backed securities ................................................. 569 -- Equity securities: Financial services ...................................................... 5,833 -- Industrial and miscellaneous ............................................ 199,380 215,279 -------- -------- $349,559 $253,197 ======== ========
19 BANCINSURANCE CORPORATION AND SUBSIDIARIES At September 30, 2003, we did not own any material non-investment-grade securities. We believe that a high quality investment portfolio is more likely to generate a stable and predictable investment return. Aside from interest rate risk, we do not believe a material risk, relative to earnings or liquidity, is inherent in holding investment-grade securities. The following table summarizes, for all securities in an unrealized loss position at September 30, 2003, the estimated fair value and pre-tax gross unrealized loss by length of time those securities have been continuously in an unrealized loss position.
Gross Estimated Unrealized Fair Value Loss ------------------------------ Fixed maturities: 0-6 months ...................................................... $ 7,753,542 $ 51,292 7-12 months ..................................................... 1,672,127 18,581 Greater than 12 months .......................................... 1,871,174 74,473 ----------- ----------- Total fixed maturities .................................... 11,296,843 144,346 ----------- ----------- Equities: 0-6 months ...................................................... 320,970 74,939 7-12 months ..................................................... 159,060 44,012 Greater than 12 months .......................................... 332,190 86,262 ----------- ----------- Total equities ............................................ 812,220 205,213 ----------- ----------- Total ..................................................... $12,109,063 $ 349,559 =========== ===========
Based on our evaluation, we do not believe that any of the above securities have suffered an other-than-temporary decline in value as of September 30, 2003. However, additional impairments within the portfolio during the remainder of 2003 are possible if current economic and financial conditions worsen. The following table presents information regarding our fixed maturity investments, by remaining period to maturity date, that were in an unrealized loss position at September 30, 2003.
Amortized Estimated Cost Fair Value ------------------------------ Remaining period to maturity date: One year or less .................................................. $ -- $ -- Greater than one year but less than or equal to five years ........ 2,602,860 2,598,717 Greater than five years but less than or equal to ten years ....... 1,606,939 1,579,959 Greater than ten years ............................................ 5,532,754 5,420,100 ----------- ----------- Total ........................................................... 9,742,553 9,598,776 Asset-backed securities ........................................... 1,698,636 1,698,067 ----------- ----------- Total ........................................................... $11,441,189 $11,296,843 =========== ===========
The following discussion summarizes our process of reviewing our investments for possible impairment. Fixed Maturities and Redeemable Preferred Stock. On a monthly basis, we review our fixed maturities and redeemable preferred stock investments for impairment. We consider the following factors when evaluating potential impairment: - the length of time and extent to which the estimated fair value has been less than book value; - the degree to which any appearance of impairment is attributable to an overall change in market conditions (e.g., interest rates); 20 BANCINSURANCE CORPORATION AND SUBSIDIARIES - the degree to which an issuer is current or in arrears in making principal and interest/dividend payments on the securities in question; - the financial condition and short-term prospects of the issuer, including any specific events that may influence the issuer's operations and its ability to make future scheduled principal and interest payments on a timely basis; - the independent auditor's report on the issuer's most recent financial statements; - buy/hold/sell recommendations of investment advisors and analysts; - relevant rating history, analysis and guidance provided by rating agencies and analysts; and - our ability and intent to hold the security for a period of time sufficient to allow for recovery in the market value. Common Stock and Non-redeemable Preferred Stock. On a monthly basis, we review our common stock and non-redeemable preferred stock investments for impairment. We consider the following factors when evaluating potential impairment: - the length of time and extent to which the estimated fair value has been less than book value; - whether the decline appears to be related to general market or industry conditions or is issuer-specific; - our ability and intent to hold the security for a period of time sufficient to allow for recovery in the market value; - the financial condition and short-term prospects of the issuer, including any specific events that may influence the issuer's operations; - the recent income or loss of the issuer; - the independent auditor's report on the issuer's most recent financial statements; - buy/hold/sell recommendations of investment advisors and analysts; and - rating agency announcements. In addition to the monthly valuation procedures described above, we continually monitor developments affecting those invested assets, paying particular attention to events that might give rise to impairment write-downs. There were $13,238 and $62,566 in impairment charges included in net realized gain on investments for the three and nine months ended September 30, 2003, respectively. There were no impairment charges included in net realized loss on investments for the three and nine months ended September 30, 2002. Included in our $371,948 of net realized gain on investments during the third quarter of 2003 were aggregate losses of $6,670 on $205,800 in sales of fixed maturity securities. We realized aggregate losses of $39,433 in the third quarter of 2003 on $179,842 in sales of equity securities. Although we had the ability to continue holding these investments, our intent to hold them changed in 2003 due primarily to decisions to modify our asset allocation and duration within the portfolio to lessen exposure to particular credit industry or tax considerations. None of these securities were sold out of necessity to raise cash. The size of our investment portfolio provides us with flexibility in determining which individual investments should be sold to achieve our primary investment goals of assuring our ability to meet our commitments to policyholders and other creditors and maximizing our investment returns. In order to meet the objective of maintaining a flexible portfolio that can achieve these goals, our equity and a majority of our fixed maturity investments are classified as available-for-sale. We continually evaluate these securities, and our purchases and sales of investments are based on our cash requirements, the characteristics of our insurance liabilities and current market conditions. At the time we determine an other-than-temporary impairment in the value of a particular investment has occurred, we consider the current facts and circumstances and make a decision to either record a write-down in the carrying value of the security or sell the security; in either case, recognizing a realized loss. LOSSES AND LOSS ADJUSTMENT EXPENSE RESERVES Our projection of ultimate loss and loss adjustment expense ("LAE") reserves are estimates of future events, the outcomes of which are unknown to us at the time the projection is made. Considerable uncertainty and variability are inherent in the estimation of loss reserves. As a result, it is possible that actual experience may be materially different than the estimates reported. As such, we cannot guarantee that future experience will be as expected or recorded by us. In establishing our September 30, 2003 reserves, we tested our data for reasonableness, such as ensuring there are no case outstanding reserves on closed claims, and consistency with data used in our previous estimates. We found no material discrepancies or inconsistencies in our data. Our estimates of ultimate loss are based on historical loss development experience. In using this historical information, we assume that past loss development is predictive of future development. The majority of our losses are short-tail in nature and adjustments to reserve amounts occur quickly. 21 BANCINSURANCE CORPORATION AND SUBSIDIARIES Our estimates allow for changes in claims and underwriting expectations, as now known or anticipated, which may impact the level of required reserves or the emergence of losses. However, we do not anticipate any extraordinary changes in the legal, social or economic environments that could affect the ultimate outcome of claims or the emergence of claims from causes not currently recognized in our historical data. Such extraordinary changes or claims emergence may impact the level of required reserves in ways that are not presently quantifiable. Thus, while we believe our reserve estimates are reasonable given the information currently available, actual emergence of losses could deviate from amounts recorded by us. We conduct a reserve study using historical loss and loss adjustment expenses by product line or coverage within product line. We compute a range of reasonable estimates as well as select an estimate of indicated reserves. The indicated range includes estimates of expected losses and loss adjustment expenses given the information currently available to us. Our indicated reserve range for loss and LAE is $12.8 million to $17.0 million. As our September 30, 2003 gross reserve of $14.9 million falls within this range, we believe it is a reasonable provision for our unpaid loss and LAE obligations as of September 30, 2003. Our reserves reflect anticipated salvage and subrogation, included as a reduction to loss reserves in the amount of $207,444. We record reserves on an undiscounted basis. We do not provide coverage that could reasonably be expected to produce asbestos and/or environmental liability claims activity or material levels of exposure to claims-made extended reporting options. We prepared our analysis based on each category of our business. The first category is ultimate loss collateral protection provided to banks on automobile loans. Ultimate loss insurance coverage is provided in two forms. One is standard coverage and the other is aggregate limit coverage in which the policy runs at a maximum loss ratio. The second category is creditor placed insurance, an alternative coverage to our ultimate loss blanket vendor single interest product. The third category is GAP coverage. Fourth is unemployment insurance protection coverage to cover the unemployment exposure on non-profit organizations. Our premiums written in the nine months ended September 30, 2003 are summarized in the following table:
Category Written Premium -------- --------------- Direct ........ $ 63,975,659 Assumed ....... 228,109 Ceded ......... (15,064,533) ------------ $ 49,139,235
We prepared our estimates of the gross and net loss and allocated LAE (expenses that can be specifically assigned to a particular claim) liabilities using loss development triangles for each of our principal insurance products: - Ultimate Loss Insurance - non-aggregate limit - Ultimate Loss Insurance - aggregate limit - Creditor Placed Insurance - GAP Insurance - Unemployment Insurance Protection Our reserve for these independently estimated principal insurance products comprise the majority of our total recorded loss and allocated LAE reserves as of September 30, 2003 on a gross and net of reinsurance basis. We prepared independent estimates for unallocated LAE reserves (expenses associated with adjusting and recording policy claims, other than those included in allocated LAE). Annual accident year loss development triangles were used to estimate ultimate loss and allocated LAE for the ultimate loss non-aggregate limit policies and creditor placed, GAP and unemployment insurance protection policies. Our data for the ultimate loss aggregate limit policies consisted of premium and loss data and maximum loss ratio by insured bank. This data was used to determine the required reserve under the maximum loss ratio. Historical "age-to-age" loss development factors ("LDF") were calculated to measure the relative development of an accident year from one maturity point to the next. We then selected appropriate age-to-age LDFs based on these historical factors. We used the selected factors to project the ultimate losses. We prepared our estimate of unallocated LAE reserves using the relationship of calendar year unallocated LAE payments to calendar year loss payments. Our selected unallocated LAE factor of 3% was selected judgmentally based on a review of historical unallocated LAE-to-loss payments from 1998 to 2002. The incurred but not reported ("IBNR") reserve is then split into IBNR on known claims and IBNR on claims yet to be reported (pure IBNR). This is based on our assumption that all of the unemployment insurance protection reserve is 22 BANCINSURANCE CORPORATION AND SUBSIDIARIES pure IBNR and the ultimate loss, creditor placed and GAP policies will have a one week lag in claim reporting. The unallocated LAE factor is applied to 50% of pure IBNR reserves and 50% of the remaining reserves on the premise that half of our unallocated LAE costs are incurred when the claim is reported and the other half when the claim is closed. INSURANCE REVENUE AND EXPENSE RECOGNITION Premiums for property and casualty related coverages, net of premium ceded to reinsurers, are recognized as income over the policy period in proportion to the risk assumed. Policy acquisition costs, primarily commission expenses and premium taxes, are capitalized and expensed over the terms of the related policies on the same basis as the related premiums are earned. Selling and administrative expenses that are not primarily related to premiums written are expensed as incurred. CODIFICATION AND SUBSCRIPTION REVENUE AND EXPENSE RECOGNITION Revenue from municipal code contracts is recognized on the percentage-of-completion method: completion is measured based on the percentage of direct labor costs incurred to date compared to estimated direct labor costs for each contract. While we use available information to estimate total direct labor costs on each contract, actual experience may vary from estimated amounts. Under this method, the costs incurred and the related revenues are included in the income statement as work progresses. Adjustments to contract cost estimates are made in the periods in which the facts which require such revisions become known. If a revised estimate indicates a loss, such loss is provided for in its entirety. The amount by which revenues are earned in advance of contractual collection dates is an unbilled receivable and the amount by which contractual billings exceed earned revenues is deferred revenue which is carried as a liability. STOCK OPTIONS We account for compensation expense for stock options under the "intrinsic value" based method in accordance with the provisions of Accounting Principles Board Opinion No. 25. Accordingly, no compensation cost has been recognized for the stock option plans. INTANGIBLE ASSETS (GOODWILL) As required by SFAS No. 142, we ceased amortizing goodwill effective January 1, 2002. Based on the impairment test required by SFAS No. 142 that we conducted in the quarter ended March 31, 2002, a non-recurring, after-tax charge of $1,481,858 was taken against income and is reported as cumulative effect of change in accounting principle in the income statement. As of September 30, 2003, our remaining goodwill balance was $753,737. SPECIAL PURPOSE VEHICLES OR OFF BALANCE SHEET BUSINESS ARRANGEMENTS We do not utilize any special purpose financing vehicles. We do not have any off-balance sheet arrangements that either have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is considered material. We hold no fair value contracts for which a lack of marketplace quotations would necessitate the use of fair value techniques. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this item is included under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Disclosure About Market Risk." ITEM 4. CONTROLS AND PROCEDURES With the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that such disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that material information relating to the Company and its consolidated subsidiaries is made known to them, particularly during the period for which our periodic reports, including this report, are being prepared. In addition, there were no changes during the period covered by this report in our internal control over financial reporting (as defined in Rules 13a-15 and 15d-15 of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 23 BANCINSURANCE CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 4(a)* Sixth Amendment to Credit Agreement dated October 20, 2003 by and among Fifth Third Bank, Central Ohio, Bancinsurance Corporation and American Legal Publishing Corporation. 4(b)* Indenture dated as of September 30, 2003 by and between Bancinsurance Corporation and JPMorgan Chase Bank. 4(c)* Amended and Restated Declaration of Trust dated as of September 30, 2003 by and among Bancinsurance Corporation, JPMorgan Chase Bank, Chase Manhatten Bank USA, National Association, John Sokol, Si Sokol and Sally Cress. 4(d)* Guarantee Agreement dated as of September 30, 2003 by and between Bancinsurance Corporation and JPMorgan Chase Bank. 31.1* Certification of Principal Executive Officer Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K The Company furnished a Form 8-K, dated July 30, 2003, on July 31, 2003 to report the issuance of a press release by the Company announcing results of operations for the second quarter ended June 30, 2003. No other reports on Form 8-K were filed during the third quarter of 2003; however, The Company furnished a Form 8-K, dated October 1, 2003, on October 1, 2003 to report the issuance of a press release by the Company announcing that it raised $7,000,000 of capital through the issuance of floating rate trust preferred securities by BIC Statutory Trust II, a special purpose business trust subsidiary formed by the Company. The Company furnished a Form 8-K, dated October 29, 2003, on October 29, 2003 to report the issuance of a press release by the Company announcing results of operations for the third quarter ended September 30, 2003. - ----------------- * Filed with this Report. 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BANCINSURANCE CORPORATION ------------------------- (Registrant) Date: November 13, 2003 By: /s/ Si Sokol ---------------------------------------------- Si Sokol Chairman and Chief Executive Officer (Principal Executive Officer) Date: November 13, 2003 By: /s/ Sally J. Cress ---------------------------------------------- Sally J. Cress Treasurer and Secretary (Principal Financial and Accounting Officer) 25 EX-4.A 3 l03799aexv4wa.txt EXHIBIT 4(A) EXHIBIT 4(a) SIXTH AMENDMENT TO CREDIT AGREEMENT This Sixth Amendment to the Credit Agreement (the "Amendment") is entered as of this 20th day of October, 2003, by and between FIFTH THIRD BANK, CENTRAL OHIO, an Ohio banking corporation (the "Bank"), BANCINSURANCE CORPORATION, an Ohio corporation (the "Borrower") and AMERICAN LEGAL PUBLISHING CORPORATION, an Ohio corporation (the "Guarantor"). WHEREAS, Bank and Borrower entered into that certain Credit Agreement, dated as of January 25, 1993, as amended by the First Amendment thereto, dated November 5, 1993, the Second Amendment thereto, dated October 19, 1994, the Third Amendment thereto, dated November 24, 1999, the Fourth Amendment thereto dated December 11, 2000 and the Fifth Amendment thereto dated July 1, 2002 (said Credit Agreement, as amended, the "Agreement"); WHEREAS, Borrower executed and delivered to Bank a Revolving Note, dated January 25, 1993, in the original principal amount of $6,000,000 (the "Note"); WHEREAS, the terms of the Note were amended and restated pursuant to Amended and Restated Revolving Notes, dated November 5, 1993, October 19, 1994, July 19, 1995, June 4, 1996, July 17, 1997, September 1, 1998, November 24, 1999, December 11, 2000 and July 1, 2002; as of the last amendment and restatement of the Note, the principal amount of the same is $13,000,000; WHEREAS, pursuant to letter agreement dated November 12, 2002, Bank consented to the dissolution of Paul Boardway & Associates, Inc., a New York corporation, a Guarantor pursuant to the Fifth Amendment to Credit Agreement, and Borrower affirmed its obligations under the Credit Agreement and Revolving Note each as amended to the date thereof and defined in the letter agreement, and Guarantor confirmed its obligations under the Unconditional Guaranty of Payment and Performance dated July 1, 2002; and WHEREAS, Borrower, Bank and Guarantor desire to amend the Agreement and the Note to extend the term thereof and to decrease the principal amount of the Note subject to the terms and conditions set forth herein; NOW THEREFORE, intending to be legally bound, the parties hereto agree as follows: 1. Amendments. (a) Section 2. Subsections 2.1(a), 2.1(b) and 2.1(c) of the Agreement are hereby amended and restated their entirety to read as follows: 2.1 Revolving Credit Loans. (a) Subject to the terms and conditions hereof, Bank hereby extends to Borrower a line of credit facility (the "Facility") under which Bank will make loans (the "Revolving Loans") to Borrower in an aggregate amount to not exceed $10,000,000. Bank may create and maintain reserves from time to time based on such credit considerations as Bank may deem appropriate. Borrower may borrow, prepay (without penalty or charge) and reborrow under the Facility, provided that the principal amount of all Revolving Loans outstanding at any one time under the Facility will not exceed $10,000,000. If the amount of the Revolving Loans outstanding at any time under the Facility exceeds such amount, Borrower shall immediately pay the amount of such excess to Bank in cash. (b) Borrower may request a Revolving Loan by written or telephone notice to Bank. Bank will make Revolving Loans by crediting the amount thereof to Borrower's account at Bank. Loan proceeds will be used for working capital purposes. (c) On the date of execution of the Sixth Amendment to Credit Agreement, Borrower shall duly execute and deliver to Bank an amended and restated Revolving Note in the form attached as Exhibit 2.1 to the Amendment, in the principal amount of $10,000,000, bearing interest as specified in such Amended and Restated Revolving Note (the "Revolving Note") and such Amended and Restated Revolving Note will substitute for the Note most recently executed by Borrower on July 1, 2002. (b) Section 2, Subsection 2. 1 (d)(i), first sentence is hereby amended and restated in its entirety to read as follows: "The term of the Facility will expire on June 30, 2007, and the Revolving Note will become payable in full on that date." (c) Section 2, Subsection 2.1 (d)(ii), first sentence is hereby amended by deleting "June 30, 2003" and substituting "June 30, 2004" in lieu thereof. 2. Representations, Warranties and Covenants of Borrower and Guarantor. To induce Bank to enter into this Amendment, Borrower and Guarantor represent and warrant as follows: (a) The representations and warranties of Borrower contained in Section 3 of the Agreement are deemed to have been made again on and as of the date of execution of this Amendment, and are true and correct as of the date of execution hereof. (b) No Event of Default (as such term is defined in Section 6 of the Agreement) or event or condition which, with the lapse of time or giving of notice or both, would constitute an Event of Default exists on the date hereof. (c) The person executing this Amendment, the Revolving Note and the hereinafter defined Guaranty, is a duly elected and acting officer of Borrower or Guarantor, as appropriate, and is duly authorized by the Board of Directors of Borrower, or Guarantor, as appropriate, to execute and deliver this Amendment, such Revolving Note or Guaranty on behalf of Borrower, or Guarantor, as appropriate. 3. Conditions. Bank's obligations under this Amendment are subject to the following conditions: (a) Borrower shall have executed and delivered to Bank the Amended and Restated Revolving Note in the form attached hereto as Exhibit 2. 1. (b) Guarantor shall have executed and delivered to Bank the Guaranty in the form attached hereto as Exhibit 5. 1. (c) The representations and warranties of Borrower and Guarantor in Section 2 hereof shall be true and correct on the date of execution of this Amendment. (d) On or before November 1, 2003, Borrower shall have delivered to Bank a resolution of the directors of Borrower in a form acceptable to Bank ratifying and approving the appropriate officer's execution of this Amendment and the Revolving Note. (e) On or before November 1, 2003, the Guarantor shall have delivered to Bank a resolution of the directors of Guarantor in a form acceptable to Bank ratifying and approving the appropriate officer's execution of this Amendment and the Guaranty. 4. General. (a) Except as expressly modified hereby, the Agreement remains unaltered and in full force and effect. Borrower acknowledges that Bank has made no oral representations to Borrower with respect to the Agreement and this Amendment thereto and that all prior understandings between the parties are merged into the Agreement as amended by this writing. All Loans outstanding on the date of execution of this Amendment shall be considered for all purposes to be Loans outstanding under the Agreement as amended by this Amendment. (b) Capitalized terms used and not otherwise defined herein will have the meanings set forth in the Agreement. (c) Nothing contained herein will be construed as waiving any default or Event of Default under the Agreement or will affect or impair any right, power or remedy of the Bank under or with respect to the Loans, the Agreement, as amended, the Note, as amended and restated, or any agreement or instrument guaranteeing, securing or otherwise relating to the Loans. (d) This Amendment shall be considered an integral part of the Agreement, and all references in the Agreement itself or any document referring thereto shall, on and after the date of execution of this Amendment, be deemed to be references to the Agreement as amended by this Amendment. (e) This Amendment will be binding upon and inure to the benefit of Borrower and Bank and their respective successors and assigns. (f) All representations, warranties and covenants made by Borrower in the Agreement and herein will survive the execution and delivery of this Amendment. (g) This Amendment will, in all respects, be governed and construed in accordance with the laws of the State of Ohio. (h) This Amendment may be executed in one or more counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument. (i) Borrower authorizes any attorney of record to appear for it in any court of record in the State of Ohio, after an Obligation becomes due and payable whether by its terms or upon default, waives the issuance and service of process, releases all errors and rights of appeal, and confesses a judgment against it in favor of the holder of such Obligation, for the principal amount of such Obligation plus interest thereon., together with court costs and attorneys' fees. Stay of Execution and all exemptions are hereby waived. Borrower also agrees that the attorney acting for Borrower as set forth in this paragraph may be compensated by Bank for such services, and Borrower waives any conflict of interest caused by such representation and compensation arrangement. If an Obligation is referred to an attorney for collection, and the payment is obtained without the entry of a judgment, the obligors will pay to the holder of such Obligation its attorneys' fees. 5. Guarantor. The undersigned acknowledges and agrees to be bound by the terms and provisions of only Section 5.2 of the Agreement and Section 2 of this Amendment and to enter into and execute an Amended and Restated Unconditional Guaranty of Payment and Performance ("Guaranty") in the form attached hereto as Exhibit 5. 1. Borrower shall cause any and all other subsidiary entities of Borrower which are created or acquired after the date hereof to enter into and execute a Guaranty. AMERICAN LEGAL PUBLISHING CORPORATION By: /s/Si Sokol ------------- Its: Chairman [Additional signatures appear on next page] IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement by their duly authorized officers as of the date first above written. BANCINSURANCE CORPORATION By: /s/John S. Sokol ---------------------------------------- Its: President FIFTH THIRD BANK, CENTRAL OHIO By: /s/Kristie Nicolosi ---------------------------------------- Its: Assistant Vice President WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE. EXHIBIT 2.1 AMENDED AND RESTATED REVOLVING NOTE $10,000,000 Columbus, Ohio January 25, 1993 First Amendment and Restatement November 5, 1993 Second Amendment and Restatement October 19, 1994 Third Amendment and Restatement July 19, 1995 Fourth Amendment and Restatement June 4, 1996 Fifth Amendment and Restatement July 17, 1997 Sixth Amendment and Restatement September 1, 1998 Seventh Amendment and Restatement November 24, 1999 Eighth Amendment and Restatement December 11, 2000 Ninth Amendment and Restatement July 1, 2002 Tenth Amendment and Restatement October 20, 2003 On June 30, 2007 BANCINSURANCE CORPORATION, an Ohio corporation ("Borrower"), for value received, hereby promises to pay to the order of FIFTH THIRD BANK, CENTRAL OHIO, an Ohio banking corporation (the "Bank"), at its offices, located at 21 East State Street, Columbus, Ohio 43215, in lawful money of the United States of America and in immediately available funds, the principal sum of Ten Million and 00/100 Dollars ($10,000,000), or such lesser unpaid principal amount as may be advanced by Bank pursuant to the terms of the Credit Agreement, dated January 25, 1993, by and between Borrower and Bank, as amended by the First Amendment thereto, dated November 5, 1993, the Second Amendment thereto dated October 19, 1994, the Third Amendment thereto dated November 24, 1999, the Fourth Amendment thereto dated December 11, 2000, the Fifth Amendment thereto dated July 1, 2002 and the Sixth Amendment thereto dated of even date herewith, as the same may be further amended from time to time (the "Agreement") together with interest on the unrepaid advances of said principal sum from date of disbursement by Bank and with all other charges herein provided, payable in cash, at the rates and in the manner hereinafter set forth. 1. INTEREST RATE. 1.1 The principal balance outstanding hereunder, will bear interest from the date of the first advance until paid at an annual floating rate of interest equal to 0.75% less than the Prime Rate (as defined below) of Bank in effect from time to time. 1.2 The interest rate charged hereunder will change automatically upon each change in the Prime Rate. Accrued and unpaid interest will be due and payable quarterly commencing on the first day of October, 2003 and continuing on the first (1st) day of each January, April, July and October thereafter during the term hereof On June 30, 2007, all outstanding principal and all accrued and unpaid interest will be due and payable. Interest will be calculated based on a 360 day year and charged for the actual number of days elapsed, and will be payable on the first day of each calendar quarter. After maturity, whether by acceleration or otherwise, this Note will bear interest (computed and adjusted in the same manner, and with the same effect, as interest hereon prior to maturity) payable on demand, at a rate per annum equal to the Default Rate, until paid, and whether before or after the entry of judgment hereon. 1.3 The Prime Rate means the rate of interest per annum. announced to be its Prime Rate from time to time by Bank at its principal office Columbus, Ohio whether or not Bank will at times lend to borrowers at lower rates of interest, or if there is no such Prime Rate, then its base rate or such other rate as may be substituted by Bank for the Prime Rate. 2. General Terms. 2.1 The principal amount of each loan made by Bank under this Note and the amount of each prepayment made by Borrower under this Note will be recorded by Bank in the regularly maintained data processing records of Bank. The aggregate unpaid principal amount of all loans set forth in such records will be presumptive evidence of the principal amount owing and unpaid on this Note. However, failure by Bank to make any such entry will not limit or otherwise affect Borrower's obligations under this Note or the Agreement. 2.2 All payments received by Bank under this Note will be applied first to payment of amounts advanced by Bank on behalf of Borrower or which may be due for insurance, taxes and attorney's fees or other charges to be paid by Borrower pursuant to the Agreement and the Loan Documents (as defined in the Agreement), then to accrued interest on this Note, then to principal which will be repaid in the inverse order of maturity. 2.3 This Note is the Revolving Note referred to in the Agreement, and is entitled to the benefits, and is subject to the terms of the Agreement. Capitalized terms used, but not otherwise defined herein will have the meanings attributed thereto in the Agreement. The principal of this Note is prepayable in the amounts and under the circumstances, and its maturity is subject to acceleration upon the terms, set forth in the Agreement. Except as otherwise expressly provided in the Agreement, if any payment on this Note becomes due and payable on a day other than one on which Bank is open for business (a "Business Day"), the maturity thereof will be extended to the next Business Day, and interest will be payable at the rate specified herein during such extension period. 2.4 After the occurrence of an Event of Default, all amounts of principal outstanding as of the date of the occurrence of such Event of Default will bear interest at the Default Rate, in Bank's sole discretion, without notice to Borrower. This provision does not constitute a waiver of any Events of Default or an agreement by Bank to permit any late payments whatsoever. 2.5 In no event will the interest rate on this Note exceed the highest rate permissible under any law which a court of competent jurisdiction will, in a final determination, deem applicable hereto. In the event that a court determines that Bank has received interest and other charges under this Note in excess of the highest permissible rate applicable hereto, such excess will be deemed received on account of, and will automatically be applied to reduce the amounts due to Bank from Borrower under this Note, other than interest, and the provisions hereof will be deemed amended to provide for the highest permissible rate. If there are no such amounts outstanding, Bank will refund to Borrower such excess. 2.6 Borrower and all endorsers, sureties, guarantors and other persons liable on this Note hereby waive presentment for payment, demand, notice of dishonor, protest, notice of protest and all other demands and notices in connection with the delivery, performance and enforcement of this Note, and consent to one or more renewals or extensions of this Note. 2.7 This Note is being executed and delivered in substitution for the Amended and Restated Revolving Note, most recently dated July 1, 2002, in the principal amount of $ 13,000,000 and is not delivered in repayment hereof 2.8 This Note may not be changed orally, but only by an instrument in writing. 2.9 This Note is being delivered in, is intended to be performed in, will be construed and enforceable in accordance with, and be governed by the internal laws of, the State of Ohio without regards to principles of conflict of laws. Borrower agrees that The State and Federal courts in Franklin County, Ohio or any other court in which Bank initiates proceedings will have exclusive jurisdiction over all matters arising out of this Note, and that service of process in any such proceeding will be effective if mailed to Borrower at its address described in the Notices section of the Agreement. BORROWER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE. 2.10 Borrower authorizes any attorney of record to appear for it in any court of record in the State of Ohio, after an Obligation becomes due and payable whether by its terms or upon default, waives the issuance and service of process, releases all errors and rights of appeal, and confesses a judgment against it in favor of the holder of such Obligation, for the principal amount of such Obligation plus interest thereon, together with court costs and attorneys' fees. Stay of Execution and all exemptions are hereby waived. Borrower also agrees that the attorney acting for Borrower as set forth in this paragraph may be compensated by Bank for such services, and Borrower waives any conflict of interest caused by such representation and compensation arrangement. If an Obligation is referred to an attorney for collection, and the payment is obtained without the entry of a judgment, the obligors will pay to the holder of such Obligation its attorneys' fees. WARNING - BY SIGNING THIS PAPER, YOU GIVE IT UP YOUR RIGHT TO NOTICE AND COURT TRIAL, IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE. BANCINSURANCE CORPORATION By: /s/John S. Sokol ----------------------------- Its: President EXHIBIT 5.1 AMENDED AND RESTATED UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE FOR VALUE RECEIVED and for the purpose of inducing FIFTH THIRD BANK, CENTRAL OHIO, an Ohio banking corporation, having an office at 21 East State Street, Columbus, Ohio 43215 ("Lender"), to make a loan in the amount of TEN MILLION AND 00/DOLLARS ($10,000,000.00) to BANCINSURANCE CORPORATION, an Ohio corporation, having an office at 250 East Broad Street, Columbus, Ohio 43215 ("Borrower"), from which the undersigned expects to derive direct monetary benefit, the undersigned AMERICAN LEGAL PUBLISHING CORPORATION, an Ohio corporation ("Guarantor"), whose tax identification number is 31-1227610, agrees for the benefit of Lender as follows: 1. Guarantor unconditionally and absolutely guarantees to Lender the full and prompt payment, whether at stated or accelerated maturity or otherwise, of any and all principal, interest, damages, losses, costs, charges, expenses and liabilities, whether fixed or contingent (collectively the "Indebtedness") and the complete, faithful and punctual performance of any and all other obligations (collectively the "Obligations") of Borrower to Lender under the terms and conditions of (a) the Credit Agreement, dated January 25,1993, by and between Borrower and Lender as amended by the First Amendment thereto, dated November 5, 1993, the Second Amendment thereto dated October 19, 1994, the Third Amendment thereto dated November 24, 1999, the Fourth Amendment thereto dated December 11, 2000, the Fifth Amendment thereto dated July 1, 2002 and the Sixth Amendment thereto dated of even date herewith, as the same may be further amended from time to time (the "Loan Agreement") pertaining to such loan; (b) the Amended and Restated Revolving Note, of even date herewith, made by Borrower to Lender, in the principal amount of TEN MILLION AND OO/DOLLARS ($10,000,000.00) and any and all renewals, amendments, modifications, reductions and extensions thereof and substitutions therefor (collectively the "Note") evidencing such loan; and (c) any other instrument, document, certificate or affidavit heretofore, now or hereafter given by Borrower evidencing or securing all or any part of the foregoing (the same, together with the Loan Agreement and the Note, collectively the "Loan Documents"). 2. Guarantor agrees that, if any of the Indebtedness shall not be paid or any of the Obligations shall not be performed by Borrower in accordance with the terms and conditions of the Loan Documents, Guarantor shall immediately so pay such indebtedness and so perform such Obligations and the same shall become the direct and primary indebtedness and obligation of Guarantor. Guarantor shall be liable for the payment of the indebtedness and the performance of the Obligations as fully and to the same effect as if Guarantor was the maker or principal obligor under the Loan Documents. 3. The liability of Guarantor under this Amended and Restated Unconditional Guaranty of Payment and Performance (the "Guaranty') is independent of the indebtedness and Obligations of Borrower, and a separate action or actions may be brought and prosecuted against Guarantor regardless of whether any action is brought against Borrower or whether Borrower be joined in any such action or actions. There shall be no duty or obligation of Lender to exhaust any remedy in law or in equity against Borrower or any security before bringing suit or instituting proceedings of any kind against Guarantor. 4. The liability of Guarantor hereunder is joint and several with all others, if any, guaranteeing payment of the indebtedness and performance of the Obligations (the "Other Guarantors"), and Guarantor may be sued without first, contemporaneously or subsequently, suing any or all of the Other Guarantors. Further, Lender may compromise with any or all of the Other Guarantors for less than all of the liability of Guarantor hereunder and release any or all of the Other Guarantors from all further liability, without impairing the right of Lender to enforce the liability hereunder of Guarantor. 5. Guarantor represents that, at the time of the execution and delivery of this Guaranty, nothing exists to impair the liability of Guarantor hereunder or the immediate effectiveness of this Guaranty. 6. The liability of Guarantor hereunder shall continue until full payment of the indebtedness and full performance of the Obligations, it being the intention hereof that Guarantor shall remain liable for the payment of the indebtedness and for the performance of the Obligations notwithstanding any act, omission or event which might, but for the provisions hereof, otherwise operate as a legal or equitable discharge of Guarantor. Without limiting the generality of the foregoing, the liability of Guarantor hereunder shall not be affected or impaired on account of the following events: a. any execution of any guaranty by any of the Other Guarantors, whether now or hereafter, or any invalidity or enforceability of any such guaranty; b. any impairment, modification, release, discharge or limitation of liability of Borrower or any of the Other Guarantors, or any stay of lien enforcement proceedings against any of the same or their respective property, resulting from any receivership, insolvency, bankruptcy, dissolution, merger, reorganization or other similar proceeding under any present or future provision of the United States Bankruptcy Code or any other similar federal or state law or under the decision of any court; c. any voluntary or involuntary liquidation, sale or other disposition of all or substantially all of the assets of Borrower; d. any determination that Borrower is not liable for the payment of the indebtedness or the performance of the Obligations because the act creating the indebtedness or Obligations is ultra vires, because the officers or persons creating the indebtedness or Obligations acted in excess of their authority, because of any exculpatory provision in the Loan Documents, because of any federal or state law or decision of any court, because of any illegality, irregularity, invalidity or unenforceability, in whole or in part, of the Loan Documents, or otherwise; or e. any failure of Lender to accelerate the maturity of the indebtedness or the Obligations upon default thereon, to preserve the liability of any person for payment of the indebtedness or performance of the Obligations, to take security therefor, to perfect its interest in any security taken or to exercise or enforce, by legal proceedings or otherwise, its rights against Borrower, any other person or any security taken; whether or not Guarantor shall have any notice or knowledge of any of the foregoing. Further, no delay in exercising any right, power or privilege under this Guaranty or the Loan Documents shall operate as a waiver of such right, power or privilege. 7. Guarantor authorizes Lender to deal in any manner with the Indebtedness and the Obligations and with the security of every kind and character given to secure the payment and performance thereof, provided that the principal portion of the indebtedness shall not be increased above the amount aforesaid without the written consent of Guarantor, and consents to each action or omission of Lender pursuant to such authority. Without limiting the generality of the foregoing, Guarantor authorizes Lender, from time to time and whether one or more times, to amend, modify or supplement any or all of the Loan Documents; accept one or more replacement promissory notes; extend the time of payment or maturity of or renew the indebtedness or the Obligations; waive or compromise any term or condition contained in the Loan Documents or any right, remedy or power thereunder, including without limitation, any condition precedent to loan advances or any right with respect to requiring additional security; accept additional or replacement security; or release or surrender security. 8. The liability of Guarantor hereunder and the rights of Lender hereunder shall be reinstated and revived with respect to any amount at any time paid against the indebtedness that thereafter is required to be restored or returned by Lender as a result of insolvency, bankruptcy, reorganization or other similar proceedings affecting Borrower, Guarantor, any of the Other Guarantors or any other person, or any of the assets of the same, or as a result of any other fact or circumstance, all as though such amount had not been paid. 9. Guarantor waives: a. notice of acceptance of this Guaranty by Lender, of loan advances by Lender and of presentment for payment, nonpayment or dishonor or protest of any of the indebtedness, or any of the indebtedness of any person or entity pledged to Lender as security for the indebtedness or the Obligations; b. any and all defenses, offsets and counterclaims of Borrower to liability under the Loan Documents or of Guarantor under this Guaranty, whether now existing or hereafter arising, it being understood and agreed that the guarantee of Guarantor hereunder is absolute and unconditional under any and all circumstances; c. any duty on the part of Lender to disclose to Guarantor any fact or facts it may now or hereafter know about Borrower, regardless of whether Lender has reason to believe that any such facts materially increase the risk beyond that which Guarantor intends to assume, has reason to believe that such facts are unknown to Guarantor or has a reasonable opportunity to communicate such facts to Guarantor, it being understood and agreed that Guarantor is fully responsible for being and remaining informed of the financial condition of Borrower and of all circumstances bearing on the risk of nonpayment of the indebtedness or nonperformance of the Obligations; and d. until the Indebtedness has been repaid and the Obligations have been performed, any and all rights of subrogation, contribution, reimbursement, indemnity, exoneration, implied contract, recourse to security or any other claim, including without limitation, any claim, as that term is defined in the United States Bankruptcy Code and any amendments, which Guarantor may now have or later acquire against Borrower, against any other entity directly or contingently liable for the payment of the indebtedness or performance of the Obligations or against the security for the indebtedness or the Obligations, arising from the existence or payment of the indebtedness or existence or performance of the Obligations under this Guaranty. 10. Whether or not due Lender from Borrower, Guarantor agrees to pay to Lender all damages, losses, costs, charges, expenses and liabilities of every kind, nature and description suffered or incurred by Lender, including without limitation attorneys' fees, arising in any manner out of, growing out of or connected in any way with the enforcement of the Loan Documents or the protection of any security created thereby, including the priority thereof, or the enforcement of this Guaranty. 11. Guarantor subordinates any and all indebtedness of Borrower now or hereafter owed to Guarantor to the Indebtedness and agrees that Guarantor shall not claim any offset or other reduction of Guarantor's liability hereunder because of any such indebtedness. 12. Guarantor shall deliver to Lender Guarantor's annually audited balance sheets and income and expense statements within ninety (90) days after the end of each fiscal year of Guarantor. 13. Guarantor shall not transfer any substantial assets to others for less than fair value or in other than the ordinary course of business, without Lender's prior written consent. 14. Nothing herein contained, nor contained in any of the other Loan Documents, shall be construed or so operate as to require Guarantor to pay interest in an amount or at a rate greater than the highest rate permissible under applicable law. Should any interest or other charges paid by Guarantor result in the computation or earning of interest in excess of the highest rate permissible under applicable law, then any and all such excess shall be and the same is waived by Lender, and all such excess shall be automatically credited against and in reduction of the principal sum, and any portion of said excess which exceeds the principal sum shall be paid by Lender to Guarantor, it being the intent of the parties hereto that under no circumstances shall Guarantor be required to pay interest in excess of the highest rate permissible under applicable law. All interest paid or agreed to be paid to Lender shall, to the extent permitted under applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the indebtedness, including the period of any renewal or extensions thereof, so that interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. Notwithstanding anything to the contrary herein contained, in the event that the interest rate to be charged hereunder ever exceeds the highest rate permissible under applicable law, thereby causing the interest accruing to be limited to such rate, then any subsequent reduction in the interest rate to which Guarantor would otherwise be entitled shall be held in abeyance until the total amount of interest accrued equals the amount of interest which would have accrued had the interest rate not been limited to the highest rate permissible under applicable law. 15. Any notice required or permitted to be given hereunder shall be in writing. If mailed by first class United States mail, postage prepaid, registered or certified with return receipt requested, then such notice shall be effective upon its deposit in the mails. Notice given in any other manner shall be effective only if and when received by the addressee. For purposes of notice, the addresses of Guarantor and Lender shall be as set forth below; provided however, that either party shall have the right to change such party's address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days' written notice to the other party. If to Guarantor: American Legal Publishing Corporation 250 East Broad Street Columbus, Ohio 43215 ATTN: Si Sokol, Chairman with a copy to: Bancinsurance Corporation 250 East Broad Street Columbus, Ohio 43215 ATTN: John S. Sokol, President If to Lender: Fifth Third Bank Corporate Banking Division 21 East State Street Columbus, Ohio 43215 Attention: John Beardslee, Vice President 16. Whenever any amount is payable to Lender hereunder, Lender shall have the right to set off such amount against amounts owing to Guarantor by Lender, whether or not then due and payable, and against all other funds or property of such Guarantor on deposit with or otherwise held in the custody of Lender, all without notice to or demand on Guarantor, such notice and demand being waived. 17. All rights and remedies of Lender are cumulative and not alternative. If any provision or any part of any provision contained in this Guaranty shall for any reason be held or deemed to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or remaining part of the affected provision of this Guaranty, and this Guaranty shall be construed as if such invalid, illegal or unenforceable provision or part thereof had never been contained herein, and the remaining provisions of this Guaranty shall remain in full force and effect. 18. Guarantor agrees that this Guaranty shall inure to the benefit of and may be enforced by Lender or its endorsees, transferees, successors and assigns, and shall be binding upon and enforceable against Guarantor and Guarantor's legal representatives, heirs, successors and assigns. This Guaranty may be assigned by Lender in whole or in part. 19. This Guaranty is executed and delivered by Guarantor at Columbus, Franklin County, Ohio and is to be governed by and construed in accordance with the laws of the State of Ohio. Guarantor consents to, and by execution of this Guaranty submits to, the personal jurisdiction of the Court of Common Pleas of Franklin County, Ohio and the United States District Court sitting in Columbus, Ohio for the purposes of any judicial proceedings which are instituted for the enforcement of this Guaranty. Guarantor agrees that venue is proper in either of said courts. 20. This Guaranty is being executed and delivered in substitution for the Unconditional Guaranty of Payment and Performance delivered by Guarantor to Lender dated July 1, 2002 and is not delivered in satisfaction of the obligations thereunder. This is the entire agreement and there are no other oral or written agreements and no understandings affecting the terms hereof This Guaranty may be modified only by subsequent written agreement executed by Guarantor and Lender. 21. Guarantor authorizes any attorney-at-law to appear in any court of record in the State of Ohio or in any other state or territory of the United States at any time after this Guaranty or the payment of the indebtedness or the performance of the Obligations becomes due, whether at stated maturity, accelerated maturity or otherwise, to waive the issuing and service of process and to confess judgment against Guarantor in favor of Lender for the amount due, together with interest, expenses, the costs of suit and reasonable counsel fees, and thereupon to release and waive all errors, rights of appeal and stays of execution. Such authority shall not be exhausted by one exercise, but judgment maybe confessed from time to time as any sums and/or costs, expenses or reasonable counsel fees shall be due, by filing an original or a photostatic copy of this Guaranty. LENDER, BY ACCEPTANCE OF THIS GUARANTY, AND GUARANTOR HEREBY MUTUALLY, VOLUNTARILY, IRREVOCABLY AND UNCONDITIONALLY WAIVE FOR THE BENEFIT OF THE OTHER ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THIS GUARANTY OR THE LOAN DOCUMENTS, THE TRANSACTIONS RELATED THERETO OR THE RELATIONSHIP ESTABLISHED THEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER AND GUARANTOR TO ENTER INTO THIS TRANSACTION. IT SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY LENDER'S ABILITY TO PURSUE ITS REMEDIES INCLUDING, BUT NOT LIMITED TO, ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN THIS GUARANTY OR THE LOAN DOCUMENTS. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed as of the 20th day of October, 2003. WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. AMERICAN LEGAL PUBLISHING CORPORATION, an Ohio corporation By: /s/Si Sokol -------------------------------- Its: Chairman EX-4.B 4 l03799aexv4wb.txt EXHIBIT 4(B) EXHIBIT 4(b) ================================================================================ BANCINSURANCE CORPORATION, AS ISSUER INDENTURE DATED AS OF SEPTEMBER 30, 2003 JPMORGAN CHASE BANK, AS TRUSTEE FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE 2033 ================================================================================ TABLE OF CONTENTS
PAGE ---- ARTICLE I. DEFINITIONS............................................................................ 1 Section 1.1. Definitions...................................................................... 1 ARTICLE II. DEBENTURES............................................................................. 7 Section 2.1. Authentication and Dating........................................................ 7 Section 2.2. Form of Trustee's Certificate of Authentication.................................. 8 Section 2.3. Form and Denomination of Debentures.............................................. 8 Section 2.4. Execution of Debentures.......................................................... 8 Section 2.5. Exchange and Registration of Transfer of Debentures.............................. 9 Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures.................................. 11 Section 2.7. Temporary Debentures............................................................. 12 Section 2.8. Payment of Interest and Additional Interest...................................... 12 Section 2.9. Cancellation of Debentures Paid, etc............................................. 14 Section 2.10. Computation of Interest.......................................................... 14 Section 2.11. Extension of Interest Payment Period............................................. 16 Section 2.12. CUSIP Numbers.................................................................... 17 ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY.................................................... 17 Section 3.1. Payment of Principal, Premium and Interest; Agreed Treatment of the Debentures... 17 Section 3.2. Offices for Notices and Payments, etc............................................ 18 Section 3.3. Appointments to Fill Vacancies in Trustee's Office............................... 19 Section 3.4. Provision as to Paying Agent..................................................... 19 Section 3.5. Certificate to Trustee........................................................... 20 Section 3.6. Additional Sums.................................................................. 20 Section 3.7. Compliance with Consolidation Provisions......................................... 20 Section 3.8. Limitation on Dividends.......................................................... 20 Section 3.9. Covenants as to the Trust........................................................ 21 Section 3.10. Additional Junior Indebtedness................................................... 21 ARTICLE IV. SECURITYHOLDERS LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE....................... 22 Section 4.1. Securityholders Lists............................................................ 22 Section 4.2. Preservation and Disclosure of Lists............................................. 22
-i- TABLE OF CONTENTS (continued)
PAGE ---- ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT................... 22 Section 5.1. Events of Default................................................................ 22 Section 5.2. Payment of Debentures on Default; Suit Therefor.................................. 24 Section 5.3. Application of Moneys Collected by Trustee....................................... 26 Section 5.4. Proceedings by Securityholders................................................... 26 Section 5.5. Proceedings by Trustee........................................................... 27 Section 5.6. Remedies Cumulative and Continuing; Delay or Omission Not a Waiver............... 27 Section 5.7. Direction of Proceedings and Waiver of Defaults by Majority of Securityholders... 27 Section 5.8. Notice of Defaults............................................................... 28 Section 5.9. Undertaking to Pay Costs......................................................... 28 ARTICLE VI. CONCERNING THE TRUSTEE................................................................. 29 Section 6.1. Duties and Responsibilities of Trustee........................................... 29 Section 6.2. Reliance on Documents, Opinions, etc............................................. 31 Section 6.3. No Responsibility for Recitals, etc.............................................. 32 Section 6.4. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debentures............................................................. 32 Section 6.5. Moneys to be Held in Trust....................................................... 32 Section 6.6. Compensation and Expenses of Trustee............................................. 32 Section 6.7. Officers' Certificate as Evidence................................................ 33 Section 6.8. Eligibility of Trustee........................................................... 33 Section 6.9. Resignation or Removal of Trustee................................................ 34 Section 6.10. Acceptance by Successor Trustee.................................................. 35 Section 6.11. Succession by Merger, etc........................................................ 36 Section 6.12. Authenticating Agents............................................................ 36 ARTICLE VII. CONCERNING THE SECURITYHOLDERS......................................................... 37 Section 7.1. Action by Securityholders........................................................ 37 Section 7.2. Proof of Execution by Securityholders............................................ 38 Section 7.3. Who Are Deemed Absolute Owners................................................... 38
-ii- TABLE OF CONTENTS (continued)
PAGE ---- Section 7.4. Debentures Owned by Company Deemed Not Outstanding............................... 38 Section 7.5. Revocation of Consents; Future Holders Bound..................................... 39 ARTICLE VIII. SECURITYHOLDERS' MEETINGS.............................................................. 39 Section 8.1. Purposes of Meetings............................................................. 39 Section 8.2. Call of Meetings by Trustee...................................................... 40 Section 8.3. Call of Meetings by Company or Securityholders................................... 40 Section 8.4. Qualifications for Voting........................................................ 40 Section 8.5. Regulations...................................................................... 40 Section 8.6. Voting........................................................................... 41 Section 8.7. Quorum; Actions.................................................................. 41 ARTICLE IX. SUPPLEMENTAL INDENTURES................................................................ 42 Section 9.1. Supplemental Indentures without Consent of Securityholders....................... 42 Section 9.2. Supplemental Indentures with Consent of Securityholders.......................... 43 Section 9.3. Effect of Supplemental Indentures................................................ 44 Section 9.4. Notation on Debentures........................................................... 44 Section 9.5. Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee...... 45 ARTICLE X. REDEMPTION OF SECURITIES............................................................... 45 Section 10.1. Optional Redemption.............................................................. 45 Section 10.2. Special Event Redemption......................................................... 45 Section 10.3. Notice of Redemption; Selection of Debentures.................................... 45 Section 10.4. Payment of Debentures Called for Redemption...................................... 46 ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE...................................... 46 Section 11.1. Company May Consolidate, etc., on Certain Terms.................................. 46 Section 11.2. Successor Entity to be Substituted............................................... 47 Section 11.3. Opinion of Counsel to be Given to Trustee........................................ 47 ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE................................................ 47 Section 12.1. Discharge of Indenture........................................................... 47 Section 12.2. Deposited Moneys to be Held in Trust by Trustee.................................. 48 Section 12.3. Paying Agent to Repay Moneys Held................................................ 48
-iii- TABLE OF CONTENTS (continued)
PAGE ---- Section 12.4. Return of Unclaimed Moneys....................................................... 48 ARTICLE XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS........................ 49 Section 13.1. Indenture and Debentures Solely Corporate Obligations............................ 49 ARTICLE XIV. MISCELLANEOUS PROVISIONS............................................................... 49 Section 14.1. Successors....................................................................... 49 Section 14.2. Official Acts by Successor Entity................................................ 49 Section 14.3. Surrender of Company Powers...................................................... 49 Section 14.4. Addresses for Notices, etc....................................................... 49 Section 14.5. Governing Law.................................................................... 50 Section 14.6. Evidence of Compliance with Conditions Precedent................................. 50 Section 14.7. Non-Business Days................................................................ 50 Section 14.8. Table of Contents, Headings, etc................................................. 50 Section 14.9. Execution in Counterparts........................................................ 50 Section 14.10. Separability..................................................................... 50 Section 14.11. Assignment....................................................................... 51 Section 14.12. Acknowledgment of Rights......................................................... 51 Section 14.13. Tax Disclosure................................................................... 51 ARTICLE XV. SUBORDINATION OF DEBENTURES............................................................ 51 Section 15.1. Agreement to Subordinate......................................................... 51 Section 15.2. Default on Senior Indebtedness................................................... 52 Section 15.3. Liquidation, Dissolution, Bankruptcy............................................. 52 Section 15.4. Subrogation...................................................................... 53 Section 15.5. Trustee to Effectuate Subordination.............................................. 54 Section 15.6. Notice by the Company............................................................ 54 Section 15.7. Rights of the Trustee; Holders of Senior Indebtedness............................ 55 Section 15.8. Subordination May Not Be Impaired................................................ 55 Section 15.9. Pari Passu to December 4, 2002 Debentures........................................ 56
-iv- THIS INDENTURE, dated as of September 30, 2003, between Bancinsurance Corporation, an Ohio corporation (the "Company"), and JPMorgan Chase Bank, a New York banking corporation, as debenture trustee (the "Trustee"). WITNESSETH: WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its Floating Rate Junior Subordinated Deferrable Interest Debentures due 2033 (the "Debentures") under this Indenture to provide, among other things, for the execution and authentication, delivery and administration thereof, and the Company has duly authorized the execution of this Indenture; and WHEREAS, all acts and things necessary to make this Indenture a valid agreement according to its terms, have been done and performed; NOW, THEREFORE, This Indenture Witnesseth: In consideration of the premises, and the purchase of the Debentures by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Debentures as follows: ARTICLE I. DEFINITIONS SECTION 1.1. DEFINITIONS. The terms defined in this Section 1.1 (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 1.1. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles and the term "generally accepted accounting principles" means such accounting principles as are generally accepted in the United States at the time of any computation. 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. "Additional Interest" means interest, if any, that shall accrue on any interest on the Debentures the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the Interest Rate, compounded quarterly (to the extent permitted by law). "Additional Junior Indebtedness" means, without duplication and other than the Debentures, any indebtedness, liabilities or obligations of the Company, or any Subsidiary of the Company, under debt securities (or guarantees in respect of debt securities) initially issued after the date of this Indenture to any trust, or a trustee of a trust, partnership or other entity affiliated with the Company that is, directly or indirectly, a finance subsidiary (as such term is defined in Rule 3a-5 under the Investment Company Act of 1940) or other financing vehicle of the Company or any Subsidiary of the Company in connection with the issuance by that entity of preferred securities or other securities that are issued on a pari passu basis with the Debentures. "Additional Sums" has the meaning set forth in Section 3.6. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Authenticating Agent" means any agent or agents of the Trustee which at the time shall be appointed and acting pursuant to Section 6.12. "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. "Board of Directors" means the board of directors or an executive committee of such board of directors. "Board Resolution" means a copy of a resolution certified by 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. "Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in New York City or Houston, Texas or Wilmington, Delaware are permitted or required by any applicable law to close. "Calculation Agent" has the meaning set forth in Section 2.10. "Certificate" means a certificate signed by any one of the principal executive officer, the principal financial officer or the principal accounting officer of the Company. "Common Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Preferred Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Trust Agreement), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Preferred Securities. "Company" means Bancinsurance Corporation, an Ohio corporation, and, subject to the provisions of Article XI, shall include its successors and assigns. "Debenture" or "Debentures" has the meaning stated in the first recital of this Indenture. "Debenture Register" has the meaning specified in Section 2.5. "Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default. "Defaulted Interest" has the meaning set forth in Section 2.8. "Distribution Period" has the meaning set forth in Section 2.8. 2 "Event of Default" means any event specified in Section 5.1, continued for the period of time, if any, and after the giving of the notice, if any, therein designated. "Extension Period" has the meaning set forth in Section 2.11. "Fee Letter" means the fee letter, dated as of the date hereof, between Bancinsurance Corporation and JPMorgan Chase Bank, in its capacity as trustee under various agreements, including this Indenture. "Indenture" means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented, or both. "Interest Payment Date" means each March 31, June 30, September 30 and December 31 during the term of this Indenture. "Interest Rate" has the meaning set forth in Section 2.8. "Investment Company Event" means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended, which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures. "LIBOR Determination Date" has the meaning set forth in Section 2.10. "Liquidation Amount" means the stated amount of $1,000.00 per Trust Security. "Maturity Date" means September 30, 2033. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the Chief Executive Officer, the Vice Chairman, the President, any Managing Director or any Vice President, and by the Treasurer, an Assistant Treasurer, the Controller, an Assistant Controller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section. "Opinion of Counsel" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or may be other counsel reasonably satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section. "Optional Redemption Price" means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest on such Debentures to the Redemption Date. 3 The term "outstanding," when used with reference to Debentures, means, subject to the provisions of Section 7.4, as of any particular time, all Debentures authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except: (a) Debentures theretofore canceled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation; (b) Debentures, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent); provided, however, that, if such Debentures, or portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as provided in Section 10.3 or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Debentures paid pursuant to Section 2.6 or in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.6 unless proof satisfactory to the Company and the Trustee is presented that any such Debentures are held by bona fide holders in due course. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Debenture means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for purposes of this definition, any Debenture authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture. "Preferred Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Common Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Trust Agreement), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Preferred Securities. "Preferred Securities Guarantee" means the guarantee agreement that the Company enters into with JPMorgan Chase Bank, as guarantee trustee, or other Persons that operates directly or indirectly for the benefit of holders of Preferred Securities of the Trust. "Principal Office of the Trustee," or other similar term, means the office of the Trustee, at which at any particular time its corporate trust business shall be principally administered, which at the time of the execution of this Indenture shall be 600 Travis, Suite 1150, Houston, Texas 77002, Attention: Institutional Trust Services. "Property Trustee" has the meaning set forth in the Trust Agreement. 4 "Purchase Agreement" means that certain Purchase Agreement, dated September 30, 2003 among the Company, the Trust and Dekania CDO I, Ltd., pursuant to which Dekania CDO I, Ltd. has purchased $7,000,000 of the Preferred Securities. "Redemption Date" has the meaning set forth in Section 10.1. "Responsible Officer" means, with respect to the Trustee, the officer in the Institutional Trust Services Department of the Trustee having direct responsibility for the administration of this Indenture. "Securities Act" means the Securities Act of 1933, as amended from time to time or any successor legislation. "Securityholder," "holder of Debentures," or other similar terms, means any Person in whose name at the time a particular Debenture is registered on the register kept by the Company or the Trustee for that purpose in accordance with the terms hereof. "Senior Indebtedness" means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by securities, debentures, notes, bonds or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement; (iv) all obligations of the Company for the reimbursement of any letter of credit, any banker's acceptance, any security purchase facility, any repurchase agreement or similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction; (v) all obligations of the type referred to in clauses (i) through (iv) above of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) above of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), whether incurred on or prior to the date of this Indenture or thereafter incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (1) any Additional Junior Indebtedness, (2) Debentures issued pursuant to this Indenture and guarantees in respect of such Debentures, (3) trade accounts payable of the Company arising in the ordinary course of business (such trade accounts payable being pari passu in right of payment to the Debentures), or (4) obligations with respect to which (a) in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are pari passu, junior or otherwise not superior in right of payment to the Debentures and (b) the Company, prior to the issuance thereof, has, if required, notified the relevant state insurance regulatory agency. Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. "Special Event" means either of an Investment Company Event or a Tax Event. "Special Redemption Date" has the meaning set forth in Section 10.2. 5 "Special Redemption Price" means (i) 107.5% of the principal amount of the Debentures being redeemed on a Special Redemption Date that occurs before September 30, 2008 and (ii) 100% of the principal amount of the Debentures being redeemed on a Special Redemption Date that occurs on September 30, 2008 or after, plus accrued and unpaid interest on such Debentures to the Special Redemption Date. "Subsidiary" means with respect to any Person, (i) any corporation at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of the outstanding partnership or similar interests of which shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, "voting stock" means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency. "Tax Event" means the receipt by the Company and the Trust of an Opinion of Counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action")) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Company on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges. "3-Month LIBOR" has the meaning set forth in Section 2.10. "Telerate Page 3750" has the meaning set forth in Section 2.10. "Trust" shall mean BIC Statutory Trust II, a Delaware statutory trust, or any other similar trust created for the purpose of issuing Preferred Securities in connection with the issuance of Debentures under this Indenture, of which the Company is the sponsor. 6 "Trust Agreement" means the Amended and Restated Declaration of Trust of the Trust, as amended or supplemented from time to time. "Trust Securities" means Common Securities and Preferred Securities of the Trust. "Trustee" means JPMorgan Chase Bank, and, subject to the provisions of Article VI hereof, shall also include its successors and assigns as Trustee hereunder. ARTICLE II. DEBENTURES SECTION 2.1. AUTHENTICATION AND DATING. Upon the execution and delivery of this Indenture, or from time to time thereafter, Debentures in an aggregate principal amount not in excess of $7,217,000 may be executed and delivered by the Company to the Trustee for authentication, and the Trustee shall thereupon authenticate and make available for delivery said Debentures to or upon the written order of the Company, signed by its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, the President or one of its Vice Presidents without any further action by the Company hereunder. In authenticating such Debentures, and accepting the additional responsibilities under this Indenture in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon: (a) a copy of any Board Resolution or Board Resolutions relating thereto and, if applicable, an appropriate record of any action taken pursuant to such resolution, in each case certified by the Secretary or an Assistant Secretary of the Company, as the case may be; and (b) an Opinion of Counsel prepared in accordance with Section 14.6 which shall also state: (1) that such Debentures, when authenticated and delivered by the Trustee and issued by the Company in each case in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute, and the Indenture constitutes valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to or limited by applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium and other statutory or decisional laws relating to or affecting creditors' rights or the reorganization of financial institutions (including, without limitation, preference and fraudulent conveyance or transfer laws), heretofore or hereafter enacted or in effect, affecting the rights of creditors generally; (2) that all laws and requirements in respect of the execution and delivery by the Company of the Debentures have been complied with and that authentication and delivery of the Debentures by the Trustee will not violate the terms of this Indenture; (3) the Debentures are not required to be registered under the Securities Act; and 7 (4) the Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended. The Trustee shall have the right to decline to authenticate and deliver any Debentures under this Section if the Trustee, being advised in writing by counsel, determines that such action may not lawfully be taken or if a Responsible Officer of the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing holders. The definitive Debentures shall be typed, printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Debentures, as evidenced by their execution of such Debentures. SECTION 2.2. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The Trustee's certificate of authentication on all Debentures shall be in substantially the following form: This is one of the Debentures referred to in the within-mentioned Indenture. JPMorgan Chase Bank, as Trustee By __________________________________ Authorized Signer SECTION 2.3. FORM AND DENOMINATION OF DEBENTURES. The Debentures shall be substantially in the form of Exhibit A attached hereto. The Debentures shall be in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of $100,000.00 in excess thereof. Any attempted transfer of the Debentures in a block having an aggregate principal amount of less than $1,000.00 shall be deemed to be voided and of no legal effect whatsoever. Any such purported transferee shall be deemed not to be a holder of such Debentures for any purpose, including, but not limited to the receipt of payments on such Debentures, and such purported transferee shall be deemed to have no interest whatsoever in such Debentures. The Debentures shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the officers executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof. SECTION 2.4. EXECUTION OF DEBENTURES. The Debentures shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, President or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents. Only such Debentures as shall bear thereon a certificate of authentication substantially in the form herein before recited, executed by the Trustee or the Authenticating Agent by the manual signature of an authorized signer, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee or the Authenticating Agent upon any Debenture executed by the Company shall be conclusive evidence that the Debenture 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 signed any of the Debentures shall cease to be such officer before the Debentures so signed shall have been authenticated and 8 delivered by the Trustee or the Authenticating Agent, or disposed of by the Company, such Debentures nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Debentures had not ceased to be such officer of the Company; and any Debenture may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Debenture, shall be the proper officers of the Company, although at the date of the execution of this Indenture any such person was not such an officer. Every Debenture shall be dated the date of its authentication. SECTION 2.5. EXCHANGE AND REGISTRATION OF TRANSFER OF DEBENTURES. The Company shall cause to be kept, at the office or agency maintained for the purpose of registration of transfer and for exchange as provided in Section 3.2, a register (the "Debenture Register") for the Debentures issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration and transfer of all Debentures as in this Article II provided. The Debenture Register shall be in written form or in any other form capable of being converted into written form within a reasonable time. Debentures to be exchanged may be surrendered at the Principal Office of the Trustee or at any office or agency to be maintained by the Company for such purpose as provided in Section 3.2, and the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange therefor the Debenture or Debentures which the Securityholder making the exchange shall be entitled to receive. Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. Registration or registration of transfer of any Debenture by the Trustee or by any agent of the Company appointed pursuant to Section 3.2, and delivery of such Debenture, shall be deemed to complete the registration or registration of transfer of such Debenture. All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee or the Authenticating Agent duly executed by the holder or its attorney duly authorized in writing. No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith. The Company or the Trustee shall not be required to exchange or register a transfer of any Debenture for a period of 15 days next preceding the date of selection of Debentures for redemption. Notwithstanding anything herein to the contrary, Debentures may not be transferred except in compliance with the restricted securities legend set forth below, unless otherwise 9 determined by the Company, upon the advice of counsel expert in securities law, in accordance with applicable law: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF 10 THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION. THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. SECTION 2.6. MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES. In case any Debenture shall become mutilated or be destroyed, lost or stolen, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, a new Debenture bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost or stolen. In every case the applicant for a substituted Debenture shall furnish to the Company and the Trustee such security or indemnity as may be required by the Trustee to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Trustee evidence to its satisfaction of the destruction, loss or theft of such Debenture and of the ownership thereof. The Trustee may authenticate any such substituted Debenture and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Debenture, 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 Debenture which has matured or is about to mature or has been called for redemption in full shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debenture, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debenture) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as may be required by the Trustee to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the Trustee of the destruction, loss or theft of such Debenture and of the ownership thereof. Every substituted Debenture issued pursuant to the provisions of this Section 2.6 by virtue of the fact that any such Debenture is destroyed, lost or stolen shall constitute an 11 additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debenture 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 Debentures duly issued hereunder. All Debentures shall be held and owned upon the express condition that, to the extent permitted by applicable law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. SECTION 2.7. TEMPORARY DEBENTURES. Pending the preparation of definitive Debentures, the Company may execute and the Trustee shall authenticate and make available for delivery temporary Debentures that are typed, printed or lithographed. Temporary Debentures shall be issuable in any authorized denomination, and substantially in the form of the definitive Debentures in lieu of which they are issued but with such omissions, insertions and variations as may be appropriate for temporary Debentures, all as may be determined by the Company. Every such temporary Debenture shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Debentures. Without unreasonable delay the Company will execute and deliver to the Trustee or the Authenticating Agent definitive Debentures and thereupon any or all temporary Debentures may be surrendered in exchange therefor, at the Principal Office of the Trustee or at any office or agency maintained by the Company for such purpose as provided in Section 3.2, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange for such temporary Debentures a like aggregate principal amount of such definitive Debentures. Such exchange shall be made by the Company at its own expense and without any charge therefor except that in case of any such exchange involving a registration of transfer the Company may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Until so exchanged, the temporary Debentures shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures authenticated and delivered hereunder. SECTION 2.8. PAYMENT OF INTEREST AND ADDITIONAL INTEREST. Interest at the Interest Rate and any Additional Interest on any Debenture that is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Debentures shall be paid to the Person in whose name said Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment except that interest and any Additional Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid. In the event that any Debenture or portion thereof is called for redemption and the redemption date is subsequent to a regular record date with respect to any Interest Payment Date and prior to such Interest Payment Date, interest on such Debenture will be paid upon presentation and surrender of such Debenture. Each Debenture shall bear interest for the period beginning on (and including) the date of original issuance and ending on (but excluding) December 31, 2003 and for each successive period beginning on (and including) December 31, 2003, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each, a "Distribution Period") at a variable rate per annum equal to the 3-Month LIBOR, determined as 12 described in Section 2.10, plus 4.05% (the "Interest Rate"), applied to the principal amount thereof, until the principal thereof becomes due and payable, and on any overdue principal and to the extent that payment of such interest is enforceable under applicable law (without duplication) on any overdue installment of interest at the Interest Rate compounded quarterly. Interest shall be payable (subject to any relevant Extension Period) quarterly in arrears on each Interest Payment Date with the first installment of interest to be paid on December 31, 2003. Any interest on any Debenture, including Additional Interest, that 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 shall be paid by the Company to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing at least 30 days prior to the date of the proposed payment of the amount of Defaulted Interest proposed to be paid on each such Debenture and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at its address as it appears in the Debenture 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 Debentures (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable. The Company may make payment of any Defaulted Interest on any Debentures in any other lawful manner after notice given by the Company to the Trustee of the proposed payment method; provided, however, the Trustee in its sole discretion deems such payment method to be practical. Any interest scheduled to become payable on an Interest Payment Date occurring during an Extension Period shall not be Defaulted Interest and shall be payable on such other date as may be specified in the terms of such Debentures. The term "regular record date" as used in this Section shall mean the close of business on the 15th day next preceding the applicable Interest Payment Date. Subject to the foregoing provisions of this Section, each Debenture delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Debenture 13 shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debenture. SECTION 2.9. CANCELLATION OF DEBENTURES PAID, ETC. All Debentures surrendered for the purpose of payment, redemption, exchange or registration of transfer, shall, if surrendered to the Company or any paying agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be promptly canceled by it, and no Debentures shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. All Debentures canceled by any Authenticating Agent shall be delivered to the Trustee. All cancelled Debentures shall be retained by the Trustee in accordance with its customary practice. If the Company shall acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are surrendered to the Trustee for cancellation. SECTION 2.10. COMPUTATION OF INTEREST. The amount of interest payable for the Distribution Period commencing on September 30, 2003 and each succeeding Distribution Period will be calculated by applying the Interest Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of interest payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable. All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)). (a) "3-Month LIBOR" means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Calculation Agent in the following order of priority: (1) On the second LIBOR Business Day (as defined below) prior to an Interest Payment Date (except with respect to the first interest payment period, such date shall be September 26, 2003) (each such day, a "LIBOR Determination Date"), LIBOR for any given security shall for the following interest payment period equal the rate, as obtained by the Calculation Agent from Bloomberg Financial Markets Commodities News, for 3- month Eurodollar deposits that appears on Dow Jones Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency Exchange Definitions), or such other page as may replace such Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date. 14 (2) If, on any LIBOR Determination Date, such rate does not appear on Dow Jones Telerate Page 3750 or such other page as may replace such Page 3750, the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London interbank market for 3-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal such arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such quotations, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that leading banks in the City of New York selected by the Calculation Agent are quoting on the relevant LIBOR Determination Date for 3-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to the principal London offices of leading banks in the London interbank market; provided that, if the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be LIBOR as determined on the previous LIBOR Determination Date. (3) As used herein: "Reference Banks" means four major banks in the London interbank market selected by the Calculation Agent; and "LIBOR Business Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London. (b) The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law. (c) The Company hereby agrees that for so long as any of the Preferred Securities remain Outstanding, there will at all times be an agent appointed to calculate LIBOR in respect of each Interest Payment Date in accordance with this Section 2.10 (the "Calculation Agent"). The Company has initially appointed the Property Trustee as Calculation Agent for purposes of determining LIBOR for each Interest Payment Date. The Calculation Agent may be removed by the Company at any time. So long as the Property Trustee holds any of the Preferred Securities, the Calculation Agent shall be the Property Trustee except as described in the immediately preceding sentence. If the Calculation Agent is unable or unwilling to act as such or is removed by the Company, the Company will promptly appoint as a replacement Calculation Agent the London office of a leading bank which is engaged in transactions in Eurodollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Company or its Affiliates. The Calculation Agent may not resign its duties without a successor having been duly appointed and having executed such documents as may be deemed necessary by the Trustee to evidence such successor's agreement to perform its obligations as the Calculation Agent hereunder and under the Trust Agreement. 15 (d) The Calculation Agent shall notify the Company and the Trustee of the Interest Rate and the LIBOR Determination Date for each Distribution Period, in each case as soon as practicable after the determination thereof but in no event later than the thirtieth (30th) day of the relevant Distribution Period. Failure to notify the Company and the Trustee, or any defect in said notice, shall not affect the obligation of the Company to make payment on the Debentures at the applicable Interest Rate. Any error in the calculation of the Interest Rate by the Calculation Agent may be corrected at any time by notice delivered as above provided. Upon the request of a holder of a Debenture, the Calculation Agent shall provide the Interest Rate then in effect and, if determined, the Interest Rate for the next Distribution Period. (e) Subject to the corrective rights set forth above, all certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions relating to the payment and calculation of interest on the Debentures and distributions on the Preferred Securities by the Trustee or the Property Trustee will (in the absence of willful default, bad faith and manifest error) be final, conclusive and binding on the Trust, the Company and all of the holders of the Debentures and the Preferred Securities, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Trustee or the Property Trustee in connection with the exercise or non-exercise by either of them of their respective powers, duties and discretion. SECTION 2.11. EXTENSION OF INTEREST PAYMENT PERIOD. So long as no Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest (including Additional Interest) shall be due and payable. No Extension Period may end on a date other than an Interest Payment Date. At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's or such Affiliate's capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) or (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any reclassification, exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the 16 Company's capital stock, (c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, or pursuant to a merger, consolidation or other business combination, (d) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Preferred Securities Guarantee). Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest to the extent permitted by applicable law. The Company must give the Trustee notice of its election to begin or extend such Extension Period at least 1 Business Day prior to the regular record date (as such term is used in Section 2.8) immediately preceding the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period. The Trustee shall give notice of the Company's election to begin a new Extension Period to the Securityholders. SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Debentures 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 Securityholders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debentures or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Debentures, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the CUSIP numbers. ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY SECTION 3.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST; AGREED TREATMENT OF THE DEBENTURES. (a) The Company covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and premium, if any, and interest and any Additional Interest on the Debentures at the place, at the respective times and in the manner provided in this Indenture and the Debentures. Each installment of interest on the Debentures may be paid (i) by mailing checks for such interest payable to the order of the holders of Debentures entitled thereto as they appear on the registry books of the Company if a request for a wire transfer has not been received by the Company or (ii) by wire transfer to any account with a banking institution 17 located in the United States designated in writing by such Person to the paying agent no later than the related record date. Notwithstanding the foregoing, so long as the holder of this Debenture is the Property Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Property Trustee. (b) The Company will treat the Debentures as indebtedness, and the amounts payable in respect of the principal amount of such Debentures as interest, for all United States federal income tax purposes and for all state and local taxes for which the consequences are derived from or determined by reference to U.S. federal income tax treatment and will treat the Preferred Securities (including but not limited to all payments and proceeds with respect to the Preferred Securities) as an undivided beneficial ownership interest in the Debentures (and payments and proceeds therefrom, respectively) for United States federal income tax purposes and for all taxes for which the consequences are derived from or determined by reference to U.S. federal income tax treatment. All payments in respect of such Debentures will be made free and clear of United States withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W-9 or W-8BEN (or any substitute or successor form) establishing its U.S. or non-United States status, respectively, for United States federal income tax purposes or any other applicable form establishing a complete exemption from U.S. withholding tax. (c) As of the date of this Indenture, the Company has no present intention to exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period. (d) As of the date of this Indenture, the Company believes that the likelihood that it would exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period at any time during which the Debentures are outstanding is remote because of the restrictions that would be imposed on the Company's ability to declare or pay dividends or distributions on, or to redeem, purchase or make a liquidation payment with respect to, any of its outstanding equity and on the Company's ability to make any payments of principal of or interest on, or repurchase or redeem, any of its debt securities that rank pari passu in all respects with (or junior in interest to) the Debentures. SECTION 3.2. OFFICES FOR NOTICES AND PAYMENTS, ETC. So long as any of the Debentures remain outstanding, the Company will maintain in Houston, Texas, an office or agency where the Debentures may be presented for payment, an office or agency where the Debentures may be presented for registration of transfer and for exchange as in this Indenture provided and an office or agency where notices and demands to or upon the Company in respect of the Debentures or of this Indenture may be served. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Company in a notice to the Trustee, or specified as contemplated by Section 2.5, such office or agency for all of the above purposes shall be the office or agency of the Delaware Trustee. In case the Company shall fail to maintain any such office or agency as set forth in this Section 3.2, or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Trustee. 18 In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside Houston, Texas, where the Debentures may be 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 designation, 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 any such office or agency in Houston, Texas, for the purposes above mentioned. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof. SECTION 3.3. APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.9, a Trustee, so that there shall at all times be a Trustee hereunder. SECTION 3.4. PROVISION AS TO PAYING AGENT. (a) If the Company shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provision of this Section 3.4, (1) that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest, if any, on the Debentures (whether such sums have been paid to it by the Company or by any other obligor on the Debentures) in trust for the benefit of the holders of the Debentures; (2) that it will give the Trustee prompt written notice of any failure by the Company (or by any other obligor on the Debentures) to make any payment of the principal of and premium, if any, or interest, if any, on the Debentures when the same shall be due and payable; and (3) that it will, at any time during the continuance of any Event of Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent. (b) If the Company shall act as its own paying agent, it will, on or before each due date of the principal of and premium, if any, or interest, if any, on the Debentures, set aside, segregate and hold in trust for the benefit of the holders of the Debentures a sum sufficient to pay such principal, premium or interest so becoming due and will notify the Trustee in writing of any failure to take such action and of any failure by the Company (or by any other obligor under the Debentures) to make any payment of the principal of and premium, if any, or interest, if any, on the Debentures when the same shall become due and payable. Whenever the Company shall have one or more paying agents for the Debentures, it will, on or prior to each due date of the principal of and premium, if any, or interest, if any, on the Debentures, deposit with a paying agent a sum sufficient to pay the principal, premium or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless such paying agent is the Trustee) the Company shall promptly notify the Trustee in writing of its action or failure to act. 19 (c) Anything in this Section 3.4 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Debentures, or for any other reason, pay, or direct any paying agent to pay to the Trustee all sums held in trust by the Company or any such paying agent, such sums to be held by the Trustee upon the trusts herein contained. (d) Anything in this Section 3.4 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.4 is subject to Sections 12.3 and 12.4. SECTION 3.5. CERTIFICATE TO TRUSTEE. The Company will deliver to the Trustee on or before 120 days after the end of each fiscal year, so long as Debentures are outstanding hereunder, a Certificate stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any default during such fiscal year by the Company in the performance of any covenants contained herein, stating whether or not they have knowledge of any such default and, if so, specifying each such default of which the signers have knowledge and the nature and status thereof. SECTION 3.6. ADDITIONAL SUMS. If and for so long as the Trust is the holder of all Debentures and the Trust is required to pay any additional taxes, duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay such additional amounts ("Additional Sums") on the Debentures as shall be required so that the net amounts received and retained by the Trust after paying taxes, duties, assessments or other governmental charges will be equal to the amounts the Trust would have received if no such taxes, duties, assessments or other governmental charges had been imposed. Whenever in this Indenture or the Debentures there is a reference in any context to the payment of principal of or interest on the Debentures, such mention shall be deemed to include mention of payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made; provided, however, that the deferral of the payment of interest during an Extension Period pursuant to Section 2.11 shall not defer the payment of any Additional Sums that may be due and payable. SECTION 3.7. COMPLIANCE WITH CONSOLIDATION PROVISIONS. The Company will not, while any of the Debentures remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article XI hereof are complied with. SECTION 3.8. LIMITATION ON DIVIDENDS. If Debentures are initially issued to the Trust or a trustee of such trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Preferred Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the 20 Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock or its Affiliates' capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any reclassification, exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (3) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, or pursuant to a merger, consolidation or other business combination, (4) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Preferred Securities Guarantee). SECTION 3.9. COVENANTS AS TO THE TRUST. For so long as the Trust Securities remain outstanding, the Company shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Company under this Indenture may succeed to the Company's ownership of such Common Securities. The Company, as owner of the Common Securities, shall, except in connection with a distribution of Debentures to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities or certain mergers, consolidations or amalgamations, each as permitted by the Trust Agreement, cause the Trust (a) to remain a statutory trust, (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes, and (c) to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Debentures. SECTION 3.10. ADDITIONAL JUNIOR INDEBTEDNESS. The Company shall not, and it shall not cause or permit any Subsidiary of the Company to, incur, issue or be obligated on any Additional Junior Indebtedness, either directly or indirectly, by way of guarantee, suretyship or otherwise, other than Additional Junior Indebtedness that, by its terms, is expressly stated to be either junior and subordinate or pari passu in all respects to the Debentures. 21 ARTICLE IV. SECURITYHOLDERS LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SECTION 4.1. SECURITYHOLDERS LISTS. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee: (a) on each regular record date for the Debentures, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Securityholders of the Debentures as of such record date; and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; except that no such lists need be furnished under this Section 4.1 so long as the Trustee is in possession thereof by reason of its acting as Debenture registrar. SECTION 4.2. PRESERVATION AND DISCLOSURE OF LISTS. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Debentures (1) contained in the most recent list furnished to it as provided in Section 4.1 or (2) received by it in the capacity of Debentures registrar (if so acting) hereunder. The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Trust Securities, and the corresponding rights and privileges of the Trustee, shall be as provided in the Trust Indenture Act of 1939, as amended. (c) Each and every holder of Debentures, by receiving and holding the same, agrees with Company and the Trustee that neither the Company nor the Trustee nor any paying agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Debentures in accordance with the provisions of subsection (b) of this Section 4.2, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b). ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT SECTION 5.1. EVENTS OF DEFAULT. "Event of Default," 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): 22 (a) the Company defaults in the payment of any interest upon any Debenture when it becomes due and payable, and fails to cure such default for a period of 30 days; provided, however, that a valid extension of an interest payment period by the Company in accordance with the terms of this Indenture shall not constitute a default in the payment of interest for this purpose; or (b) the Company defaults in the payment of all or any part of the principal of (or premium, if any, on) any Debentures as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration or otherwise; or (c) the Company defaults in the performance of, or breaches, any of its covenants or agreements in this Indenture or in the terms of the Debentures established as contemplated in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the outstanding Debentures, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (d) a court of competent jurisdiction shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or (e) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or (f) the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of the Debentures to holders of such Trust Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Trust Securities or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Trust Agreement. If an Event of Default occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal of the Debentures and the interest accrued thereon, if any, to be due and payable immediately, and upon any such 23 declaration the same shall become immediately due and payable. For so long as any Preferred Securities remain outstanding, if upon an Event of Default the Trustee fails or the holders of not less than 25% in aggregate principal amount of the outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the holders of a majority in Liquidation Amount of the Preferred Securities then outstanding shall have the right to make such declaration by a notice in writing to the Property Trustee, the Company and the Trustee. In addition, such holders shall have such other rights to direct the Trustee as are set forth in Section 6.7 of the Trust Agreement. The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Debentures 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 all matured installments of interest upon all the Debentures and the principal of and premium, if any, on the Debentures which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and Additional Interest) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other amounts due to the Trustee pursuant to Section 6.6, and if any and all Events of Default under this Indenture, other than the non-payment of the principal of or premium, if any, on Debentures which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein -- then and in every such case the holders of a majority in aggregate principal amount of the Debentures then outstanding, by written notice to the Company and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or 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 of the Debentures 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 of the Debentures shall continue as though no such proceeding had been taken. SECTION 5.2. PAYMENT OF DEBENTURES ON DEFAULT; SUIT THEREFOR. The Company covenants that upon the occurrence of an Event of Default pursuant to Section 5.1(a) or Section 5.1(b) then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Debentures the whole amount that then shall have become due and payable on all Debentures for principal and premium, if any, or interest, or both, as the case may be, with Additional Interest accrued on the Debentures (to the extent that payment of such interest is enforceable under applicable law and, if the Debentures are held by the Trust or a trustee of such Trust, without duplication of any other amounts paid by the Trust or a trustee in respect thereof); and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any other amounts due to the Trustee under Section 6.6. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as 24 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 Debentures and collect in the manner provided by law out of the property of the Company or any other obligor on such Debentures wherever situated the moneys adjudged or decreed to be payable. In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Debentures under Bankruptcy 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 Debentures, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Debentures shall then be due and payable as therein expressed or by declaration of acceleration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and empowered, by intervention in such proceedings or otherwise, (i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Debentures and, in case of any judicial proceedings, (ii) 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 (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all other amounts due to the Trustee under Section 6.6), and of the Securityholders allowed in such judicial proceedings relative to the Company or any other obligor on the Debentures, or to the creditors or property of the Company or such other obligor, unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Debentures 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, (iii) to collect and receive any moneys or other property payable or deliverable on any such claims, and (iv) to distribute the same after the deduction of its charges and expenses. Any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other amounts due to the Trustee under Section 6.6. Nothing herein contained shall be construed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, 25 arrangement, adjustment or composition affecting the Debentures or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. All rights of action and of asserting claims under this Indenture, or under any of the Debentures, may be enforced by the Trustee without the possession of any of the Debentures, or the production thereof at 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 Debentures. 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 Debentures, and it shall not be necessary to make any holders of the Debentures parties to any such proceedings. SECTION 5.3. APPLICATION OF MONEYS COLLECTED BY TRUSTEE. Any moneys collected by the Trustee pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Debentures in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid: First: To the payment of costs and expenses incurred by, and reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all other amounts due to the Trustee under Section 6.6; Second: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XV; Third: To the payment of the amounts then due and unpaid upon Debentures for principal (and premium, if any), and interest on the Debentures, in respect of which or for the benefit of which money has been collected, ratably, without preference or priority of any kind, according to the amounts due on such Debentures for principal (and premium, if any) and interest, respectively; and Fourth: The balance, if any, to the Company. SECTION 5.4. PROCEEDINGS BY SECURITYHOLDERS. No holder of any Debenture shall have any right to institute any suit, action or proceeding for any remedy hereunder, unless such holder previously shall have given to the Trustee written notice of an Event of Default with respect to the Debentures and unless the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding shall have given the Trustee a written request to institute such action, suit or proceeding and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding. 26 Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Debenture to receive payment of the principal of, premium, if any, and interest, on such Debenture when due, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder and by accepting a Debenture hereunder it is expressly understood, intended and covenanted by the taker and holder of every Debenture with every other such taker and holder and the Trustee, that no one or more holders of Debentures shall have any right in any manner whatsoever by virtue or by availing itself of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other Debentures, 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 Debentures. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. SECTION 5.5. PROCEEDINGS BY TRUSTEE. In case of an Event of Default hereunder the Trustee may in its discretion proceed to protect and enforce the rights 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 5.6. REMEDIES CUMULATIVE AND CONTINUING; DELAY OR OMISSION NOT A WAIVER. Except as otherwise provided in Section 2.6 with respect to the replacement of mutilated, destroyed, lost or stolen Debentures, all powers and remedies given by this Article V to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Debentures, and no delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right or power accruing upon any Event of 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 5.4, every power and remedy given by this Article V or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders. No delay or omission of the Trustee or any Securityholder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to any Securityholder may be exercised from time to time, and as often as may be deemed expedient, by the Trustee (in accordance with its duties under Section 6.1 hereof) or by such holder, as the case may be. SECTION 5.7. DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY OF SECURITYHOLDERS. The holders of a majority in aggregate principal amount of the Debentures 27 affected at the time outstanding 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 such Debentures; provided, however, that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction or if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if a Responsible Officer of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability. The holders of a majority in aggregate principal amount of the Debentures at the time outstanding may on behalf of the holders of all of the Debentures waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9; provided, however, that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debentures 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 hereunder shall have been waived as permitted by this Section, said default or Event of Default shall for all purposes of the Debentures and this Indenture be deemed to have been cured and to be not continuing. SECTION 5.8. NOTICE OF DEFAULTS. The Trustee shall, within 90 days after the actual knowledge by a Responsible Officer of the Trustee of the occurrence of a default with respect to the Debentures, mail to all Securityholders, as the names and addresses of such holders appear upon the Debenture Register, notice of all defaults with respect to the Debentures known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purpose of this Section 5.8 being hereby defined to be the events specified in clauses (a), (b), (c), (d), (e) and (f) of Section 5.1, not including periods of grace, if any, provided for therein); provided, however, that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Debentures, the Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders. SECTION 5.9. UNDERTAKING TO PAY COSTS. All parties to this Indenture agree, and each holder of any Debenture by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that 28 such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Debentures outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debenture against the Company on or after the same shall have become due and payable. ARTICLE VI. CONCERNING THE TRUSTEE SECTION 6.1. DUTIES AND RESPONSIBILITIES OF TRUSTEE. With respect to the holders of Debentures issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Debentures and after the curing or waiving of all Events of Default which may have occurred, with respect to the Debentures, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default with respect to the Debentures has occurred (which has not been cured or waived), 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 man would exercise or use under the circumstances in the conduct of his own affairs. 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: (a) prior to the occurrence of an Event of Default with respect to Debentures and after the curing or waiving of all Events of Default which may have occurred (1) the duties and obligations of the Trustee with respect to Debentures shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations with respect to the Debentures 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 the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the 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 same to determine whether or not they conform to the requirements of this Indenture; 29 (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) 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 Securityholders pursuant to Section 5.7 or the requisite holders of the Preferred Securities pursuant to Section 5.1, 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. (d) None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is ground for believing that the repayment of such funds or liability is not assured to it under the terms of this Indenture or indemnity satisfactory to the Trustee against such risk is not reasonably assured to it. (e) If at any time the Trustee hereunder is not the same Person as the Property Trustee under the Trust Agreement: (i) whenever a reference is made herein to the dissolution, termination or liquidation of the Trust, the Trustee shall be entitled to assume that no such dissolution, termination, or liquidation has occurred so long as the Trust Securities are or continue to be registered in the name of such Property Trustee, and the Trustee shall be charged with notice or knowledge of such dissolution, termination or liquidation only upon written notice thereof given to the Trustee by the Sponsor under the Trust Agreement; and (ii) the Trustee shall not be charged with notice or knowledge that any Person is a holder of Preferred Securities or Common Securities issued by the Trust or whether any group of holders of Preferred Securities constitutes any specified percentage of all outstanding Preferred Securities for any purpose under this Indenture, unless and until the Trustee is furnished with a list of holders by such Property Trustee and the aggregate Liquidation Amount of the Preferred Securities then outstanding. The Trustee may conclusively rely and shall be protected in relying on such list. (f) The Trustee shall not, and shall not be deemed to, owe any fiduciary duty to the holders of any of the Trust Securities issued by the Trust and shall not be liable to any such holder (other than for the willful misconduct or negligence of the Trustee) if the Trustee in good faith (i) pays over or distributes to a registered holder of the Trust Securities or to the Company or to any other Person, cash, property or securities to which such holders of such Trust Securities shall be entitled or (ii) takes any action or omits to take any action at the request of the holder of such Trust Securities. Nothing in this paragraph shall affect the obligation of any other such Person to hold such payment for the benefit of, and to pay such amount over to, such holders of Preferred Securities or Common Securities or their representatives. 30 SECTION 6.2. RELIANCE ON DOCUMENTS, OPINIONS, ETC. Except as otherwise provided in Section 6.1: (a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, debenture or other paper or 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 an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution 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 of its selection and any advice or 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 in accordance with such advice or Opinion of Counsel; (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, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; (e) the Trustee shall not be liable for any action taken or omitted 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; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to the Debentures (that has not been cured or waived) to exercise with respect to Debentures such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs; (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, coupon or other paper or document, unless requested in writing to do so by the holders of not less than a majority in aggregate principal amount of the outstanding Debentures affected thereby; provided, however, 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 expense or liability 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 (including any Authenticating Agent) or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care; and 31 (h) with the exceptions of defaults under Sections 5.1(a) or 5.1(b), the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Debentures unless a written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any other obligor on the Debentures or by any holder of the Debentures. SECTION 6.3. NO RESPONSIBILITY FOR RECITALS, ETC. The recitals contained herein and in the Debentures (except in the certificate of authentication of the Trustee or the Authenticating Agent) shall be taken as the statements of the Company, and the Trustee and the Authenticating Agent assume no responsibility for the correctness of the same. The Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the Debentures. The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any Debentures or the proceeds of any Debentures authenticated and delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture. SECTION 6.4. TRUSTEE, AUTHENTICATING AGENT, PAYING AGENTS, TRANSFER AGENTS OR REGISTRAR MAY OWN DEBENTURES. The Trustee or any Authenticating Agent or any paying agent or any transfer agent or any Debenture registrar, in its individual or any other capacity, may become the owner or pledgee of Debentures with the same rights it would have if it were not Trustee, Authenticating Agent, paying agent, transfer agent or Debenture registrar. SECTION 6.5. MONEYS TO BE HELD IN TRUST. Subject to the provisions of Section 12.4, all moneys received by the Trustee or any paying agent shall, until used or applied as herein provided, be held in trust for the purpose for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee and any paying agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Company, signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President, a Vice President, the Treasurer or an Assistant Treasurer of the Company. SECTION 6.6. COMPENSATION AND EXPENSES OF TRUSTEE. Subject to the Fee Letter, the Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as shall be agreed to in writing between the Company and the Trustee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and the 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 compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence, bad faith or willful misconduct. The Company also covenants to indemnify each of the Trustee or any predecessor Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Trustee) incurred without negligence or willful misconduct on the part of the Trustee and arising out of or in connection with the acceptance or administration of this Trust, including the reasonable costs and expenses of defending itself against any claim of 32 liability. The obligations of the Company under this Section 6.6 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, and the Company hereby grants and pledges to the Trustee, a lien prior to that of the Debentures 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 Debentures. Without prejudice to any other rights 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 5.1(d), Section 5.1(e) or Section 5.1(f), 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. The provisions of this Section shall survive the resignation or removal of the Trustee and the defeasance or other termination of this Indenture. Notwithstanding anything in this Indenture or any Debenture to the contrary, the Trustee shall have no obligation whatsoever to advance funds to pay any principal of or interest on or other amounts with respect to the Debentures or otherwise advance funds to or on behalf of the Company. In no event shall the Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its reasonable control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Indenture. SECTION 6.7. OFFICERS' CERTIFICATE AS EVIDENCE. Except as otherwise provided in Sections 6.1 and 6.2, 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 negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of 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 6.8. ELIGIBILITY OF TRUSTEE. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia or a corporation or other Person authorized under such laws to exercise corporate trust powers, having (or whose obligations under this Indenture are guaranteed by an affiliate having) a combined capital and surplus of at least U.S. Fifty Million Dollars ($50,000,000.00) and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising 33 or examining authority, then for the purposes of this Section 6.8 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent records of condition so published. The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.8, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.9. If the Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act of 1939, the Trustee shall either eliminate such interest or resign, to the extent and in the manner described by this Indenture. SECTION 6.9. RESIGNATION OR REMOVAL OF TRUSTEE. (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof, at the Company's expense, to the holders of the Debentures at their addresses as they shall appear on the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee or trustees by written instrument, in duplicate, executed by order of its 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 shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation to the affected Securityholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee. (b) In case at any time any of the following shall occur-- (1) the Trustee shall fail to comply with the provisions of Section 6.8 after written request therefor by the Company or by any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months, or (2) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.8 and shall fail to resign after written request therefor by the Company or by any such Securityholder, or (3) the Trustee shall become incapable of acting, or shall be adjudged a 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, 34 then, in any such case, the Company may remove the Trustee and appoint a successor Trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of Section 5.9, any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor Trustee. (c) Upon prior written notice to the Company and the Trustee, the holders of a majority in aggregate principal amount of the Debentures at the time outstanding may at any time remove the Trustee and nominate a successor Trustee, which shall be deemed appointed as successor Trustee unless within 10 Business Days after such nomination the Company objects thereto, in which case, or in the case of a failure by such holders to nominate a successor Trustee, the Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.9 provided, may petition any court of competent jurisdiction for an appointment of a successor. (d) Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor Trustee as provided in Section 6.10. SECTION 6.10. ACCEPTANCE BY SUCCESSOR TRUSTEE. Any successor Trustee appointed as provided in Section 6.9 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 retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Trustee herein; but, 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 6.6, execute and deliver an instrument transferring to such successor Trustee all the rights and powers of the Trustee so ceasing to act and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee thereunder. 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 to secure any amounts then due it pursuant to the provisions of Section 6.6. If a successor Trustee is appointed, the Company, the retiring Trustee and the successor Trustee 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 Debentures as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor 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 Trust 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 35 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. No successor Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 6.8. In no event shall a retiring Trustee be liable for the acts or omissions of any successor Trustee hereunder. Upon acceptance of appointment by a successor Trustee as provided in this Section 6.10, the Company shall mail notice of the succession of such Trustee hereunder to the holders of Debentures at their addresses as they shall appear on the Debenture Register. If the Company fails to mail such notice within 10 Business Days after the acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Company. SECTION 6.11. SUCCESSION BY MERGER, ETC. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of 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; provided such corporation shall be otherwise eligible and qualified under this Article. In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Debentures 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 Debentures so authenticated; and in case at that time any of the Debentures shall not have been authenticated, any successor to the Trustee may authenticate such Debentures either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debentures or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Debentures in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 6.12. AUTHENTICATING AGENTS. There may be one or more Authenticating Agents appointed by the Trustee upon the request of the Company with power to act on its behalf and subject to its direction in the authentication and delivery of Debentures issued upon exchange or registration of transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Debentures; provided, however, that the Trustee shall have no liability to the Company for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Debentures. Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any state or territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a 36 combined capital and surplus of at least $50,000,000.00 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 6.12 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section. Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 6.12 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent. Any Authenticating Agent may at any time resign 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 the Debentures 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 any Authenticating Agent shall cease to be eligible under this Section 6.12, the Trustee may, and upon the request of the Company shall, promptly appoint a successor Authenticating Agent eligible under this Section 6.12, shall give written notice of such appointment to the Company and shall mail notice of such appointment to all holders of Debentures as the names and addresses of such holders appear on the Debenture Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein. The Company agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services. Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Trustee. ARTICLE VII. CONCERNING THE SECURITYHOLDERS SECTION 7.1. ACTION BY SECURITYHOLDERS. Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Debentures 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 have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debentures voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a combination of such instrument or 37 instruments and any such record of such a meeting of such Securityholders or (d) by any other method the Trustee deems satisfactory. If the Company shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, the Company may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for such Debentures for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, and for that purpose the outstanding Debentures shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than 6 months after the record date. SECTION 7.2. PROOF OF EXECUTION BY SECURITYHOLDERS. Subject to the provisions of Section 6.1, 6.2 and 8.5, proof of the execution of any instrument by a Securityholder or his 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 Debentures shall be proved by the Debenture Register or by a certificate of the Debenture registrar. The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary. The record of any Securityholders' meeting shall be proved in the manner provided in Section 8.6. SECTION 7.3. WHO ARE DEEMED ABSOLUTE OWNERS. Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture. SECTION 7.4. DEBENTURES OWNED BY COMPANY DEEMED NOT OUTSTANDING. In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Indenture, Debentures which are owned 38 by the Company or any other obligor on the Debentures 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 the Debentures shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided, however, that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.4 if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Debentures and that the pledgee is not the Company or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. SECTION 7.5. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the holders of the percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7.1) or any holder as of an applicable record date (in cases where a record date has been set pursuant to Section 7.1) of a Debenture (or any Debenture issued in whole or in part in exchange or substitution therefor) the serial number of which is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee at the Principal Office of the Trustee and upon proof of holding as provided in Section 7.2, revoke such action so far as concerns such Debenture (or so far as concerns the principal amount represented by any exchanged or substituted Debenture). Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture or any Debenture issued in exchange or substitution therefor. ARTICLE VIII. SECURITYHOLDERS' MEETINGS SECTION 8.1. PURPOSES OF MEETINGS. A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes: (a) to give any notice to the Company or to the Trustee, 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 Securityholders pursuant to any of the provisions of Article V; (b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article VI; 39 (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.2; 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 such Debentures under any other provision of this Indenture or under applicable law. SECTION 8.2. CALL OF MEETINGS BY TRUSTEE. The Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.1, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Debentures affected at their addresses as they shall appear on the Debentures Register and, if the Company is not a holder of Debentures, to the Company. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting. SECTION 8.3. CALL OF MEETINGS BY COMPANY OR SECURITYHOLDERS. In case at any time the Company pursuant to a Board Resolution, or the holders of at least 10% in aggregate principal amount of the Debentures, as the case may be, then outstanding, shall have requested the Trustee to call a meeting of Securityholders, 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 Securityholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 8.1, by mailing notice thereof as provided in Section 8.2. SECTION 8.4. QUALIFICATIONS FOR VOTING. To be entitled to vote at any meeting of Securityholders a Person shall be (a) a holder of one or more Debentures with respect to which the meeting is being held or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more such Debentures. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. SECTION 8.5. REGULATIONS. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Debentures and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and 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. 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 Securityholders as provided in Section 8.3, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting. 40 Subject to the provisions of Section 7.4, at any meeting each holder of Debentures with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000.00 principal amount of Debentures held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Debenture 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 other than by virtue of Debentures held by him or instruments in writing as aforesaid duly designating him as the Person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.2 or 8.3 may be adjourned from time to time by a majority of those present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice. SECTION 8.6. VOTING. The vote upon any resolution submitted to any meeting of holders of Debentures with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Debentures held or represented by them. 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 triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders 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 8.2. The record shall show the serial numbers of the Debentures voting in favor of or against any resolution. 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. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 8.7. QUORUM; ACTIONS. The Persons entitled to vote a majority in principal amount of the Debentures then outstanding shall constitute a quorum for a meeting of Securityholders; provided, however, that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or other action which may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding, the Persons holding or representing such specified percentage in principal amount of the Debentures then outstanding will constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Securityholders, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.2, except that such notice need be given only once not less than 5 days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening 41 of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Debentures then outstanding which shall constitute a quorum. Except as limited by the provisos in the first paragraph of Section 9.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the holders of a majority in principal amount of the Debentures then outstanding; provided, however, that, except as limited by the provisos in the first paragraph of Section 9.2, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action which this Indenture expressly provides may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the holders of a not less than such specified percentage in principal amount of the Debentures then outstanding. Any resolution passed or decision taken at any meeting of holders of Debentures duly held in accordance with this Section shall be binding on all the Securityholders, whether or not present or represented at the meeting. ARTICLE IX. SUPPLEMENTAL INDENTURES SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF SECURITYHOLDERS. 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, without the consent of the Securityholders, 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 Article XI hereof; (b) to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the holders of Debentures as the Board of Directors shall consider to be for the protection of the holders of such Debentures, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a default or an Event of Default 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 or amend such other provisions in regard to matters or questions arising under this Indenture; provided that any such action shall not materially adversely affect the interests of the holders of the Debentures; 42 (d) to add to, delete from, or revise the terms of Debentures, including, without limitation, any terms relating to the issuance, exchange, registration or transfer of Debentures, including to provide for transfer procedures and restrictions substantially similar to those applicable to the Preferred Securities as required by Section 2.5 (for purposes of assuring that no registration of Debentures is required under the Securities Act); provided, however, that any such action shall not adversely affect the interests of the holders of the Debentures then outstanding (it being understood, for purposes of this proviso, that transfer restrictions on Debentures substantially similar to those that were applicable to Preferred Securities shall not be deemed to materially adversely affect the holders of the Debentures); (e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Debentures 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; (f) to make any change (other than as elsewhere provided in this paragraph) that does not adversely affect the rights of any Securityholder in any material respect; or (g) to provide for the issuance of and establish the form and terms and conditions of the Debentures, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or the Debentures, or to add to the rights of the holders of Debentures. The Trustee is hereby authorized 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 and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, 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 9.1 may be executed by the Company and the Trustee without the consent of the holders of any of the Debentures at the time outstanding, notwithstanding any of the provisions of Section 9.2. SECTION 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS. With the consent (evidenced as provided in Section 7.1) of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding affected by such supplemental indenture, 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 Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the 43 right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture; provided further, however, that if the Debentures are held by a trust or a trustee of such trust, such supplemental indenture shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities shall have consented to such supplemental indenture; provided further, however, that if the consent of the Securityholder of each outstanding Debenture is required, such supplemental indenture shall not be effective until each holder of the Trust Securities shall have consented to such supplemental indenture. Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders as aforesaid, 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. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, prepared by the Company, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Debenture Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. It shall not be necessary for the consent of the Securityholders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. SECTION 9.3. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debentures 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 9.4. NOTATION ON DEBENTURES. Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Debentures so modified as to conform, in the opinion of the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee or the Authenticating Agent and delivered in exchange for the Debentures then outstanding. 44 SECTION 9.5. EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE FURNISHED TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall, in addition to the documents required by Section 14.6, receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article IX. The Trustee shall receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article IX is authorized or permitted by, and conforms to, the terms of this Article IX and that it is proper for the Trustee under the provisions of this Article IX to join in the execution thereof. ARTICLE X. REDEMPTION OF SECURITIES SECTION 10.1. OPTIONAL REDEMPTION. The Company shall have the right to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any March 31, June 30, September 30 or December 31 on or after September 30, 2008 (a "Redemption Date"), at the Optional Redemption Price. SECTION 10.2. SPECIAL EVENT REDEMPTION. If a Special Event shall occur and be continuing, the Company shall have the right to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event (the "Special Redemption Date") at the Special Redemption Price. SECTION 10.3. NOTICE OF REDEMPTION; SELECTION OF DEBENTURES. In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debentures, it shall cause to be mailed a notice of such redemption at least 45 and not more than 75 days prior to the Redemption Date or the Special Redemption Date to the holders of Debentures so to be redeemed as a whole or in part at their last addresses as the same appear on the Debenture Register. Such mailing shall be by first class mail. 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 Debenture designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debenture. Each such notice of redemption shall specify the CUSIP number, if any, of the Debentures to be redeemed, the Redemption Date or the Special Redemption Date, as applicable, the Optional Redemption Price or the Special Redemption Price, as applicable, at which Debentures are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Debentures are to be redeemed the notice of redemption shall specify the numbers of the Debentures to be redeemed. In case the Debentures are 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 Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof will be issued. 45 Prior to 10:00 a.m. (New York City time) on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Optional Redemption Price or Special Redemption Price, together with accrued interest to the Redemption Date or Special Redemption Date, as applicable. If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 75 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed. SECTION 10.4. PAYMENT OF DEBENTURES CALLED FOR REDEMPTION. If notice of redemption has been given as provided in Section 10.3, the Debentures or portions of Debentures with respect to which such notice has been given shall become due and payable on the Redemption Date or Special Redemption Date, as applicable, and at the place or places stated in such notice at the applicable Optional Redemption Price or Special Redemption Price, together with interest accrued to the Redemption Date or Special Redemption Date, as applicable, and on and after said date (unless the Company shall default in the payment of such Debentures at the Optional Redemption Price or Special Redemption Price, as applicable, together with interest accrued to said date) interest on the Debentures or portions of Debentures so called for redemption shall cease to accrue. On presentation and surrender of such Debentures at a place of payment specified in said notice, such Debentures or the specified portions thereof shall be paid and redeemed by the Company at the applicable Optional Redemption Price or Special Redemption Price, together with interest accrued thereon to the Redemption Date or Special Redemption Date, as applicable. Upon presentation of any Debenture redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Debenture or Debentures of authorized denominations, in principal amount equal to the unredeemed portion of the Debenture so presented. ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE SECTION 11.1. COMPANY MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. Nothing contained in this Indenture or in the Debentures 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, transfer or other disposition of the property or capital stock of the Company or its successor or successors as an entirety, or substantially as an entirety, to any other Person (whether or not affiliated with the Company, or its successor or successors) authorized to acquire and operate the same; provided, however, that the Company hereby covenants and agrees that, upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other disposition, the due and 46 punctual payment of the principal of (and premium, if any) and interest on all of the Debentures in accordance with their terms, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company, shall be expressly assumed by supplemental indenture satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company shall have been merged, or by the entity which shall have acquired such property or capital stock. SECTION 11.2. SUCCESSOR ENTITY TO BE SUBSTITUTED. In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor entity, 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 Debentures 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, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company, and thereupon the predecessor entity shall be relieved of any further liability or obligation hereunder or upon the Debentures. Such successor entity thereupon may cause to be signed, and may issue in its own name, any or all of the Debentures issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or the Authenticating Agent; and, upon the order of such successor entity instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and deliver any Debentures which previously shall have been signed and delivered by the officers of the Company, to the Trustee or the Authenticating Agent for authentication, and any Debentures which such successor entity thereafter shall cause to be signed and delivered to the Trustee or the Authenticating Agent for that purpose. All the Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debentures had been issued at the date of the execution hereof. SECTION 11.3. OPINION OF COUNSEL TO BE GIVEN TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall receive, in addition to the Opinion of Counsel required by Section 9.5, an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or other disposition, and any assumption, permitted or required by the terms of this Article XI complies with the provisions of this Article XI. ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE SECTION 12.1. DISCHARGE OF INDENTURE. When (a) the Company shall deliver to the Trustee for cancellation all Debentures theretofore authenticated (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) and not theretofore canceled, or 47 (b) all the Debentures not theretofore canceled or delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within 1 year or are to be called for redemption within 1 year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee, in trust, funds, which shall be immediately due and payable, sufficient to pay at maturity or upon redemption all of the Debentures (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) not theretofore canceled or delivered to the Trustee for cancellation, including principal and premium, if any, and interest due or to become due to such date of maturity or redemption date, as the case may be, but excluding, however, the amount of any moneys for the payment of principal of, and premium, if any, or interest on the Debentures (1) theretofore repaid to the Company in accordance with the provisions of Section 12.4, or (2) paid to any state or to the District of Columbia pursuant to its unclaimed property or similar laws, and if in the case of either clause (a) or clause (b) the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.5, 2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall survive until such Debentures shall mature and be paid. Thereafter, Sections 6.6 and 12.4 shall survive, and the Trustee, on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with, and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. The Company agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture or the Debentures. SECTION 12.2. DEPOSITED MONEYS TO BE HELD IN TRUST BY TRUSTEE. Subject to the provisions of Section 12.4, all moneys deposited with the Trustee pursuant to Section 12.1 shall be held in trust in a non-interest bearing account and applied by it to the payment, either directly or through any paying agent (including the Company if acting as its own paying agent), to the holders of the particular Debentures for the payment of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal, and premium, if any, and interest. SECTION 12.3. PAYING AGENT TO REPAY MONEYS HELD. Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent of the Debentures (other than the Trustee) shall, upon demand of the Company, be repaid to it or paid to the Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys. SECTION 12.4. 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 Debentures and not applied but remaining unclaimed by the holders of Debentures for 2 years after the date upon which the principal of, and premium, if any, or interest on such Debentures, as the case may be, shall have become due and payable, shall, subject to applicable escheatment laws, be repaid to the Company by the Trustee or such paying agent on written demand; and the holder of any of the Debentures shall thereafter look only to the Company for any payment 48 which such holder may be entitled to collect, and all liability of the Trustee or such paying agent with respect to such moneys shall thereupon cease. ARTICLE XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SECTION 13.1. INDENTURE AND DEBENTURES SOLELY CORPORATE OBLIGATIONS. No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of 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 all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Debentures. ARTICLE XIV. MISCELLANEOUS PROVISIONS SECTION 14.1. SUCCESSORS. All the covenants, stipulations, promises and agreements of the Company in this Indenture shall bind its successors and assigns whether so expressed or not. SECTION 14.2. OFFICIAL ACTS BY SUCCESSOR ENTITY. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee, officer or other authorized Person of any entity that shall at the time be the lawful successor of the Company. SECTION 14.3. SURRENDER OF COMPANY POWERS. The Company by instrument in writing executed by authority of at least 2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company and thereupon such power so surrendered shall terminate both as to the Company, and as to any permitted successor. SECTION 14.4. ADDRESSES FOR NOTICES, ETC. Any notice, consent, direction, request, authorization, waiver or demand which by any provision of this Indenture is required or permitted to be given, made, furnished or served by the Trustee or by the Securityholders on or to the Company may be given or served in writing by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company, with the Trustee for the purpose) to the Company, 250 East Broad Street, 10th Floor, Columbus, OH 43215, Attention: John S. Sokol. Any notice, consent, direction, request, authorization, waiver or demand by any Securityholder 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 office of the Trustee, addressed to the Trustee, 600 Travis, Suite 1150, Houston, 49 Texas 77002, Attention: Institutional Trust Services. Any notice, consent, direction, request, authorization, waiver or demand on or to any Securityholder shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the address set forth in the Debenture Register. SECTION 14.5. GOVERNING LAW. This Indenture and each Debenture shall be deemed to be a contract made under the law of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State, without regard to conflict of laws principles thereof. SECTION 14.6. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. 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 (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) 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; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not in the opinion of such person, such condition or covenant has been complied with. SECTION 14.7. NON-BUSINESS DAYS. In any case where the date of payment of interest on or principal of the Debentures will be a day that is not a Business Day, the payment of such interest on or principal of the Debentures need not be made on such date but may be made on the next succeeding Business Day, except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the original date of payment, and no interest shall accrue for the period from and after such date. SECTION 14.8. TABLE OF CONTENTS, HEADINGS, ETC. 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 14.9. EXECUTION IN COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. SECTION 14.10. SEPARABILITY. In case any one or more of the provisions contained in this Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable 50 in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Debentures, but this Indenture and such Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. SECTION 14.11. ASSIGNMENT. The Company will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto. SECTION 14.12. ACKNOWLEDGMENT OF RIGHTS. The Company agrees that, with respect to any Debentures held by the Trust or the Property Trustee of the Trust, if the Property Trustee of the Trust fails to enforce its rights under this Indenture as the holder of Debentures held as the assets of such Trust after the holders of a majority in Liquidation Amount of the Preferred Securities of such Trust have so directed such Property Trustee, a holder of record of such Preferred Securities may, to the fullest extent permitted by law, institute legal proceedings directly against the Company to enforce such Property Trustee's rights under this Indenture without first instituting any legal proceedings against such trustee or any other Person. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest (or premium, if any) or principal on the Debentures on the date such interest (or premium, if any) or principal is otherwise payable (or in the case of redemption, on the redemption date), the Company agrees that a holder of record of Preferred Securities of the Trust may directly institute a proceeding against the Company for enforcement of payment to such holder directly of the principal of (or premium, if any) or interest on the Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Preferred Securities of such holder on or after the respective due date specified in the Debentures. SECTION 14.13. TAX DISCLOSURE. Notwithstanding anything to the contrary herein, the parties to the transactions described herein (and their employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the U.S. federal income tax treatment and U.S. federal income tax structure of the transactions described herein and any and all materials of any kind (including opinions or other tax analyses) that are provided to the parties relating to such tax treatment and tax structure; provided, however, for purposes of this sentence the purchase price and other economic terms, commissions and fees shall not be considered part of such tax treatment or tax structure; and further provided, however, that the foregoing shall not apply to the extent reasonably necessary to comply with applicable securities laws. ARTICLE XV. SUBORDINATION OF DEBENTURES SECTION 15.1. AGREEMENT TO SUBORDINATE. The Company covenants and agrees, and each holder of Debentures by such Securityholder's acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article XV; and each 51 holder of a Debenture, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of, and premium, if any, and interest on all Debentures shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article XV shall prevent the occurrence of any default or Event of Default hereunder. SECTION 15.2. DEFAULT ON SENIOR INDEBTEDNESS. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company following any grace period, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default and such acceleration has not been rescinded or canceled, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption) of, or premium, if any, or interest on the Debentures. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 15.2, such payment shall, subject to Section 15.7, be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. SECTION 15.3. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company, on account of the principal (and premium, if any) or interest on the Debentures. Upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, which the Securityholders or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XV, shall be paid by the Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any 52 instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness. For purposes of this Article XV, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XV with respect to the Debentures to the payment of all Senior Indebtedness, that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article XI of this Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article XI of this Indenture. Nothing in Section 15.2 or in this Section shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6 of this Indenture. SECTION 15.4. SUBROGATION. Subject to the payment in full of all Senior Indebtedness, the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Debentures shall be paid in full. For the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders or the Trustee would be entitled except for the provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, 53 and the holders of the Debentures be deemed to be a payment or distribution by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XV are and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of such Senior Indebtedness, on the other hand. Nothing contained in this Article XV or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of (and premium, if any) and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debentures and creditors of the Company, other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Securityholders, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV. SECTION 15.5. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Securityholder by such Securityholder's acceptance thereof authorizes and directs the Trustee on such Securityholder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XV and appoints the Trustee such Securityholder's attorney-in-fact for any and all such purposes. SECTION 15.6. NOTICE BY THE COMPANY. The Company shall give prompt written notice to a Responsible Officer of the Trustee at the Principal Office of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV, unless and until a Responsible Officer of the Trustee at the Principal Office of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not 54 have received the notice provided for in this Section at least 2 Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within 2 Business Days prior to such date. The Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee or representative on behalf of such holder), to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XV, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 15.7. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Article VI of this Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Securityholders, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise. Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6. SECTION 15.8. SUBORDINATION MAY NOT BE IMPAIRED. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. 55 Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Securityholders, without incurring responsibility to the Securityholders and without impairing or releasing the subordination provided in this Article XV or the obligations hereunder of the holders of the Debentures to the holders of such Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company, and any other Person. SECTION 15.9. PARI PASSU TO DECEMBER 4, 2002 DEBENTURES. Notwithstanding anything to the contrary herein, the Debentures shall be pari passu in all respects to those certain Floating Rate Junior Subordinated Deferrable Interest Debentures issued by the Company to BIC Statutory Trust I on December 4, 2002. Signatures appear on the following page 56 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written. BANCINSURANCE CORPORATION By /s/John Sokol ------------------------------------ Name: John Sokol Title: President JPMORGAN CHASE BANK, AS TRUSTEE By /s/Rebecca A. Newman -------------------------------------- Name: Rebecca A. Newman Title: Vice President EXHIBIT A FORM OF JUNIOR SUBORDINATED DEBENTURE [FORM OF FACE OF SECURITY] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO BANCINSURANCE CORPORATION (THE "COMPANY"), (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR A-1-1 EXEMPTION RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION. THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATE AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE OF BANCINSURANCE CORPORATION ___________, 2003 Bancinsurance Corporation, a corporation duly organized and existing under the laws of the State of Ohio (the "Company" which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to [_____________], not in its individual capacity but solely as Property Trustee for BIC Statutory Trust II (the "Holder") or registered assigns, the principal sum of [_____________] ($[_____________]) on September 30, 2033, and to pay interest on said principal sum from September 30, 2003, or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 30 and December 31 of each year, commencing December 31, A-1-2 2003, for the period beginning on (and including) the date of original issuance and ending on (but excluding) December 31, 2003 and for each successive period beginning on (and including) December 31, 2003, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each a "Distribution Period"), at a variable rate per annum equal to 3-Month LIBOR, determined as described below, plus 4.05% (the "Interest Rate"), applied to the principal amount hereof, until the principal hereof is paid or duly provided for or made available for payment, and on any overdue principal and (without duplication) on any overdue installment of interest at the same rate per annum, compounded quarterly, from the dates such amounts are due until they are paid or made available for payment. The amount of interest payable for any period will be computed on the basis of the actual number of days in the Distribution Period concerned divided by 360. In the event that any date on which interest is payable on this Debenture is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, which shall be fifteen days prior to the day on which the relevant Interest Payment Date occurs. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date. "3-Month LIBOR" as used herein, means: (1) On the second LIBOR Business Day (as defined below) prior to an Interest Payment Date (except with respect to the first interest payment period, such date shall be September 26, 2003) (each such day, a "LIBOR Determination Date"), LIBOR for any given security shall for the following interest payment period equal the rate, as obtained by the Calculation Agent from Bloomberg Financial Markets Commodities News, for 3-month Eurodollar deposits that appears on Dow Jones Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency Exchange Definitions), or such other page as may replace such Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date. (2) If, on any LIBOR Determination Date, such rate does not appear on Dow Jones Telerate Page 3750 or such other page as may replace such Page 3750, the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London interbank market for 3-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal such arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such quotations, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that leading banks in the City of New York selected by the Calculation Agent are quoting on the relevant LIBOR Determination Date for 3-month Eurodollar deposits in an A-1-3 amount determined by the Calculation Agent by reference to the principal London offices of leading banks in the London interbank market; provided that, if the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be LIBOR as determined on the previous LIBOR Determination Date. (3) As used herein: "Reference Banks" means four major banks in the London interbank market selected by the Calculation Agent; and "LIBOR Business Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London. The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law. All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one half cent being rounded upward)). The principal of and interest on this Debenture shall be payable at the office or agency of the Trustee (or other paying agent appointed by the Company) maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made by check mailed to the registered holder at such address as shall appear in the Debenture Register if a request for a wire transfer by such holder has not been received by the Company or by wire transfer to an account appropriately designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debenture is the Property Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Property Trustee. So long as no Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest (including Additional Interest) shall be due and payable. No Extension Period may end on a date other than an Interest Payment Date. At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's or such Affiliate's capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) and A-1-4 (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any reclassification, exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class of series of the Company's indebtedness for any class or series of the Company's capital stock, (c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, or pursuant to a merger, consolidation or other business combination, (d) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Preferred Securities Guarantee). Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. The Company must give the Trustee notice of its election to begin or extend such Extension Period at least 1 Business Day prior to the regular record date (as such term is used in Section 2.8 of the Indenture) immediately preceding the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. A-1-5 Notwithstanding anything to the contrary herein, this Debenture shall be pari passu in all respects to those certain Floating Rate Junior Subordinated Deferrable Interest Debentures issued by the Company to BIC Statutory Trust I on December 4, 2002. This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee. Capitalized terms used and not defined in this Debenture shall have the meanings assigned in the Indenture dated as of the date of original issuance of this Debenture between the Trustee and the Company. Signatures appear on the following page. A-1-6 IN WITNESS WHEREOF, the Company has duly executed this certificate. BANCINSURANCE CORPORATION By _________________________________ Name: Title: CERTIFICATE OF AUTHENTICATION This is one of the Debentures referred to in the within-mentioned Indenture. JPMORGAN CHASE BANK, AS TRUSTEE By: _______________________________ Authorized Officer A-1-7 EX-4.C 5 l03799aexv4wc.txt EXHIBIT 4(C) EXHIBIT 4(c) ================================================================================ AMENDED AND RESTATED DECLARATION OF TRUST BY AND AMONG JPMORGAN CHASE BANK AS PROPERTY TRUSTEE, CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION, AS DELAWARE TRUSTEE BANCINSURANCE CORPORATION, AS SPONSOR, AND JOHN SOKOL, SI SOKOL AND SALLY CRESS AS ADMINISTRATORS, DATED AS OF SEPTEMBER 30, 2003 ================================================================================ TABLE OF CONTENTS
PAGE ---- ARTICLE I INTERPRETATION AND DEFINITIONS............................................................ 1 Section 1.1. Definitions...................................................................... 1 ARTICLE II ORGANIZATION.............................................................................. 8 Section 2.1. Name............................................................................. 8 Section 2.2. Office........................................................................... 8 Section 2.3. Purpose.......................................................................... 8 Section 2.4. Authority........................................................................ 8 Section 2.5. Title to Property of the Trust................................................... 9 Section 2.6. Powers and Duties of the Trustees and the Administrators......................... 9 Section 2.7. Prohibition of Actions by the Trust and the Property Trustee..................... 12 Section 2.8. Powers and Duties of the Property Trustee........................................ 13 Section 2.9. Certain Duties and Responsibilities of the Property Trustee and Administrators................................................................... 15 Section 2.10. Certain Rights of Property Trustee............................................... 16 Section 2.11. Execution of Documents........................................................... 19 Section 2.12. Not Responsible for Recitals or Issuance of Securities........................... 19 Section 2.13. Duration of Trust................................................................ 19 Section 2.14. Mergers.......................................................................... 19 ARTICLE III SPONSOR................................................................................... 21 Section 3.1. Sponsor's Purchase of Common Securities.......................................... 21 Section 3.2. Responsibilities of the Sponsor.................................................. 21 Section 3.3. Expenses......................................................................... 21 Section 3.4. Right to Proceed................................................................. 22 ARTICLE IV PROPERTY TRUSTEE, DELAWARE TRUSTEE AND ADMINISTRATORS..................................... 22 Section 4.1. Property Trustee; Eligibility.................................................... 22 Section 4.2. Administrators................................................................... 23 Section 4.3. Appointment, Removal and Resignation of Property Trustee and Administrators................................................................... 23 Section 4.4. Property Trustee Vacancies....................................................... 25 Section 4.5. Effect of Vacancies.............................................................. 25 Section 4.6. Meetings of the Property Trustee and the Administrators.......................... 25 Section 4.7. Delegation of Power.............................................................. 25 Section 4.8. Conversion, Consolidation or Succession to Business.............................. 26 Section 4.9. Delaware Trustee................................................................. 26 ARTICLE V DISTRIBUTIONS............................................................................. 26 Section 5.1. Distributions.................................................................... 26
-i- TABLE OF CONTENTS (continued) ARTICLE VI ISSUANCE OF SECURITIES.................................................................... 26 Section 6.1. General Provisions Regarding Securities.......................................... 26 Section 6.2. Registrar and Paying Agent....................................................... 27 Section 6.3. Form and Dating.................................................................. 29 Section 6.4. Mutilated, Destroyed, Lost or Stolen Certificates................................ 29 Section 6.5. Temporary Securities............................................................. 30 Section 6.6. Cancellation..................................................................... 30 Section 6.7. Rights of Holders; Waivers of Past Defaults...................................... 30 ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST...................................................... 32 Section 7.1. Dissolution and Termination of Trust............................................. 32 ARTICLE VIII TRANSFER OF INTERESTS..................................................................... 33 Section 8.1. General.......................................................................... 33 Section 8.2. Transfer Procedures and Restrictions............................................. 34 Section 8.3. Deemed Security Holders.......................................................... 36 ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, PROPERTY TRUSTEE OR OTHERS.............. 36 Section 9.1. Liability........................................................................ 36 Section 9.2. Exculpation...................................................................... 37 Section 9.3. Fiduciary Duty................................................................... 37 Section 9.4. Indemnity........................................................................ 37 Section 9.5. Outside Businesses............................................................... 38 Section 9.6. Compensation; Fee................................................................ 39 ARTICLE X ACCOUNTING................................................................................ 39 Section 10.1. Fiscal Year...................................................................... 39 Section 10.2. Certain Accounting Matters....................................................... 39 Section 10.3. Banking.......................................................................... 40 Section 10.4. Withholding...................................................................... 40 ARTICLE XI AMENDMENTS AND MEETINGS................................................................... 41 Section 11.1. Amendments....................................................................... 41 Section 11.2. Meetings of the Holders of Securities; Action by Written Consent................. 43 ARTICLE XII REPRESENTATIONS OF PROPERTY TRUSTEE....................................................... 44 Section 12.1. Representations and Warranties of Property Trustee............................... 44 ARTICLE XIII MISCELLANEOUS............................................................................. 44 Section 13.1. Notices.......................................................................... 44 Section 13.2. Governing Law.................................................................... 46 Section 13.3. Intention of the Parties......................................................... 46
-ii- TABLE OF CONTENTS (continued) Section 13.4. Headings......................................................................... 46 Section 13.5. Successors and Assigns........................................................... 46 Section 13.6. Partial Enforceability........................................................... 46 Section 13.7. Counterparts..................................................................... 46
ANNEX I TERMS OF SECURITIES EXHIBIT A-1 FORM OF PREFERRED SECURITY CERTIFICATE [FORM OF FACE OF SECURITY] EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE EXHIBIT B SPECIMEN OF INITIAL DEBENTURE EXHIBIT C PURCHASE AGREEMENT EXHIBIT D Form of Transferor Certificate to be Executed by QIBs EXHIBIT E FORM OF TRANSFEREE CERTIFICATE TO BE EXECUTED BY TRANSFEREES OTHER THAN QIBS -iii- AMENDED AND RESTATED DECLARATION OF TRUST OF BIC STATUTORY TRUST II SEPTEMBER 30, 2003 AMENDED AND RESTATED DECLARATION OF TRUST ("Trust Agreement") dated and effective as of September 30, 2003, by the Property Trustee (as defined herein), the Delaware Trustee (as defined herein), the Administrators (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the assets of the Trust (as defined herein) to be issued pursuant to this Trust Agreement; WHEREAS, the Property Trustee, the Delaware Trustee, the Administrators and the Sponsor established BIC Statutory Trust II (the "Trust"), a statutory trust under the Statutory Trust Act (as defined herein) pursuant to a Declaration of Trust dated as of September 25, 2003 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of the State of the State of Delaware on September 25, 2003, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain debentures of the Debenture Issuer (as defined herein); and WHEREAS, the parties hereto, by this Trust Agreement, amend and restate each and every term and provision of the Original Declaration; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a statutory trust under the Statutory Trust Act and that this Trust Agreement constitutes the governing instrument of such statutory trust, the Property Trustee declares that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Trust Agreement. The parties hereto hereby agree as follows: ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1. DEFINITIONS. Unless the context otherwise requires: (a) Capitalized terms used in this Trust Agreement but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Trust Agreement has the same meaning throughout; (c) all references to "the Trust Agreement" or "this Trust Agreement" are to this Trust Agreement as modified, supplemented or amended from time to time; (d) all references in this Trust Agreement to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Trust Agreement unless otherwise specified; and (e) a reference to the singular includes the plural and vice versa. "Additional Interest" has the meaning set forth in the Indenture. "Administrative Action" has the meaning set forth in paragraph 4(a) of Annex I. "Administrators" means each of John Sokol, Si Sokol and Sally Cress, solely in such Person's capacity as Administrator of the Trust and not in such Person's individual capacity, or such Administrator's successor in interest in such capacity, or any successor appointed as herein provided. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Bankruptcy Event" means, with respect to any Person: (a) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of such Person or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or (b) such Person shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian or sequestrator (or other similar official) of such Person of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due. "Business Day" means any day other than Saturday, Sunday or any other day on which banking institutions in New York City, Houston, Texas or Wilmington, Delaware are permitted or required by any applicable law to close. "Calculation Agent" shall mean the Person appointed as Calculation Agent pursuant to Section 2.10 of the Indenture. "Certificate" means any certificate evidencing Securities. 2 "Closing Date" has the meaning set forth in the Purchase Agreement. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "Common Securities" has the meaning set forth in paragraph 1(b) of Annex I. "Common Security Certificate" means a definitive Certificate in fully registered form representing a Common Security substantially in the form of Exhibit A-2. "Company Indemnified Person" means (a) any Administrator; (b) any Affiliate of any Administrator; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Administrator; or (d) any officer, employee or agent of the Trust or its Affiliates. "Corporate Trust Office" means the office of the Institutional Trustee at which the corporate trust business of the Institutional Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Trust Agreement is located at 600 Travis, Suite 1150, Houston, Texas 77002, Attention: Institutional Trust Services. "Coupon Rate" has the meaning set forth in paragraph 2(a) of Annex I. "Covered Person" means: (a) any Administrator, officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) any of the Trust's Affiliates; and (b) any Holder of Securities. "Creditor" has the meaning set forth in Section 3.3. "Debenture Issuer" means Bancinsurance Corporation, an Ohio corporation, in its capacity as issuer of the Debentures under the Indenture. "Debenture Trustee" means JPMorgan Chase Bank, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means the Floating Rate Junior Subordinated Deferrable Interest Debentures due 2033 to be issued by the Debenture Issuer under the Indenture. "Defaulted Interest" has the meaning set forth in the Indenture. "Delaware Trustee" means Chase Manhattan Bank USA, National Association, a national banking association, solely in its capacity as Delaware Trustee of the Trust and not in its individual capacity, or its successor-in-interest in such capacity, or any successor Delaware Trustee appointed as herein provided. "Direct Action" has the meaning set forth in Section 2.8(d). "Distribution" means a distribution payable to Holders of Securities in accordance with Section 5.1. 3 "Distribution Payment Date" has the meaning set forth in paragraph 2(b) of Annex I. "Distribution Period" has the meaning set forth in paragraph 2(a) of Annex I. "Event of Default" means any one of the following events (whatever the reason for such event 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): (a) the occurrence of an Indenture Event of Default; or (b) default by the Trust in the payment of any Optional Redemption Price of any Security when it becomes due and payable; or (c) default in the performance, or breach, in any material respect, of any covenant or warranty of the Property Trustee in this Trust Agreement (other than those specified in clause (a) or (b) above) and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail to the Property Trustee and to the Sponsor by the Holders of at least 25% in aggregate liquidation amount of the outstanding Preferred Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (d) the occurrence of a Bankruptcy Event with respect to the Property Trustee if a successor Property Trustee has not been appointed within 90 days thereof. "Extension Period" has the meaning set forth in paragraph 2(b) of Annex I. "Fee Letter" means the fee letter, dated as of the date hereof, between Bancinsurance Corporation and JPMorgan Chase Bank, in its capacity as trustee under various agreements, including this Trust Agreement. "Fiduciary Indemnified Person" shall mean the Property Trustee, the Delaware Trustee, any Affiliate of the Property Trustee or the Delaware Trustee, and any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Property Trustee or the Delaware Trustee. "Fiscal Year" has the meaning set forth in Section 10.1. "Guarantee" means the guarantee agreement to be dated as of the Closing Date, of the Sponsor in respect of the Preferred Securities. "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Statutory Trust Act. "Indemnified Person" means a Company Indemnified Person or a Fiduciary Indemnified Person. 4 "Indenture" means the Indenture dated as of the Closing Date, between the Debenture Issuer and the Debenture Trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued, as such Indenture and any supplemental indenture may be amended, supplemented or otherwise modified from time to time. "Indenture Event of Default" means an "Event of Default" as defined in the Indenture. "Interest" means any interest due on the Debentures including any Additional Interest and Defaulted Interest. "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Investment Company Event" has the meaning set forth in paragraph 4(a) of Annex I. "LIBOR Determination Date" has the meaning set forth in paragraph 4(a) of Annex I. "Liquidation" has the meaning set forth in paragraph 3 of Annex I. "Liquidation Distribution" has the meaning set forth in paragraph 3 of Annex I. "Majority in liquidation amount of the Securities" means Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Preferred Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "Maturity Date" has the meaning set forth in paragraph 4(a) of Annex I. "Officers' Certificates" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person, and, with respect to the Administrators, a certificate signed by at least two Administrators. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for it in this Trust Agreement shall include: (a) a statement that each individual signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each individual in rendering the Officers' Certificate; (c) a statement that each such individual signing the Officers' Certificate has made such examination or investigation as, in such individual's opinion, is necessary to enable such 5 individual to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Optional Redemption Price" has the meaning set forth in paragraph 4(a) of Annex I. "Paying Agent" means any Person authorized by the Administrators to pay Distributions or other amounts in respect of any Securities on behalf of the Trust. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Securities" has the meaning set forth in paragraph 1(a) of Annex I. "Preferred Security Certificate" means a definitive Certificate in fully registered form representing a Preferred Security substantially in the form of Exhibit A-1. "Property Account" has the meaning set forth in Section 2.8(c). "Property Trustee" means the Trustee meeting the eligibility requirements set forth in Section 4.1. "Pro Rata" has the meaning set forth in paragraph 8 of Annex I. "Purchase Agreement" means the Purchase Agreement relating to the offering and sale of Preferred Securities in the form of Exhibit C. "QIB" means a "qualified institutional buyer" as defined in Rule 144A under the Securities Act. "Quorum" means a majority of the Administrators or, if there are only two Administrators, both of them. "Redemption Date" has the meaning set forth in paragraph 4(a) of Annex I. "Redemption/Distribution Notice" has the meaning set forth in paragraph 4(e) of Annex I. "Registrar" has the meaning set forth in Section 6.2. "Responsible Officer" means, with respect to the Property Trustee, any officer in the Institutional Trust Services Department of the Property Trustee having direct responsibility for the administration of this Trust Agreement. "Restricted Securities Legend" has the meaning set forth in Section 8.2(b). 6 "Rule 3a-5" means Rule 3a-5 under the Investment Company Act. "Rule 3a-7" means Rule 3a-7 under the Investment Company Act. "Securities" means the Common Securities and the Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. "Special Event" has the meaning set forth in paragraph 4(a) of Annex I. "Special Redemption Date" has the meaning set forth in paragraph 4(a) of Annex I. "Special Redemption Price" has the meaning set forth in paragraph 4(a) of Annex I. "Sponsor" means Bancinsurance Corporation, an Ohio corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del.C.Section 3801, et seq. as may be amended from time to time. "Successor Entity" has the meaning set forth in Section 2.14(b). "Successor Property Trustee" has the meaning set forth in Section 4.3(a). "Successor Securities" has the meaning set forth in Section 2.14(b). "Super Majority" has the meaning set forth in paragraph 5(b) of Annex I. "Tax Event" has the meaning set forth in paragraph 4(a) of Annex I. "3-Month LIBOR" has the meaning set forth in paragraph 4(a) of Annex I. "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trustees" means the Property Trustee and the Delaware Trustee. "Trust Property" means (a) the Debentures, (b) any cash on deposit in, or owing to, the Property Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to the trusts of this Trust Agreement. "25% in liquidation amount of the Securities" means Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Preferred Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of 25% or more of the aggregate liquidation amount (including the stated amount 7 that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "U.S. Person" means a United States Person as defined in Section 7701(a)(30) of the Code. ARTICLE II ORGANIZATION SECTION 2.1. NAME. The Trust is named "BIC Statutory Trust II," as such name may be modified from time to time by the Administrators following written notice to the Holders of the Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Administrators. SECTION 2.2. OFFICE. The address of the Delaware Trustee in the State of Delaware is Chase Manhattan Bank USA, National Association, c/o JPMorgan Chase Bank, 500 Stanton Christiana Road, Building 4, (3rd Floor), Newark, Delaware, 19713, Attention: Institutional Trust Services, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Holders, the Sponsor, the Property Trustee and the Administrators. The principal executive office of the Trust is c/o Bancinsurance Corporation, 250 East Broad Street, 10th Floor, Columbus, Ohio 43215. On at least 10 Business Days written notice to the Holders of the Securities, the Administrators may designate another principal office, which shall be in a state of the United States or in the District of Columbia. SECTION 2.3. PURPOSE. The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities representing undivided beneficial interests in the assets of the Trust, (b) to invest the gross proceeds from such sale to acquire the Debentures, (c) to facilitate direct investment in the assets of the Trust through issuance of the Common Securities and the Preferred Securities and (d) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust. SECTION 2.4. AUTHORITY. Except as specifically provided in this Trust Agreement, the Property Trustee shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Property Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Property Trustee acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Property Trustee to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Property Trustee as set forth in this Trust Agreement. The Administrators shall have only those ministerial duties set forth herein with respect to accomplishing the purposes of the Trust and are not intended to be trustees or fiduciaries with respect to the Trust or the Holders. The Property Trustee shall have the right, but shall not be obligated except as provided in Section 2.6, to perform those duties assigned to the Administrators. 8 SECTION 2.5. TITLE TO PROPERTY OF THE TRUST. Except as provided in Section 2.8 with respect to the Debentures and the Property Account or as otherwise provided in this Trust Agreement, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 2.6. POWERS AND DUTIES OF THE TRUSTEES AND THE ADMINISTRATORS. (a) The Trustees and the Administrators shall conduct the affairs of the Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in paragraph (b) of this Section, and in accordance with the following provisions (i) and (ii), the Property Trustee and the Administrators shall have the authority to enter into all transactions and agreements in exercising the authority, express or implied, otherwise granted to the Property Trustee or the Administrators, as the case may be, under this Trust Agreement, and to perform all acts in furtherance thereof, including without limitation, the following: (i) Each Administrator shall have the power and authority to act on behalf of the Trust with respect to the following matters: (A) the issuance and sale of the Securities; (B) to cause the Trust to enter into, and to execute and deliver on behalf of the Trust, such agreements as may be necessary or desirable in connection with the purposes and function of the Trust, including agreements with the Paying Agent; (C) ensuring compliance with the Securities Act and applicable state securities or blue sky laws; (D) the sending of notices (other than notices of default), and other information regarding the Securities and the Debentures to the Holders in accordance with this Trust Agreement; (E) the consent to the appointment of a Paying Agent and Registrar in accordance with this Trust Agreement, which consent shall not be unreasonably withheld or delayed; (F) execution and delivery of the Securities in accordance with this Trust Agreement; (G) execution and delivery of closing certificates pursuant to the Purchase Agreement and the application for a taxpayer identification number; (H) unless otherwise required by the Statutory Trust Act, to execute on behalf of the Trust (either acting alone or together with any or all of the Administrators) any documents that the Administrators have the power to execute pursuant to this Trust Agreement including execution of any Officer's Certificate required pursuant to Section 11.1; 9 (I) the taking of any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder); (J) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Preferred Securities and Holders of Common Securities as to such actions and applicable record dates; and (K) to duly prepare and file all applicable tax returns and tax information reports that are required to be filed with respect to the Trust on behalf of the Trust. (ii) As among the Property Trustee and the Administrators, the Property Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters: (A) the establishment of the Property Account; (B) the receipt of the Debentures; (C) the collection of interest, principal and any other payments made in respect of the Debentures in the Property Account; (D) the distribution through the Paying Agent of amounts owed to the Holders in respect of the Securities; (E) the exercise of all of the rights, powers and privileges of a holder of the Debentures; (F) the sending of notices of default and other information regarding the Securities and the Debentures to the Holders in accordance with this Trust Agreement; (G) the distribution of the Trust Property in accordance with the terms of this Trust Agreement; (H) to the extent provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of the State of the State of Delaware; (I) after any Event of Default (provided that such Event of Default is not by or with respect to the Property Trustee) the taking of any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and 10 protect and conserve the Trust Property for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder); and (J) to take all action that may be necessary for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Preferred Securities or to enable the Trust to effect the purposes for which the Trust was created. (iii) The Property Trustee shall have the power and authority to act on behalf of the Trust with respect to any of the duties, liabilities, powers or the authority of the Administrators set forth in Section 2.6(a)(i)(D), (E) and (F) herein but shall not have a duty to do any such act unless specifically requested to do so in writing by the Sponsor, and shall then be fully protected in acting pursuant to such written request; and in the event of a conflict between the action of the Administrators and the action of the Property Trustee, the action of the Property Trustee shall prevail. (b) So long as this Trust Agreement remains in effect, the Trust (or the Property Trustee or Administrators acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, neither the Property Trustee nor the Administrators may cause the Trust to (i) acquire any investments or engage in any activities not authorized by this Trust Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Holders, except as expressly provided herein, (iii) take any action that would reasonably be expected (x) to cause the Trust to fail or cease to qualify as a "grantor trust" for United States federal income tax purposes or (y) to require the trust to register as an Investment Company under the Investment Company Act, (iv) incur any indebtedness for borrowed money or issue any other debt or (v) take or consent to any action that would result in the placement of a lien on any of the Trust Property. The Property Trustee shall, at the sole cost and expense of the Trust, defend all claims and demands of all Persons at any time claiming any lien on any of the Trust Property adverse to the interest of the Trust or the Holders in their capacity as Holders. (c) In connection with the issuance and sale of the Preferred Securities, the Sponsor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Sponsor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) the taking of any action necessary to obtain an exemption from the Securities Act; (ii) the determination of the States in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and the determination of any and all such acts, other than actions which must be taken by or on behalf of the Trust, and the advice to the Administrators of actions they must take on behalf of the Trust, and the preparation for execution and filing of any documents to be executed and filed by the 11 Trust or on behalf of the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States in connection with the sale of the Preferred Securities; (iii) the negotiation of the terms of, and the execution and delivery of, the Purchase Agreement providing for the sale of the Preferred Securities; and (iv) the taking of any other actions necessary or desirable to carry out any of the foregoing activities. (d) Notwithstanding anything herein to the contrary, the Administrators and the Holders of a Majority in liquidation amount of the Common Securities are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not (i) be deemed to be an Investment Company required to be registered under the Investment Company Act, and (ii) fail to be classified as a "grantor trust" for United States federal income tax purposes. The Administrators and the Holders of a Majority in liquidation amount of the Common Securities shall not take any action inconsistent with the treatment of the Debentures as indebtedness of the Debenture Issuer for United States federal income tax purposes. In this connection, the Administrators and the Holders of a Majority in liquidation amount of the Common Securities are authorized to take any action, not inconsistent with applicable laws, the Certificate of Trust or this Trust Agreement, as amended from time to time, that each of the Administrators and the Holders of a Majority in liquidation amount of the Common Securities determines in their discretion to be necessary or desirable for such purposes. (e) Subject to the Fee Letter, all reasonable expenses incurred by the Administrators or the Property Trustee pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the Property Trustee and the Administrators shall have no obligations with respect to such expenses. (f) The assets of the Trust shall consist of the Trust Property. (g) Legal title to all Trust Property shall be vested at all times in the Property Trustee (in its capacity as such) and shall be held and administered by the Property Trustee and the Administrators for the benefit of the Trust in accordance with this Trust Agreement. (h) If the Property Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Trust Agreement and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Property Trustee or to such Holder, then and in every such case the Sponsor, the Property Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Property Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 2.7. PROHIBITION OF ACTIONS BY THE TRUST AND THE PROPERTY TRUSTEE. (a) The Trust shall not, and the Property Trustee shall cause the Trust not to, engage in any activity other than as required or authorized by this Trust Agreement. In particular, the Trust shall not and the Property Trustee shall cause the Trust not to: 12 (i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of the Securities pursuant to the terms of this Trust Agreement and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust Property for other than a Trust purpose; (iv) make any loans or incur any indebtedness other than loans represented by the Debentures; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever other than as expressly provided herein; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; (vii) carry on any "trade or business" as that phrase is used in the Code; or (viii) other than as provided in this Trust Agreement (including Annex I), (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, or (C) exercise any right to rescind or annul any Trust Agreement that the principal of all the Debentures shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received a written opinion of counsel to the effect that such modification will not cause the Trust to cease to be classified as a "grantor trust" for United States federal income tax purposes. SECTION 2.8. POWERS AND DUTIES OF THE PROPERTY TRUSTEE. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Trust and the Holders of the Securities. The right, title and interest of the Property Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Section 4.3 and shall cease as to such predecessor Property Trustee. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered. (b) The Property Trustee shall not transfer its right, title and interest in the Debentures to the Administrators. (c) The Property Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Property Account") in the name of and under the exclusive control of the Property Trustee and the Paying Agent, and maintained in the Property Trustee's trust department, 13 on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures, deposit such funds into the Property Account and make payments, or cause the Paying Agent to make payments, to the Holders of the Preferred Securities and Holders of the Common Securities from the Property Account in accordance with Section 5.1. Funds in the Property Account shall be held uninvested until disbursed in accordance with this Trust Agreement; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Preferred Securities and the Common Securities to the extent the Debentures are redeemed or mature; (iii) upon written notice of distribution issued by the Administrators in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain circumstances pursuant to the terms of the Securities; and (iv) act as Calculation Agent until removed in accordance with Section 2.10 of the Indenture. (d) The Property Trustee may bring or defend, pay, collect, compromise, arbitrate, resort to legal action with respect to, or otherwise adjust claims or demands of or against, the Trust that arise out of or in connection with an Event of Default of which a Responsible Officer of the Property Trustee has actual knowledge or arises out of the Property Trustee's duties and obligations under this Trust Agreement; provided, however, that if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the Redemption Date or the Special Redemption Date, as applicable), then a Holder of the Preferred Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Securities of such Holder (a "Direct Action") on or after the respective due dates specified in the Debentures. In connection with such Direct Action, the rights of the Holders of the Common Securities will be subrogated to the rights of such Holder of the Preferred Securities to the extent of any payment made by the Debenture Issuer to such Holder of the Preferred Securities in such Direct Action; provided, however, that no Holder of the Common Securities may exercise such right of subrogation so long as an Event of Default with respect to the Preferred Securities has occurred and is continuing. (e) The Property Trustee shall continue to serve as a Trustee until either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of the Securities pursuant to the terms of the Securities and this Trust Agreement; or (ii) a Successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 4.3. 14 (f) The Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a Holder of the Debentures under the Indenture and, if an Event of Default occurs and is continuing, the Property Trustee may, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to this Trust Agreement (including Annex I). (g) The Property Trustee must exercise the powers set forth in this Section 2.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 2.3, and the Property Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 2.3. SECTION 2.9. CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY TRUSTEE AND ADMINISTRATORS. (a) The Property Trustee, before the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Trust Agreement and no implied covenants shall be read into this Trust Agreement against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 6.7), the Property Trustee shall exercise such of the rights and powers vested in it by this Trust Agreement, 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. (b) The duties and responsibilities of the Property Trustee and the Administrators shall be as provided by this Trust Agreement. Notwithstanding the foregoing, no provision of this Trust Agreement shall require the Property Trustee or Administrators to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers if the Property Trustee or such Administrator shall have reasonable grounds to believe that repayment of such funds or adequate protection against such risk of liability is not reasonably assured to the Property Trustee or such Administrator. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Property Trustee or Administrators shall be subject to the provisions of this Article. Nothing in this Trust Agreement shall be construed to relieve an Administrator or the Property Trustee from liability for the Property Trustee's or such Administrator's own negligent act, the Property Trustee's or such Administrator's own negligent failure to act, or the Property Trustee's or such Administrator's own willful misconduct. To the extent that, at law or in equity, the Property Trustee or an Administrator has duties and liabilities relating to the Trust or to the Holders, the Property Trustee or such Administrator shall not be liable to the Trust or to any Holder for the Property Trustee's or such Administrator's good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of the Administrators or the Property Trustee otherwise existing at law or in equity, are agreed by the Sponsor and the Holders to replace such other duties and liabilities of the Administrators or the Property Trustee. (c) All payments made by the Property Trustee or a Paying Agent in respect of the Securities shall be made only from the revenue and proceeds from the Trust Property and only to 15 the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Property Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Holder, by its acceptance of a Security, agrees that it will look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Property Trustee and the Administrators are not personally liable to it for any amount distributable in respect of any Security or for any other liability in respect of any Security. This Section 2.9(c) does not limit the liability of the Property Trustee expressly set forth elsewhere in this Trust Agreement. (d) The Property Trustee shall not be liable for its own acts or omissions hereunder except as a result of its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (ii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Preferred Securities or the Common Securities, as applicable, relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement; (iii) the Property Trustee's sole duty with respect to the custody, safekeeping and physical preservation of the Debentures and the Property Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its fiduciary accounts generally, subject to the protections and limitations on liability afforded to the Property Trustee under this Trust Agreement; (iv) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor; and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Account maintained by the Property Trustee pursuant to Section 2.8(c)(i) and except to the extent otherwise required by law; and (v) the Property Trustee shall not be responsible for monitoring the compliance by the Administrators or the Sponsor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for any default or misconduct of the Administrators or the Sponsor. SECTION 2.10. CERTAIN RIGHTS OF PROPERTY TRUSTEE. Subject to the provisions of Section 2.9: (a) the Property Trustee may conclusively rely and shall fully be protected in acting, or refraining from acting, in good faith upon any resolution, opinion of counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, appraisal, bond, 16 debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (b) if (i) in performing its duties under this Trust Agreement, the Property Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Trust Agreement, the Property Trustee finds the same ambiguous or inconsistent with any other provisions contained herein, or (iii) the Property Trustee is unsure of the application of any provision of this Trust Agreement, then, except as to any matter as to which the Holders of Preferred Securities are entitled to vote under the terms of this Trust Agreement, the Property Trustee may deliver a notice to the Sponsor requesting the Sponsor's written instructions as to the course of action to be taken and the Property Trustee shall take such action, or refrain from taking such action, as the Property Trustee shall be instructed in writing, in which event the Property Trustee shall have no liability except for its own negligence or willful misconduct; (c) any direction or act of the Sponsor or the Administrators contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers' Certificate; (d) whenever in the administration of this Trust Agreement, the Property Trustee shall deem it desirable that a matter be proved or established before undertaking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may request and conclusively rely upon an Officers' Certificate as to factual matters which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Administrators; (e) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or reregistration thereof; (f) the Property Trustee may consult with counsel of its selection (which counsel may be counsel to the Sponsor or any of its Affiliates) and the advice of such 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 in reliance thereon and in accordance with such advice; the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Agreement from any court of competent jurisdiction; (g) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Holders pursuant to this Trust Agreement, unless such Holders shall have offered to the Property Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; provided, that nothing contained in this Section 2.10(g) shall be taken to relieve the Property Trustee, subject to Section 2.9(b), upon the occurrence of an Event of Default, to exercise such of the rights and powers vested in it by this Trust Agreement, 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; provided, further, that nothing in this Section 2.10(g) shall prevent the Property Trustee from exercising its rights under Section 4.3; 17 (h) the Property 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 evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Holders, but the Property Trustee may make such further inquiry or investigation into such facts or matters as it may see fit; (i) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of or for the supervision of, any such agent or attorney appointed with due care by it hereunder; (j) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (i) may request instructions from the Holders of the Preferred Securities which instructions may only be given by the Holders of the same proportion in liquidation amount of the Preferred Securities as would be entitled to direct the Property Trustee under the terms of the Preferred Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be fully protected in acting in accordance with such instructions; (k) except as otherwise expressly provided in this Trust Agreement, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Trust Agreement; (l) when the Property Trustee incurs expenses or renders services in connection with a Bankruptcy Event, such expenses (including the fees and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law or law relating to creditors rights generally; (m) the Property Trustee shall not be charged with knowledge of an Event of Default unless a Responsible Officer of the Property Trustee obtains actual knowledge of such event or the Property Trustee receives written notice of such event from any Holder, the Sponsor or the Debenture Trustee; (n) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Property Trustee to so act or as to its compliance with any of the terms and provisions of this Trust Agreement, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; and (o) no provision of this Trust Agreement shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable 18 law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 2.11. EXECUTION OF DOCUMENTS. Unless otherwise required by the Statutory Trust Act, the Property Trustee, or any one or more of the Administrators, as the case may be, is authorized to execute on behalf of the Trust any documents that the Property Trustee or the Administrators, as the case may be, have the power and authority to execute pursuant to Section 2.6. SECTION 2.12. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained in this Trust Agreement and the Securities shall be taken as the statements of the Sponsor, and the Property Trustee does not assume any responsibility for their correctness. The Property Trustee makes no representations as to the value or condition of the property of the Trust or any part thereof. The Property Trustee makes no representations as to the validity or sufficiency of this Trust Agreement, the Debentures or the Securities. SECTION 2.13. DURATION OF TRUST. The Trust, unless earlier dissolved pursuant to the provisions of Article VII hereof, shall be in existence for 35 years from the Closing Date. SECTION 2.14. MERGERS. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described in Section 2.14(b) and (c) and except in connection with the liquidation of the Trust and the distribution of the Debentures to Holders of Securities pursuant to Section 7.1(a)(iv) of the Trust Agreement or Section 4 of Annex I. (b) The Trust may, with the consent of the Property Trustee and without the consent of the Holders of the Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any state; provided that: (i) if the Trust is not the surviving entity, such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Securities other securities having substantially the same terms as the Securities (the "Successor Securities") so that the Successor Securities rank the same as the Securities rank with respect to Distributions and payments upon Liquidation, redemption and otherwise; (ii) the Sponsor expressly appoints a trustee of the Successor Entity that possesses substantially the same powers and duties as the Property Trustee as the Holder of the Debentures; 19 (iii) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect; (iv) the Property Trustee receives written confirmation from a nationally recognized statistical rating organization that rates securities issued by the initial purchaser of the Preferred Securities that it will not reduce or withdraw the rating of any such securities because of such merger, conversion, consolidation, amalgamation or replacement; (v) such Successor Entity has a purpose substantially identical to that of the Trust; (vi) prior to such merger, consolidation, amalgamation or replacement, the Trust has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect; (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (C) following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will continue to be classified as a "grantor trust" for United States federal income tax purposes; (vii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Guarantee; (viii) the Sponsor owns 100% of the common securities of any Successor Entity; and (ix) prior to such merger, consolidation, amalgamation or replacement, the Property Trustee shall have received an Officers' Certificate of the Administrators and an opinion of counsel, each to the effect that all conditions precedent under this Section 2.14(b) to such transaction have been satisfied. (c) Notwithstanding Section 2.14(b), the Trust shall not, except with the consent of Holders of 100% in aggregate liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes. 20 ARTICLE III SPONSOR SECTION 3.1. SPONSOR'S PURCHASE OF COMMON SECURITIES. On the Closing Date, the Sponsor will purchase all of the Common Securities issued by the Trust in an amount at least equal to 3% of the capital of the Trust, at the same time as the Preferred Securities are sold. SECTION 3.2. RESPONSIBILITIES OF THE SPONSOR. In connection with the issue and sale of the Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in, or direct the Administrators to engage in, the following activities: (a) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; and (b) to negotiate the terms of and/or execute on behalf of the Trust, the Purchase Agreement and other related agreements providing for the sale of the Preferred Securities. SECTION 3.3. EXPENSES. Subject to the Fee Letter, in connection with the offering, sale and issuance of the Debentures to the Trust and in connection with the sale of the Securities by the Trust, the Sponsor, in its capacity as Debenture Issuer, shall: (a) pay all reasonable costs and expenses relating to the offering, sale and issuance of the Debentures, including compensation of the Debenture Trustee under the Indenture in accordance with the provisions of the Indenture; (b) be responsible for and shall pay all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization, maintenance and dissolution of the Trust) and the offering, sale and issuance of the Securities, the reasonable fees and expenses (including reasonable counsel fees and expenses) of the Property Trustee, the Delaware Trustee and the Administrators and the costs and expenses relating to the operation of the Trust, including, without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, Paying Agents, Registrars, duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets and the enforcement by the Property Trustee of the rights of the Holders; and (c) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. The Sponsor's obligations under this Section 3.3 shall be for the benefit of, and shall be enforceable by, any Person to whom such debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor has received notice hereof. Any such Creditor may 21 enforce the Sponsor's obligations under this Section 3.3 directly against the Sponsor and the Sponsor irrevocably waives any right or remedy to require that any such Creditor take any action against the Trust or any other Person before proceeding against the Sponsor. The Sponsor agrees to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 3.3. SECTION 3.4. RIGHT TO PROCEED. The Sponsor acknowledges the rights of Holders to institute a Direct Action as set forth in Section 2.8(d) hereto. ARTICLE IV PROPERTY TRUSTEE, DELAWARE TRUSTEE AND ADMINISTRATORS SECTION 4.1. PROPERTY TRUSTEE; ELIGIBILITY. (a) There shall at all times be one Property Trustee which shall: (i) not be an Affiliate of the Sponsor; (ii) not offer or provide credit or credit enhancement to the Trust; and (iii) be a banking corporation or trust company organized and doing business under the laws of the United States of America or any state thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00), and subject to supervision or examination by Federal, state, or District of Columbia authority. If such corporation or trust company publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 4.1(a)(iii), the combined capital and surplus of such corporation or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 4.1(a), the Property Trustee shall immediately resign in the manner and with the effect set forth in Section 4.3(a). (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act of 1939, as amended, the Property Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to this Trust Agreement. (d) The initial Property Trustee shall be JPMorgan Chase Bank. SECTION 4.1A DELAWARE TRUSTEE REQUIRED. (a) If required by the Statutory Trust Act, there shall at all times be a Delaware Trustee with respect to the Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware or (ii) a legal entity that 22 has its principal place of business in the State of Delaware, otherwise meets the requirements of applicable Delaware law and shall act through one or more persons authorized to bind such entity. If at any time the Delaware Trustee shall cease to be eligible in accordance with the provisions of this Section 4.1A, it shall resign immediately in the manner and with the effect hereinafter specified in this Article IV. (b) The Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Property Trustee or the Administrators set forth herein. The Delaware Trustee shall be one of the trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Statutory Trust Act and for taking such actions as are required to be taken by a Delaware trustee under the Statutory Trust Act. The duties (including fiduciary duties), liabilities and obligations of the Delaware Trustee shall be limited to (a) accepting legal process served on the Trust in the State of Delaware and (b) the execution of any certificates required to be filed with the Secretary of State of the State of Delaware that the Delaware Trustee is required to execute under Section 3811 of the Statutory Trust Act and there shall be no other duties (including fiduciary duties) or obligations, express or implied, at law or in equity, of the Delaware Trustee. The Delaware Trustee shall have all rights, privileges and immunities of the Property Trustee. SECTION 4.2. ADMINISTRATORS. Each Administrator shall be a U.S. Person, 21 years of age or older and authorized to bind the Sponsor. The initial Administrators shall be John Sokol, Si Sokol and Sally Cress. There shall at all times be at least one Administrator. Except where a requirement for action by a specific number of Administrators is expressly set forth in this Trust Agreement and except with respect to any action the taking of which is the subject of a meeting of the Administrators, any action required or permitted to be taken by the Administrators may be taken by, and any power of the Administrators may be exercised by, or with the consent of, any one such Administrator. SECTION 4.3. APPOINTMENT, REMOVAL AND RESIGNATION OF PROPERTY TRUSTEE AND ADMINISTRATORS. (a) Notwithstanding anything to the contrary in this Trust Agreement, no resignation or removal of the Property Trustee and no appointment of a Successor Property Trustee pursuant to this Article shall become effective until the acceptance of appointment by the Successor Property Trustee in accordance with the applicable requirements of this Section 4.3. Subject to the immediately preceding paragraph, the Property Trustee may resign at any time by giving written notice thereof to the Sponsor. Upon the resignation of the Property Trustee, the Holders of the Common Securities shall appoint a successor meeting the eligibility requirements (the "Successor Property Trustee"). If the instrument of acceptance by the Successor Property Trustee required by this Section 4.3 shall not have been delivered to the Property Trustee within 60 days after the giving of such notice of resignation or delivery of the instrument of removal, the Property Trustee may petition, at the expense of the Trust, any Federal, state or District of Columbia court of competent jurisdiction for the appointment of a Successor Property Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Property Trustee. The Property Trustee shall have no liability for the selection of such successor pursuant to this Section 4.3. 23 The Property Trustee may be removed by the act of the Holders of a Majority in liquidation amount of the Preferred Securities, delivered to the Property Trustee (in its individual capacity and on behalf of the Trust) if an Event of Default shall have occurred and be continuing. If the Property Trustee shall be so removed, the Holders of Preferred Securities, by act of the Holders of a Majority in liquidation amount of the Preferred Securities then outstanding delivered to the Property Trustee, shall promptly appoint a Successor Property Trustee, and such Successor Property Trustee shall comply with the applicable requirements of this Section 4.3. If no Successor Property Trustee shall have been so appointed by the Holders of a Majority in liquidation amount of the Preferred Securities and accepted appointment in the manner required by this Section 4.3, within 30 days after delivery of an instrument of removal, any Holder who has been a Holder of the Securities for at least 6 months may, on behalf of himself and all others similarly situated, petition any Federal, state or District of Columbia court of competent jurisdiction for the appointment of the Successor Property Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Property Trustee. The Property Trustee shall give notice of its resignation to the Sponsor and the Successor Property Trustee shall give notice of a removal and each appointment of a Successor Property Trustee to all Holders in the manner provided in Section 13.1(d) and shall give notice to the Sponsor. Each notice shall include the name of the Successor Property Trustee and the address of its Corporate Trust Office. (b) In case of the appointment hereunder of a Successor Property Trustee, the retiring Property Trustee and the Successor Property Trustee shall execute and deliver an amendment hereto wherein the Successor Property Trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, the Successor Property Trustee all the rights, powers, trusts and duties of the retiring Property Trustee with respect to the Securities and the Trust and (ii) shall add to or change any of the provisions of this Trust Agreement as shall be necessary to provide for or facilitate the administration of the Trust by more than one Property Trustee, it being understood that nothing herein or in such amendment shall constitute such Property Trustees co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Property Trustee shall become effective to the extent provided therein and each Successor Property Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Property Trustee; but, on request of the Trust or any Successor Property Trustee such retiring Property Trustee shall duly assign, transfer and deliver to such Successor Property Trustee all Trust Property, all proceeds thereof and money held by such retiring Property Trustee hereunder with respect to the Securities and the Trust. (c) No Property Trustee shall be liable for the acts or omissions to act of any Successor Property Trustee. (d) The Holders of the Preferred Securities will have no right to vote to appoint, remove or replace the Administrators, which voting rights are hereby vested exclusively in the Holder of the Common Securities. 24 SECTION 4.4. PROPERTY TRUSTEE VACANCIES. If the Property Trustee ceases to hold office for any reason a vacancy shall occur. A resolution certifying the existence of such vacancy by the Property Trustee, the Delaware Trustee or any Administrator shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a trustee appointed in accordance with Section 4.3. SECTION 4.5. EFFECT OF VACANCIES. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of the Property Trustee, the Delaware Trustee or any Administrator shall not operate to dissolve, terminate or annul the Trust or terminate this Trust Agreement. SECTION 4.6. MEETINGS OF THE PROPERTY TRUSTEE AND THE ADMINISTRATORS. Meetings of the Administrators shall be held from time to time upon the call of an Administrator. Regular meetings of the Administrators may be held in person in the United States or by telephone, at a place (if applicable) and time fixed by resolution of the Administrators. Notice of any in-person meetings of the Property Trustee with the Administrators or meetings of the Administrators shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Property Trustee with the Administrators or meetings of the Administrators or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of the Property Trustee or an Administrator, as the case may be, at a meeting shall constitute a waiver of notice of such meeting except where the Property Trustee or an Administrator, as the case may be, attends a meeting for the express purpose of objecting to the transaction of any activity on the grounds that the meeting has not been lawfully called or convened. Unless provided otherwise in this Trust Agreement, any action of the Property Trustee or the Administrators, as the case may be, may be taken at a meeting by vote of the Property Trustee or a majority vote of the Administrators present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Property Trustee or the Administrators. Meetings of the Property Trustee and the Administrators together shall be held from time to time upon the call of the Property Trustee or an Administrator. SECTION 4.7. DELEGATION OF POWER. (a) Any Administrator may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 that is a U.S. Person his or her power for the purpose of executing any documents contemplated in Section 2.6; and (b) the Administrators shall have power to delegate from time to time to such of their number the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrators or otherwise as the Administrators may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. 25 SECTION 4.8. CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any Person into which the Property 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 Property Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Property Trustee shall be the successor of the Property Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. SECTION 4.9. DELAWARE TRUSTEE. The provisions of this Article IV governing the appointment, removal and resignation and vacancies of the Property Trustee shall apply to the Delaware Trustee, so long as one is required. Upon the appointment of a successor Delaware Trustee, such successor shall file a certificate of amendment to the certificate of trust in accordance with Section 3810 of the Statutory Trust Act. ARTICLE V DISTRIBUTIONS SECTION 5.1. DISTRIBUTIONS. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Preferred Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debenture Issuer makes a payment of Interest or any principal on the Debentures held by the Property Trustee, the Paying Agent shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of such amounts to Holders. ARTICLE VI ISSUANCE OF SECURITIES SECTION 6.1. GENERAL PROVISIONS REGARDING SECURITIES. (a) The Administrators shall, on behalf of the Trust, issue one series of preferred securities substantially in the form of Exhibit A-1 representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I and one series of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I. The Trust shall issue no securities or other interests in the assets of the Trust other than the Preferred Securities and the Common Securities. The Preferred Securities rank pari passu to, and payment thereon shall be made Pro Rata with, the Common Securities except that, where an Event of Default has occurred and is continuing, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Preferred Securities as set forth in Annex I. (b) The Certificates shall be signed on behalf of the Trust by one or more Administrators. Such signature shall be the facsimile or manual signature of any Administrator. In case any Administrator of the Trust who shall have signed any of the Securities shall cease to 26 be such Administrator before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Administrator, and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be an Administrator of the Trust, although at the date of the execution and delivery of the Trust Agreement any such person was not such an Administrator. A Preferred Security Certificate shall not be valid until authenticated by the facsimile or manual signature of an authorized signatory of the Property Trustee. Such signature shall be conclusive evidence that the Preferred Security Certificate has been authenticated under this Trust Agreement. Upon written order of the Trust signed by at least one Administrator, the Property Trustee shall authenticate the Preferred Securities Certificate for original issue. The Property Trustee may appoint an authenticating agent that is a U.S. Person acceptable to the Trust to authenticate the Preferred Securities Certificate. A Common Security Certificate need not be so authenticated. (c) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (d) Upon issuance of the Securities as provided in this Trust Agreement, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable. (e) Every Person, by virtue of having become a Holder in accordance with the terms of this Trust Agreement, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Trust Agreement and the Guarantee. SECTION 6.2. REGISTRAR AND PAYING AGENT. (a) The Property Trustee shall keep or cause to be kept, at the Corporate Trust Office, a register or registers (the "Register") in which the registrar and transfer agent with respect to the Trust Securities (the "Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Preferred Securities Certificates and Common Securities Certificates and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. The Person acting as the Property Trustee shall at all times also be the Registrar. The provisions of Article IX shall apply to the Property Trustee in its role as Registrar. (b) Subject to Section 6.2(d), upon surrender for registration of transfer of any Preferred Securities Certificate at the office or agency maintained pursuant to Section 6.2(f), the Administrators or any one of them shall execute by manual or facsimile signature and deliver to the Property Trustee, and the Property Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities Certificates in authorized denominations of a like aggregate Liquidation Amount as may be required by this Trust Agreement dated the date of execution by such Administrator or Trustee. At the option of a Holder, Preferred Securities Certificates may be exchanged for other Preferred Securities Certificates in authorized denominations and of a like aggregate Liquidation Amount upon surrender of the Preferred Securities Certificate to be exchanged at the office or agency maintained pursuant to Section 6.2(f). Whenever any Preferred Securities Certificates are so surrendered for exchange, the Administrators or any one of them shall execute by manual or facsimile signature and deliver to the Property Trustee, and the Property Trustee shall 27 authenticate and deliver, the Preferred Securities Certificates that the Holder making the exchange is entitled to receive. (c) The Registrar shall not be required, (i) to issue, register the transfer of or exchange any Preferred Security during a period beginning at the opening of business fifteen (15) days before the day of selection for redemption of such Preferred Securities pursuant to Annex I and ending at the close of business on the day of mailing of the notice of redemption or (ii) to register the transfer of or exchange any Preferred Security so selected for redemption in whole or in part, except, in the case of any such Preferred Security to be redeemed in part, any portion thereof not to be redeemed. (d) Every Preferred Securities Certificate presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by the Holder or such Holder's attorney duly authorized in writing and (i) if such Preferred Securities Certificate is being transferred to a QIB, accompanied by a certificate of the transferor substantially in the form set forth as Exhibit E hereto or (ii) if such Preferred Securities Certificate is being transferred otherwise than to a QIB, accompanied by a certificate of the transferee substantially in the form set forth as Exhibit F hereto. (e) No service charge shall be made for any registration of transfer or exchange of Preferred Securities Certificates, but the Property Trustee on behalf of the Trust may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities Certificates. (f) The Administrators shall designate an office or offices or agency or agencies where Preferred Securities Certificates may be surrendered for registration of transfer or exchange. The Administrators initially designate the Corporate Trust Office of the Property Trustee as its office and agency for such purposes. The Administrators shall give prompt written notice to the Property Trustee and to the Holders of any change in the location of any such office or agency. (g) The Paying Agent shall initially be the Property Trustee. The Paying Agent shall make Distributions to Holders from the Property Account and shall report the amounts of such Distributions to the Property Trustee and the Administrators. Any Paying Agent shall have the revocable power to withdraw funds from the Property Account solely for the purpose of making the Distributions referred to above. The Administrators may revoke such power and remove the Paying Agent in their sole discretion. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon thirty (30) days' written notice to the Administrators and the Property Trustee. If the Property Trustee shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrators shall appoint a successor (which shall be a bank or trust company) to act as Paying Agent. Such successor Paying Agent appointed by the Administrators shall execute and deliver to the Trustees an instrument in which such successor Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent will hold all sums, if any, held by it for payment to the Holders in trust for the benefit of the Holders entitled thereto until such sums shall be paid to such Holders. The Paying Agent shall return all unclaimed funds to the Property Trustee and 28 upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Article IX shall apply to the Property Trustee also in its role as Paying Agent, for so long as the Property Trustee shall act as Paying Agent and, to the extent applicable, to any other Paying Agent appointed hereunder. Any reference in this Trust Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. SECTION 6.3. FORM AND DATING. The Preferred Securities Certificates and the Property Trustee's certificate of authentication thereon shall be substantially in the form of Exhibit A-1, and the Common Securities Certificates shall be substantially in the form of Exhibit A-2, each of which is hereby incorporated in and expressly made a part of this Trust Agreement. Certificates may be typed, printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrators, as conclusively evidenced by one or more of their execution thereof. The Securities may have letters, numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Sponsor). The Trust at the direction of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the Property Trustee in writing. Each Preferred Security Certificate shall be dated on or before the date of its authentication. The terms and provisions of the Securities set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the terms of this Trust Agreement and to the extent applicable, the Property Trustee, the Administrators and the Sponsor, by their execution and delivery of this Trust Agreement, expressly agree to such terms and provisions and to be bound thereby. Preferred Securities will be issued only in blocks having a stated liquidation amount of not less than $100,000.00 and any multiple of $1,000.00 in excess thereof. The Preferred Securities are being offered and sold by the Trust pursuant to the Purchase Agreement in definitive, registered form without coupons and with the Restricted Securities Legend. SECTION 6.4. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If: (a) any mutilated Certificates should be surrendered to the Registrar, or if the Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Property Trustee such security or indemnity as may be required by it to keep the Registrar, the Administrators and the Property Trustee harmless; then, in the absence of notice that such Certificate shall have been acquired by a protected purchaser, an Administrator on behalf of the Trust shall execute (and in the case of a Preferred Security Certificate, the Property Trustee shall authenticate) and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 6.4, the Registrar or the Administrators may require the payment of a sum sufficient to cover any tax or 29 other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. SECTION 6.5. TEMPORARY SECURITIES. Until definitive Securities are ready for delivery, the Administrators may prepare and, in the case of the Preferred Securities, the Property Trustee shall authenticate, temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Administrators consider appropriate for temporary Securities. Without unreasonable delay, the Administrators shall prepare and, in the case of the Preferred Securities, the Property Trustee shall authenticate, definitive Securities in exchange for temporary Securities. SECTION 6.6. CANCELLATION. The Administrators at any time may deliver Securities to the Property Trustee for cancellation. The Registrar shall forward to the Property Trustee any Securities surrendered to it for registration of transfer, redemption or payment. The Property Trustee shall promptly cancel all Securities surrendered for registration of transfer, payment, replacement or cancellation and shall retain such canceled Securities in accordance with its customary practices. The Administrators may not issue new Securities to replace Securities that have been paid or that have been delivered to the Property Trustee for cancellation. SECTION 6.7. RIGHTS OF HOLDERS; WAIVERS OF PAST DEFAULTS. (a) The legal title to the Trust Property is vested exclusively in the Property Trustee (in its capacity as such) in accordance with Section 2.5, and the Holders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Securities and the Holders thereof shall have no preemptive or similar rights. (b) For so long as any Preferred Securities remain outstanding, if upon an Indenture Event of Default, the Debenture Trustee fails or the holders of not less than 25% in principal amount of the outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the Holders of a Majority in liquidation amount of the Preferred Securities then outstanding shall have the right to make such declaration by a notice in writing to the Property Trustee, the Sponsor and the Debenture Trustee. At any time after a declaration of acceleration with respect to the Debentures has been made and before a judgment or decree for payment of the money due has been obtained by the Debenture Trustee as provided in the Indenture, if the Property Trustee fails to annul any such Trust Agreement and waive such default, the Holders of a Majority in liquidation amount of the Preferred Securities, by written notice to the Property Trustee, the Sponsor and the Debenture Trustee, may rescind and annul such Trust Agreement and its consequences if: (i) the Debenture Issuer has paid or deposited with the Debenture Trustee a sum sufficient to pay 30 (A) all overdue installments of interest on all of the Debentures, (B) any accrued Additional Interest on all of the Debentures, (C) the principal of (and premium, if any, on) any Debentures that have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Debentures, and (D) all sums paid or advanced by the Debenture Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee and the Property Trustee, their agents and counsel; and (ii) all Events of Default with respect to the Debentures, other than the nonpayment of the principal of the Debentures that has become due solely by such acceleration, have been cured or waived as provided in Section 5.7 of the Indenture. The Holders of at least a Majority in liquidation amount of the Preferred Securities may, on behalf of the Holders of all the Preferred Securities, waive any past default or Event of Default, except a default or Event of Default in the payment of principal or interest (unless such default or Event of Default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee) or a default or Event of Default in respect of a covenant or provision that under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Debenture. No such rescission shall affect any subsequent default or impair any right consequent thereon. Upon receipt by the Property Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, by Holders of any part of the Preferred Securities, a record date shall be established for determining Holders of outstanding Preferred Securities entitled to join in such notice, which record date shall be at the close of business on the day the Property Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day that is 90 days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written notice that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 6.7. (c) Except as otherwise provided in paragraphs (a) and (b) of this Section 6.7, the Holders of at least a Majority in liquidation amount of the Preferred Securities may, on behalf of the Holders of all the Preferred Securities, waive any past default or Event of Default and its 31 consequences. Upon such waiver, any such default or Event of Default shall cease to exist, and any default or Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Trust Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST SECTION 7.1. DISSOLUTION AND TERMINATION OF TRUST. (a) The Trust shall dissolve on the first to occur of: (i) unless earlier dissolved, on September 30, 2038, the expiration of the term of the Trust; (ii) upon a Bankruptcy Event with respect to the Sponsor, the Trust or the Debenture Issuer; (iii) (other than in connection with a merger, consolidation or similar transaction not prohibited by the Indenture, this Trust Agreement or the Guarantee, as the case may be) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor, upon the consent of Holders of a Majority in liquidation amount of the Securities voting together as a single class to file a certificate of cancellation with respect to the Trust or upon the revocation of the charter of the Sponsor and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iv) upon exercise of the right of the Holder of all of the outstanding Common Securities to dissolve the Trust as provided in Annex I hereto; (v) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor, the Trust or the Debenture Issuer; (vi) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; or (vii) before the issuance of any Securities, with the consent of the Property Trustee and the Sponsor. (b) As soon as is practicable after the occurrence of an event referred to in Section 7.1(a), and after satisfaction of liabilities to creditors of the Trust as required by applicable law, including of the Statutory Trust Act, and subject to the terms set forth in Annex I, the Delaware Trustee shall, upon receipt of direction from the Administrators, terminate the Trust by filing a certificate of cancellation with the Secretary of the State of the State of Delaware and shall notify the Property Trustee in writing of such filing as soon as such filing has been made. 32 (c) The provisions of Section 2.9 and Article IX shall survive the termination of the Trust. ARTICLE VIII TRANSFER OF INTERESTS SECTION 8.1. GENERAL. (a) Subject to Section 8.1(c), where Preferred Securities are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for an equal number of Preferred Securities represented by different certificates, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfer and exchanges, the Trust shall issue and the Property Trustee shall authenticate Preferred Securities Certificates at the Registrar's request. (b) Upon issuance of the Common Securities, the Sponsor shall acquire and retain beneficial and record ownership of the Common Securities and for so long as the Securities remain outstanding, the Sponsor shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Sponsor, in its capacity as Debenture Issuer, under the Indenture that is a U.S. Person may succeed to the Sponsor's ownership of the Common Securities. (c) Preferred Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Trust Agreement and in the terms of the Securities. To the fullest extent permitted by applicable law, any transfer or purported transfer of any Security not made in accordance with this Trust Agreement shall be null and void and will be deemed to be of no legal effect whatsoever and any such transferee shall be deemed not to be the holder of such Preferred Securities for any purpose, including but not limited to the receipt of Distributions on such Preferred Securities, and such transferee shall be deemed to have no interest whatsoever in such Preferred Securities. (d) The Registrar shall provide for the registration of Securities and of transfers of Securities, which will be effected without charge but only upon payment (with such indemnity as the Registrar may require) in respect of any tax or other governmental charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Securities, the Registrar shall cause one or more new Securities of the same tenor to be issued in the name of the designated transferee or transferees. Every Security surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Security surrendered for registration of transfer shall be canceled by the Property Trustee pursuant to Section 6.6. A transferee of a Security shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Security. By acceptance of a Security, each transferee shall be deemed to have agreed to be bound by this Trust Agreement. 33 (e) The Trust shall not be required (i) to issue, register the transfer of, or exchange any Securities during a period beginning at the opening of business 15 days before the day of any selection of Securities for redemption and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of the Securities to be redeemed, or (ii) to register the transfer or exchange of any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. SECTION 8.2. TRANSFER PROCEDURES AND RESTRICTIONS. (a) The Preferred Securities shall bear the Restricted Securities Legend, which shall not be removed unless there is delivered to the Property Trustee and the Sponsor such satisfactory evidence, which may include an opinion of counsel, as may be reasonably required to ensure that neither the legend nor the restrictions on transfer set forth therein are required to comply with the provisions of the Securities Act. Upon provision of such satisfactory evidence, the Administrators shall execute and deliver to the Property Trustee and the Property Trustee shall authenticate and deliver, at the written direction of the Administrators, Preferred Securities that do not bear the legend. (b) Except as permitted by Section 8.2(a), each Preferred Security shall bear a legend (the "Restricted Securities Legend") in substantially the following form and a Preferred Security shall not be transferred except in compliance with such legend, unless otherwise determined by the Sponsor, upon the advice of counsel expert in securities law, in accordance with applicable law: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN 34 THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS PREFERRED SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION. 35 THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. (c) To permit registrations of transfers and exchanges, the Administrators shall execute and the Property Trustee shall authenticate Preferred Securities at the Registrar's request. (d) Registrations of transfers or exchanges will be effected without charge, but only upon payment (with such indemnity as the Registrar or the Sponsor may require) in respect of any tax or other governmental charge that may be imposed in relation to it. (e) All Preferred Securities issued upon any registration of transfer or exchange pursuant to the terms of this Trust Agreement shall evidence the same security and shall be entitled to the same benefits under this Trust Agreement as the Preferred Securities surrendered upon such registration of transfer or exchange. SECTION 8.3. DEEMED SECURITY HOLDERS. The Trust, the Administrators, the Property Trustee, the Paying Agent, or the Registrar may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust, the Administrators, the Property Trustee, the Paying Agent, or the Registrar shall have actual or other notice thereof. ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, PROPERTY TRUSTEE OR OTHERS SECTION 9.1. LIABILITY. (a) Except as expressly set forth in this Trust Agreement, the Guarantee and the terms of the Securities, the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; or (ii) required to pay to the Trust or to any Holder of the Securities any deficit upon dissolution of the Trust or otherwise. 36 (b) Pursuant to the Statutory Trust Act, the Holders of the Preferred Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 9.2. EXCULPATION. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Trust Agreement or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and, if selected by such Indemnified Person, has been selected by such Indemnified Person with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. SECTION 9.3. FIDUCIARY DUTY. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Trust Agreement shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of the Indemnified Person. (b) Whenever in this Trust Agreement an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Trust Agreement or by applicable law. SECTION 9.4. INDEMNITY. 37 (a) The Sponsor agrees to the fullest extent permitted by applicable law, to indemnify and hold harmless each Indemnified Person from and against any loss, damage, liability, tax (other than income, franchise or other taxes imposed on amounts paid pursuant to Section 3.3 or 9.6 hereof), penalty, expense or claim of any kind or nature whatsoever incurred without negligence (or, in the case of the Delaware Trustee, gross negligence), bad faith or willful misconduct on its part, arising out of or in connection with the acceptance or administration of the Trust hereunder, including the advancement of funds to cover the cost and expenses of defending itself against any claims or liability in connection with the exercise or performance of any of its powers or its duties hereunder; provided, however, that the Sponsor shall have no such obligation to make any such advancement unless it receives an undertaking, by or on behalf of such Indemnified Person, to repay such amount if it is determined that such Indemnified Person is not entitled to be indemnified pursuant to this Section 9.4. (b) The Trust shall have no payment, reimbursement or indemnity obligations to any Indemnified Person under this Section 9.4 or Section 3.3 or 9.6 hereof. The provisions of this Section 9.4 shall survive the termination of this Trust Agreement and the earlier removal or resignation of any Trustee. (c) No Indemnified Person may claim any Lien on any Trust Property whether before or after termination of the Trust as a result of any amount due pursuant to this Section 9.4. (d) In no event shall the Property Trustee and the Delaware Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its reasonable control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Trust Agreement. (e) The Sponsor or the Trust may purchase and maintain insurance on behalf of any Person who is or was an Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Sponsor would have the power to indemnify him against such liability under the provisions of this Section 9.4. (f) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 9.4 shall, unless otherwise provided when authorized or ratified, (i) continue as to a Person who has ceased to be an Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a Person; and (ii) survive the termination or expiration of this Trust Agreement or the earlier removal or resignation of an Indemnified Person. SECTION 9.5. OUTSIDE BUSINESSES. Any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee (subject to Section 4.1(c)) may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Trust Agreement in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the 38 business of the Trust, shall not be deemed wrongful or improper. None of any Covered Person, the Sponsor, the Delaware Trustee or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. SECTION 9.6. COMPENSATION; FEE. Subject to the Fee Letter, the Sponsor agrees: (a) to pay to the Property Trustee and the Delaware Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (b) except as otherwise expressly provided herein, to reimburse the Property Trustee and the Delaware Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by the Property Trustee or the Delaware Trustee in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of their respective agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence (or, in the case of the Delaware Trustee, its gross negligence), bad faith or willful misconduct. The provisions of this Section 9.6 shall survive the dissolution of the Trust and the termination of this Trust Agreement and the removal or resignation of the Property Trustee and the Delaware Trustee. No Trustee may claim any lien or charge on any property of the Trust as a result of any amount due pursuant to this Section 9.6. ARTICLE X ACCOUNTING SECTION 10.1. FISCAL YEAR. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 10.2. CERTAIN ACCOUNTING MATTERS. (a) At all times during the existence of the Trust, the Administrators shall keep, or cause to be kept at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust. The books of account shall be maintained, at the Sponsor's expense, in accordance with generally accepted accounting principles, consistently applied. The books of account and the records of the Trust 39 shall be examined by and reported upon (either separately or as part of the Sponsor's regularly prepared consolidated financial report) as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Administrators. (b) The Administrators shall cause to be duly prepared and delivered to each of the Holders of Securities Form 1099 or such other annual United States federal income tax information statement required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Administrators shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. (c) The Administrators, at the Sponsor's expense, shall cause to be duly prepared at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, and filed an annual United States federal income tax return on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Administrators on behalf of the Trust with any state or local taxing authority. SECTION 10.3. BANKING. The Trust shall maintain in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Property Trustee shall be made directly to the Property Account and no other funds of the Trust shall be deposited in the Property Account. The sole signatories for such accounts (including the Property Account) shall be designated by the Property Trustee. SECTION 10.4. WITHHOLDING. The Property Trustee or any Paying Agent and the Administrators shall comply with all withholding requirements under United States federal, state and local law. The Property Trustee or any Paying Agent shall request, and each Holder shall provide to the Property Trustee or any Paying Agent, such forms or certificates as are necessary to establish an exemption from withholding with respect to the Holder, and any representations and forms as shall reasonably be requested by the Property Trustee or any Paying Agent to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Administrators shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Property Trustee or any Paying Agent is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a Distribution in the amount of the withholding to the Holder. In the event of any claimed overwithholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Property Trustee or any Paying Agent may reduce subsequent Distributions by the amount of such withholding. 40 ARTICLE XI AMENDMENTS AND MEETINGS SECTION 11.1. AMENDMENTS. (a) Except as otherwise provided in this Trust Agreement or by any applicable terms of the Securities, this Trust Agreement may only be amended by a written instrument approved and executed by the Property Trustee. (b) Notwithstanding any other provision of this Article XI, an amendment may be made, and any such purported amendment shall be valid and effective only if: (i) the Property Trustee shall have first received (A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Trust Agreement (including the terms of the Securities); and (B) an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Trust Agreement (including the terms of the Securities); and (ii) the result of such amendment would not be to (A) cause the Trust to cease to be classified for purposes of United States federal income taxation as a grantor trust; or (B) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act. (c) Except as provided in Sections 4.3(b), 11.1(d), (e) or (h), no amendment shall be made, and any such purported amendment shall be void and ineffective unless the Holders of a Majority in liquidation amount of the Preferred Securities shall have consented to such amendment. (d) In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Holder, this Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Securities as of a specified date or change any conversion or exchange provisions or (ii) restrict the right of a Holder to institute suit for the enforcement of any such payment on or after such date. (e) Section 8.1(b) and 8.1(c) and this Section 11.1 shall not be amended without the consent of all of the Holders of the Securities. (f) Article III shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities. 41 (g) The rights of the Holders of the Preferred Securities under Article IV to appoint and remove the Property Trustee shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Preferred Securities. (h) Subject to Sections 11.1(b)-(g), this Trust Agreement may be amended by the Property Trustee and the Holders of a Majority in liquidation amount of the Common Securities without the consent of the Holders of the Preferred Securities to: (i) cure any ambiguity; (ii) correct or supplement any provision in this Trust Agreement that may be defective or inconsistent with any other provision of this Trust Agreement; (iii) add to the covenants, restrictions or obligations of the Sponsor; or (iv) modify, eliminate or add to any provision of this Trust Agreement to such extent as may be necessary to ensure that the Trust will be classified for United States federal income tax purposes at all times as a grantor trust and will not be required to register as an "investment company" under the Investment Company Act (including without limitation to conform to any change in Rule 3a-5, Rule 3a-7 or any other applicable rule under the Investment Company Act or written change in interpretation or application thereof by any legislative body, court, government agency or regulatory authority) which amendment does not have a material adverse effect on the rights, preferences or privileges of the Holders of Securities; provided, however, that no such modification, elimination or addition referred to in clauses (i), (ii) or (iii) shall adversely affect in any material respect the powers, preferences or special rights of Holders of Preferred Securities. (i) No amendment or modification to this Trust Agreement that affects the rights, duties, liabilities or indemnities of the Delaware Trustee hereunder shall be permitted without the prior written consent of the Delaware Trustee. 42 SECTION 11.2. MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT. (a) Meetings of the Holders of any class of Securities may be called at any time by the Administrators (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Trust Agreement or the terms of the Securities. The Administrators shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 25% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Administrators one or more calls in a writing stating that the signing Holders of the Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of the Securities calling a meeting shall specify in writing the Certificates held by the Holders of the Securities exercising the right to call a meeting and only those Securities represented by such Certificates shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of the Securities: (i) notice of any such meeting shall be given to all the Holders of the Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of the Securities is permitted or required under this Trust Agreement, such vote, consent or approval may be given at a meeting of the Holders of the Securities. Any action that may be taken at a meeting of the Holders of the Securities may be taken without a meeting and without prior notice if a consent in writing setting forth the action so taken is signed by the Holders of the Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of the Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of the Securities entitled to vote who have not consented in writing. The Administrators may specify that any written ballot submitted to the Holders of the Securities for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Administrators; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of the Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; each meeting of the Holders of the Securities shall be conducted by the Administrators or by such other Person that the Administrators may designate; and 43 (iii) unless the Statutory Trust Act, this Trust Agreement, or the terms of the Securities otherwise provides, the Administrators, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of the Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote; provided, however, that each meeting shall be conducted in the United States (as that term is defined in Treasury Regulations section 301.7701-7). ARTICLE XII REPRESENTATIONS OF PROPERTY TRUSTEE SECTION 12.1. REPRESENTATIONS AND WARRANTIES OF PROPERTY TRUSTEE. The initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Trust Agreement, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee, that: (a) the Property Trustee is a New York banking corporation with trust powers, duly organized and validly existing under the laws of the State of New York with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Trust Agreement; (b) the execution, delivery and performance by the Property Trustee of this Trust Agreement have been duly authorized by all necessary corporate action on the part of the Property Trustee. This Trust Agreement has been duly executed and delivered by the Property Trustee, and it constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law); (c) the execution, delivery and performance of this Trust Agreement by the Property Trustee do not conflict with or constitute a breach of the charter or by-laws of the Property Trustee; and (d) no consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution, delivery or performance by the Property Trustee of this Trust Agreement. ARTICLE XIII MISCELLANEOUS SECTION 13.1. NOTICES. All notices provided for in this Trust Agreement shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied (which 44 telecopy shall be followed by notice delivered or mailed by first class mail) or mailed by first class mail, as follows: (a) if given to the Trust in care of the Administrators at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): BIC Statutory Trust II c/o Bancinsurance Corporation 250 East Broad Street, 10th Floor Columbus, Ohio 43215 Attention: John S. Sokol Telecopy: 614-228-5552 with a copy to the Property Trustee (b) if given to the Property Trustee, at the Property Trustee's mailing address set forth below (or such other address as the Property Trustee may give notice of to the Holders of the Securities): JPMorgan Chase Bank 600 Travis, Suite 1150 Houston, Texas 77002 Attention: Institutional Trust Services Telecopy: 713-577-5200 (c) if given to the Delaware Trustee, at the Delaware Trustee's mailing address set forth below (or such other address as the Delaware Trustee may give notice of to the Holders of the Securities): Chase Manhattan Bank USA, National Association c/o JPMorgan Chase Bank 500 Stanton Christiana Road Building 4 (3rd Floor) Newark, Delaware 19713 Attention: Corporate Trust Administration Telecopy No.: 302-552-6280 (d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice of to the Trust): Bancinsurance Corporation 250 East Broad Street, 10th Floor Columbus, Ohio 43215 Attention: John S. Sokol Telecopy: 614-228-5552 45 (e) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 13.2. GOVERNING LAW. This Trust Agreement and the rights of the parties hereunder shall be governed by and interpreted in accordance with the law of the State of Delaware and all rights and remedies shall be governed by such laws without regard to the principles of conflict of laws of the State of Delaware or any other jurisdiction that would call for the application of the law of any jurisdiction other than the State of Delaware; provided, however, that there shall not be applicable to the Trust, the Trustees or this Trust Agreement any provision of the laws (statutory or common) of the State of Delaware pertaining to trusts that relate to or regulate, in a manner inconsistent with the terms hereof (a) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (b) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (c) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (d) fees or other sums payable to trustees, officers, agents or employees of a trust, (e) the allocation of receipts and expenditures to income or principal, or (f) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding or investing trust assets. SECTION 13.3. INTENTION OF THE PARTIES. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Trust Agreement shall be interpreted to further this intention of the parties. SECTION 13.4. HEADINGS. Headings contained in this Trust Agreement are inserted for convenience of reference only and do not affect the interpretation of this Trust Agreement or any provision hereof. SECTION 13.5. SUCCESSORS AND ASSIGNS. Whenever in this Trust Agreement any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Trust Agreement by the Sponsor and the Property Trustee shall bind and inure to the benefit of their respective successors and assigns, whether or not so expressed. SECTION 13.6. PARTIAL ENFORCEABILITY. If any provision of this Trust Agreement, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Trust Agreement, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 13.7. COUNTERPARTS. This Trust Agreement may contain more than one counterpart of the signature page and this Trust Agreement may be executed by the affixing of 46 the signature of each of the Property Trustee, the Delaware Trustee and Administrators to any of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. Signatures appear on the following page 47 IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written. JPMORGAN CHASE BANK, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS PROPERTY TRUSTEE By: /s/Rebecca A. Newman ----------------------------------- Name: Rebecca A. Newman Title: Vice President CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION, AS DELAWARE TRUSTEE By: /s/John J. Cashin ----------------------------------- Name: John J. Cashin Title: Vice President BANCINSURANCE CORPORATION, AS SPONSOR By: /s/John Sokol ----------------------------------- Name: John Sokol Title: President /s/John Sokol --------------------------------------- John Sokol, as Administrator /s/ Si Sokol --------------------------------------- Si Sokol as, Administrator /s/Sally Cress --------------------------------------- Sally Cress, as Administrator ANNEX I TERMS OF SECURITIES Pursuant to Section 6.1 of the Amended and Restated Declaration of Trust, dated as of September 30, 2003 (as amended from time to time, the "Trust Agreement"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Trust Agreement): 1. Designation and Number. (a) 7,000 Floating Rate Preferred Securities of BIC Statutory Trust II (the "Trust"), with an aggregate stated liquidation amount with respect to the assets of the Trust of seven million dollars ($7,000,000) and a stated liquidation amount with respect to the assets of the Trust of $1,000.00 per Preferred Security, are hereby designated for the purposes of identification only as the "Preferred Securities". The Preferred Security Certificates evidencing the Preferred Securities shall be substantially in the form of Exhibit A-1 to the Trust Agreement, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. (b) 217 Floating Rate Common Securities of the Trust (the "Common Securities") with an aggregate stated liquidation amount with respect to the assets of the Trust of Two Hundred Seventeen Thousand Dollars ($217,000) and a stated liquidation amount of $1,000 per Common Security will be evidenced by Common Security Certificates substantially in the form of Exhibit A-2 to the Trust Agreement, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. Distributions. (a) Distributions will be payable on each Security for the period beginning on (and including) September 30, 2003 and ending on (but excluding) December 31, 2003 and for each successive period beginning on (and including) December 31 2003, and each succeeding Distribution Payment Date and ending on (but excluding) the next succeeding Distribution Payment Date (each, a "Distribution Period") at a variable rate per annum equal to the 3-Month LIBOR, determined as described below, plus 4.05% (the "Coupon Rate"), applied to the stated liquidation amount thereof, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarterly period will bear interest thereon compounded quarterly at the applicable Coupon Rate (to the extent permitted by law). A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds available therefor. In the event that any date on which a Distribution is payable on the Securities is not a Business Day, then payment of interest payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable. The amount of I-1 interest payable for any Distribution Period will be calculated by applying the Coupon Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. All percentages resulting from any calculations on the Preferred Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or ..09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)). (b) Distributions on the Securities will be cumulative, will accrue from the date of original issuance, and will be payable, subject to extension of distribution payment periods as described herein, quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2003 (each a "Distribution Payment Date") when, as and if available for payment. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures, so long as no Indenture Event of Default has occurred and is continuing, by deferring the payment of interest on the Debentures for up to 20 consecutive quarterly periods (each an "Extension Period") at any time and from time to time, subject to the conditions described below, although such interest would continue to accrue on the Debentures at the Coupon Rate compounded quarterly (to the extent permitted by law) during any Extension Period. No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date and provided further, however, during any such Extension Period, the Debenture Issuer and its Affiliates shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Debenture Issuer's or its Affiliates' capital stock (other than payments of dividends or distributions to the Debenture Issuer) or make any guarantee payments with respect to the foregoing, or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Debenture Issuer or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) and (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Debenture Issuer in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Debenture Issuer (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any reclassification, exchange or conversion of any class or series of the Debenture Issuer's capital stock (or any capital stock of a subsidiary of the Debenture Issuer) for any class or series of the Debenture Issuer's capital stock or of any class or series of the Debenture Issuer's indebtedness for any class or series of the Debenture Issuer's capital stock, (c) the purchase of fractional interests in shares of the Debenture Issuer's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, or pursuant to a merger, consolidation or other business combination, (d) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or I-2 other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Preferred Securities Guarantee). Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust's funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to and to the extent set forth in the Guarantee. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. The relevant record dates shall be 15 days before the relevant Distribution Payment Date. Distributions payable on any Securities that are not punctually paid on any Distribution Payment Date, as a result of the Debenture Issuer having failed to make a payment under the Debentures, as the case may be, when due (taking into account any Extension Period), will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such payment date. (d) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities. 3. Liquidation Distribution Upon Dissolution. In the event of the voluntary or involuntary dissolution of the Trust (each a "Liquidation") other than in connection with a redemption of the Debentures or as described in Section 7.1(a)(vii), the Holders of the Securities will be entitled to receive out of the assets of the Trust available for distribution to Holders of the Securities, after satisfaction of liabilities to creditors of the Trust (to the extent not satisfied by I-3 the Debenture Issuer), distributions equal to the lesser of (i) the aggregate of the stated liquidation amount of $1,000.00 per Security plus accrued and unpaid Distributions thereon to the date of payment, to the extent the Trust shall have funds available therefor, and (ii) the amount of assets of the Trust remaining available for distribution to Holders in liquidation of the Trust (such amount being, in either case, the "Liquidation Distribution"), unless in connection with such Liquidation, the Debentures in aggregate stated principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Coupon Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, and having the same record date as, such Securities, after paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with the Statutory Trust Act, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities. The Sponsor, as the Holder of all of the Common Securities, has the right at any time to dissolve the Trust (including, without limitation, upon the occurrence of a Special Event) and, after satisfaction of liabilities to creditors of the Trust, cause the Debentures to be distributed to the Holders of the Securities on a Pro Rata basis in accordance with the aggregate stated liquidation amount thereof. If a Liquidation of the Trust occurs as described in clause (i), (ii), (iii), (iv) or (v) in Section 7.1(a) of the Trust Agreement, the Trust shall be liquidated by the Property Trustee as expeditiously as it determines to be possible by distributing, after satisfaction of liabilities to creditors of the Trust, to the Holders of the Securities, the Debentures on a Pro Rata basis to the extent not satisfied by the Debenture Issuer, unless such distribution is determined by the Property Trustee not to be practical, in which event such Holders will be entitled to receive out of the assets of the Trust available for distribution to the Holders, after satisfaction of liabilities of creditors of the Trust to the extent not satisfied by the Debenture Issuer, an amount equal to the Liquidation Distribution. If, upon any such Liquidation the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on such Preferred Securities shall be paid to the Holders of the Trust Securities on a Pro Rata basis, except that if an Event of Default has occurred and is continuing, the Preferred Securities shall have a preference over the Common Securities with regard to such distributions. After the date for any distribution of the Debentures upon dissolution of the Trust (i) the Securities of the Trust will be deemed to be no longer outstanding, (ii) upon surrender of a Holder's Securities certificate, such Holder of the Securities will receive a certificate representing the Debentures to be delivered upon such distribution, and (iii) any certificates representing the Securities still outstanding will be deemed to represent undivided beneficial interests in such of the Debentures as have an aggregate principal amount equal to the aggregate stated liquidation amount with an interest rate identical to the Coupon Rate of, and bearing accrued and unpaid interest equal to accrued and unpaid distributions on, the Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissuance (and until such certificates are so surrendered, no payments of interest or principal shall be made to Holders of Securities in respect of any payments due and payable under the Debentures; I-4 provided, however that such failure to pay shall not be deemed to be an Event of Default and shall not entitle the Holder to the benefits of the Guarantee), and (iv) all rights of Holders of Securities under the Trust Agreement shall cease, except the right of such Holders to receive Debentures upon surrender of certificates representing such Securities. 4. Redemption and Distribution. (a) The Debentures will mature on September 30, 2033. The Debentures may be redeemed by the Debenture Issuer, in whole or in part at any time and from time to time on or after September 30, 2008, at the Optional Redemption Price. In addition, the Debentures may be redeemed by the Debenture Issuer at the Special Redemption Price, in whole but not in part, at any Distribution Payment Date, upon the occurrence and continuation of a Special Event within 120 days following the occurrence of such Special Event at the Special Redemption Price, upon not less than 45 nor more than 75 days' notice to holders of such Debentures so long as such Special Event is continuing. "3-Month LIBOR" means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Calculation Agent in the following order of priority: (1) On the second LIBOR Business Day (as defined below) prior to an Interest Payment Date (except with respect to the first interest payment period, such date shall be September 26, 2003) (each such day, a "LIBOR Determination Date"), LIBOR for any given security shall for the following interest payment period equal the rate, as obtained by the Calculation Agent from Bloomberg Financial Markets Commodities News, for 3- month Eurodollar deposits that appears on Dow Jones Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency Exchange Definitions), or such other page as may replace such Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date. (2) If, on any LIBOR Determination Date, such rate does not appear on Dow Jones Telerate Page 3750 or such other page as may replace such Page 3750, the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London interbank market for 3-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal such arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such quotations, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that leading banks in the City of New York selected by the Calculation Agent are quoting on the relevant LIBOR Determination Date for 3-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to the principal London offices of leading banks in the London interbank market; provided that, if the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be LIBOR as determined on the previous LIBOR Determination Date. I-5 (3) As used herein: "Reference Banks" means four major banks in the London interbank market selected by the Calculation Agent; and "LIBOR Business Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London. (b) The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law. "Investment Company Event" means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion, will be considered an Investment Company that is required to be registered under the Investment Company Act which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures. "Maturity Date" means September 30, 2033. "Optional Redemption Price" means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest on such Debentures to the Redemption Date. "Redemption Date" shall mean the date fixed for the redemption of Preferred Securities, which shall be on any March 31, June 30, September 30 or December 31, on or after September 30, 2008. "Special Event" means a Tax Event or an Investment Company Event. "Special Redemption Date" means a date on which a Special Event redemption occurs, which shall be on any March 31, June 30, September 30 or December 31 within 120 days following the occurrence of a Special Event. "Special Redemption Price" means (1) 107.5% of the principal amount of the Debentures being redeemed on a Special Redemption Date that occurs before September 30, 2008 and (ii) 100% of the principal amount of the Debentures being redeemed on a Special Redemption Date that occurs on September 30, 2008 or after, plus, in each case, accrued and unpaid interest on such Debentures to the Special Redemption Date. "Tax Event" means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action")) or judicial decision interpreting or applying such laws or regulations, regardless of I-6 whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Debenture Issuer or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Debenture Issuer on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Debenture Issuer, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. (a) Upon the repayment in full at maturity or redemption in whole or in part of the Debentures (other than following the distribution of the Debentures to the Holders of the Securities), the proceeds from such repayment or payment shall concurrently be applied to redeem Pro Rata at the applicable Optional Redemption Price or Special Redemption Price, as applicable, Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed; provided, however, that holders of such Securities shall be given not less than 30 nor more than 60 days' notice of such redemption (other than at the scheduled maturity of the Debentures). (b) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Preferred Securities will be redeemed Pro Rata and the Preferred Securities to be redeemed will be redeemed Pro Rata from each Holder of Preferred Securities. (c) The Trust may not redeem fewer than all the outstanding Preferred Securities unless all accrued and unpaid Distributions have been paid on all Preferred Securities for all quarterly Distribution periods terminating on or before the date of redemption. (d) Redemption or Distribution Procedures. (i) Notice of any redemption of, or notice of distribution of the Debentures in exchange for the Securities (a "Redemption/Distribution Notice") will be given by the Administrators on behalf of the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph 4(e)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of such Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of such Securities at the address of each such Holder appearing on the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. I-7 (ii) If the Securities are to be redeemed and the Trust gives a Redemption/ Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this paragraph 4 (which notice will be irrevocable), then, provided that the Property Trustee has a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will pay the relevant Optional Redemption Price or Special Redemption Price, as applicable, to the Holders of such Securities by check mailed to the address of each such Holder appearing on the books and records of the Trust on the Redemption Date. If a Redemption/Distribution Notice shall have been given and funds deposited as required then immediately prior to the close of business on the date of such deposit Distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the applicable Optional Redemption Price or Special Redemption Price specified in paragraph 4(a), but without interest on such Optional Redemption Price or Special Redemption Price. If any date fixed for redemption of Securities is not a Business Day, then payment of any such Optional Redemption Price or Special Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Optional Redemption Price or Special Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Trust or by the Debenture Issuer as guarantor pursuant to the Guarantee, Distributions on such Securities will continue to accrue at the Coupon Rate from the original Redemption Date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Optional Redemption Price or Special Redemption Price. In the event of any redemption of the Preferred Securities issued by the Trust in part, the Trust shall not be required to (i) issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before any selection for redemption of the Preferred Securities and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of the Preferred Securities to be so redeemed or (ii) register the transfer of or exchange any Preferred Securities so selected for redemption, in whole or in part, except for the unredeemed portion of any Preferred Securities being redeemed in part. (iii) Redemption/Distribution Notices shall be sent by the Administrators on behalf of the Trust to (A) in respect of the Preferred Securities, the Holders thereof and (B) in respect of the Common Securities, the Holder thereof. (iv) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. I-8 5. Voting Rights - Preferred Securities. (a) Except as provided under paragraphs 5(b) and 7 and as otherwise required by law and the Trust Agreement, the Holders of the Preferred Securities will have no voting rights. The Administrators are required to call a meeting of the Holders of the Preferred Securities if directed to do so by Holders of at least 25% in liquidation amount of the Preferred Securities. (b) Subject to the requirements of obtaining a tax opinion by the Property Trustee in certain circumstances set forth in the last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Preferred Securities, voting separately as a class, have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Trust Agreement, including the right to direct the Property Trustee, as holder of the Debentures, to (i) exercise the remedies available under the Indenture as the holder of the Debentures, (ii) waive any past default that is waivable under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable or (iv) consent on behalf of all the Holders of the Preferred Securities to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required; provided, however, that, where a consent or action under the Indenture would require the consent or act of the holders of greater than a simple majority in aggregate principal amount of Debentures (a "Super Majority") affected thereby, the Property Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Preferred Securities outstanding which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. If the Property Trustee fails to enforce its rights under the Debentures after the Holders of a Majority in liquidation amount of such Preferred Securities have so directed the Property Trustee, to the fullest extent permitted by law, a Holder of the Preferred Securities may institute a legal proceeding directly against the Debenture Issuer to enforce the Property Trustee's rights under the Debentures without first instituting any legal proceeding against the Property Trustee or any other person or entity. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date the interest or principal is payable (or in the case of redemption, the Redemption Date or the Special Redemption Date, as applicable), then a Holder of record of the Preferred Securities may directly institute a proceeding for enforcement of payment, to such Holder directly of the principal of or interest on the Debentures having an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Securities of such Holder on or after the respective due dates specified in the Debentures. The Property Trustee shall notify all Holders of the Preferred Securities of any default actually known to the Property Trustee with respect to the Debentures unless (x) such default has been cured prior to the giving of such notice or (y) the Property Trustee determines in good faith that the withholding of such notice is in the interest of the Holders of such Preferred Securities, except where the default relates to the payment of principal of or interest on any of the Debentures. Such notice shall state that such Indenture Event of Default also constitutes an Event of Default hereunder. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the Property Trustee shall not take any of the actions described in clauses (i), (ii) or (iii) above unless the Property Trustee has obtained an opinion of tax counsel I-9 to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes. In the event the consent of the Property Trustee, as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the Property Trustee shall request the direction of the Holders of the Securities with respect to such amendment modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of a Super Majority, the Property Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities outstanding which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The Property Trustee shall not take any such action in accordance with the directions of the Holders of the Securities unless the Property Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes. A waiver of an Indenture Event of Default will constitute a waiver of the corresponding Event of Default hereunder. Any required approval or direction of Holders of the Preferred Securities may be given at a separate meeting of Holders of the Preferred Securities convened for such purpose, at a meeting of all of the Holders of the Securities in the Trust or pursuant to written consent. The Property Trustee will cause a notice of any meeting at which Holders of the Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of the Preferred Securities. Each such notice will include a statement setting forth the following information (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Preferred Securities will be required for the Trust to redeem and cancel Preferred Securities or to distribute the Debentures in accordance with the Trust Agreement and the terms of the Securities. Notwithstanding that Holders of the Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not entitle the Holder thereof to vote or consent and shall, for purposes of such vote or consent, be treated as if such Preferred Securities were not outstanding. In no event will Holders of the Preferred Securities have the right to vote to appoint, remove or replace the Administrators, which voting rights are vested exclusively in the Sponsor as the Holder of all of the Common Securities of the Trust. Under certain circumstances as more fully described in the Trust Agreement, Holders of Preferred Securities have the right to vote to appoint, remove or replace the Trustees. I-10 6. Voting Rights - Common Securities. (a) Except as provided under paragraphs 6(b), 6(c) and 7 and as otherwise required by law and the Trust Agreement, the Common Securities will have no voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article IV of the Trust Agreement, to vote to appoint, remove or replace any Administrators. (c) Subject to Section 6.7 of the Trust Agreement and only after each Event of Default (if any) with respect to the Preferred Securities has been cured, waived, or otherwise eliminated and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Trust Agreement, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided, however, that, where a consent or action under the Indenture would require a Super Majority, the Property Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Common Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. Notwithstanding this paragraph 6(c), the Property Trustee shall not revoke any action previously authorized or approved by a vote or consent of the Holders of the Preferred Securities. Other than with respect to directing the time, method and place of conducting any proceeding for any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall not take any action described in (i), (ii) or (iii) above, unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. If the Property Trustee fails to enforce its rights under the Trust Agreement, to the fullest extent permitted by law, any Holder of the Common Securities may institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Trust Agreement, without first instituting a legal proceeding against the Property Trustee or any other Person. Any approval or direction of Holders of the Common Securities may be given at a separate meeting of Holders of the Common Securities convened for such purpose, at a meeting of all of the Holders of the Securities in the Trust or pursuant to written consent. The Administrators will cause a notice of any meeting at which Holders of the Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of the Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. I-11 No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Trust Agreement and the terms of the Securities. 7. Amendments to Trust Agreement and Indenture. (a) In addition to any requirements under Section 11.1 of the Trust Agreement, if any proposed amendment to the Trust Agreement provides for, or the Property Trustee, Sponsor or Administrators otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Trust Agreement or otherwise, or (ii) the Liquidation of the Trust, other than as described in Section 7.1 of the Trust Agreement, then the Holders of outstanding Securities, voting together as a single class, will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in liquidation amount of the Securities, affected thereby; provided, however, if any amendment or proposal referred to in clause (i) above would adversely affect only the Preferred Securities or only the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a Majority in liquidation amount of such class of Securities. (b) In the event the consent of the Property Trustee as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Debentures, the Property Trustee shall request the written direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification, or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require a Super Majority, the Property Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. (c) Notwithstanding the foregoing, no amendment or modification may be made to the Trust Agreement if such amendment or modification would (i) cause the Trust to be classified for purposes of United States federal income taxation as other than a grantor trust, (ii) reduce or otherwise adversely affect the powers, rights, duties or immunities of the Property Trustee or the Delaware Trustee or (iii) cause the Trust to be deemed an Investment Company which is required to be registered under the Investment Company Act. (d) Notwithstanding any provision of the Trust Agreement, the right of any Holder of the Preferred Securities to receive payment of distributions and other payments upon redemption or otherwise, on or after their respective due dates, or to institute a suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. For the protection and enforcement of the foregoing provision, each and every Holder of the Preferred Securities shall be entitled to such relief as can be given either at law or equity. I-12 8. Pro Rata. A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of the Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities then outstanding unless, in relation to a payment, an Event of Default has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Preferred Securities Pro Rata according to the aggregate liquidation amount of the Preferred Securities held by the relevant Holder relative to the aggregate liquidation amount of all Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Preferred Securities, to each Holder of the Common Securities Pro Rata according to the aggregate liquidation amount of the Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. 9. Ranking. The Preferred Securities rank pari passu with and payment thereon shall be made Pro Rata with the Common Securities except that, where an Event of Default has occurred and is continuing, the rights of Holders of the Common Securities to receive payment of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of the Holders of the Preferred Securities with the result that no payment of any Distribution on, or Optional Redemption Price (or Special Redemption Price) of, any Common Security, and no other payment on account of redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all outstanding Preferred Securities for all distribution periods terminating on or prior thereto, or in the case of payment of the Optional Redemption Price (or Special Redemption Price) the full amount of such Optional Redemption Price (or Special Redemption Price) on all outstanding Preferred Securities then called for redemption, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions on, or the Optional Redemption Price (or Special Redemption Price) of, the Preferred Securities then due and payable. 10. Acceptance of Guarantee and Indenture. Each Holder of the Preferred Securities and the Common Securities, by the acceptance of such Securities, agrees to the provisions of the Guarantee, including the subordination provisions therein and to the provisions of the Indenture. 11. No Preemptive Rights. The Holders of the Securities shall have no preemptive or similar rights to subscribe for any additional securities of the Trust. 12. Miscellaneous. These terms constitute a part of the Trust Agreement. The Sponsor will provide a copy of the Trust Agreement, the Guarantee, and the Indenture to a Holder without charge on written request to the Sponsor at its principal place of business. I-13 EXHIBIT A-1 FORM OF PREFERRED SECURITY CERTIFICATE [FORM OF FACE OF SECURITY] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS PREFERRED SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION `SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY A-1-1 INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION. THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE TRUST AGREEMENT TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. CERTIFICATE NUMBER ___ _____ PREFERRED SECURITIES __________, 2003 CERTIFICATE EVIDENCING FLOATING RATE PREFERRED SECURITIES OF BIC STATUTORY TRUST II (LIQUIDATION AMOUNT $1,000.00 PER PREFERRED SECURITY) BIC Statutory Trust II, a statutory trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that ________________ (the "Holder") is the registered owner of [$AMOUNT(#)] securities of the Trust representing undivided beneficial interests in the assets of the Trust, (liquidation amount $1,000.00 per capital security) (the "Preferred Securities"). A-1-2 Subject to the Trust Agreement (as defined below), the Preferred Securities are transferable on the books and records of the Trust in person or by a duly authorized attorney, upon surrender of this Certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities represented hereby are issued pursuant to, and shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of September 30, 2003, among John Sokol, Si Sokol and Sally Cress as Administrators, JPMorgan Chase Bank, as Property Trustee, Chase Manhattan Bank USA, National Association, as Delaware Trustee, Bancinsurance Corporation, as Sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Trust, including the designation of the terms of the Preferred Securities as set forth in Annex I to such amended and restated Trust Agreement as the same may be amended from time to time (the "Trust Agreement"). Capitalized terms used herein but not defined shall have the meaning given them in the Trust Agreement. The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the Trust Agreement, the Guarantee, and the Indenture to the Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this Security, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. By acceptance of this Security, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Preferred Securities as evidence of beneficial ownership in the Debentures. This Preferred Security is governed by, and construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws. Signatures appear on following page A-1-3 WITNESS WHEREOF, the Trust has duly executed this certificate. BIC STATUTORY TRUST II By: ----------------------------------- Name: Title: Administrator CERTIFICATE OF AUTHENTICATION This is one of the Preferred Securities referred to in the within-mentioned Trust Agreement. JPMORGAN CHASE BANK, AS THE PROPERTY TRUSTEE By: ----------------------------------- Authorized Signatory A-1-4 [FORM OF REVERSE OF SECURITY] Distributions on each Preferred Security will be payable for the period beginning on (and including) September 30, 2003 and ending on (but excluding) December 31, 2003 and for each successive period beginning on (and including) December 31, 2003, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each a "Distribution Period"), at a variable rate equal to 3-Month LIBOR, determined as described below, plus 4.05% (the "Coupon Rate"), applied to the stated liquidation amount of $1,000.00 per Preferred Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than a quarterly period will bear interest thereon compounded quarterly at the Distribution late (to the extent permitted by applicable law). The term "Distributions" as used herein includes payments of Interest and any principal on the Debentures held by the Property Trustee unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds available therefor. In the event that any date on which a Distribution is payable on this Preferred Security is not a Business Day, then a payment of the Distribution payable on such date will be made on the next succeeding day which is a Business Day (and without any Distribution or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. The amount of interest payable for any Distribution Period will be calculated by applying the Coupon Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. "3-Month LIBOR" means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Calculation Agent in the following order of priority: (1) On the second LIBOR Business Day (as defined below) prior to an Interest Payment Date (except with respect to the first interest payment period, such date shall be September 26, 2003) (each such day, a "LIBOR Determination Date"), LIBOR for any given security shall for the following interest payment period equal the rate, as obtained by the Calculation Agent from Bloomberg Financial Markets Commodities News, for 3- month Eurodollar deposits that appears on Dow Jones Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency Exchange Definitions), or such other page as may replace such Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date. (2) If, on any LIBOR Determination Date, such rate does not appear on Dow Jones Telerate Page 3750 or such other page as may replace such Page 3750, the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London interbank market for 3-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such A-1-5 quotations, LIBOR shall equal such arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such quotations, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that leading banks in the City of New York selected by the Calculation Agent are quoting on the relevant LIBOR Determination Date for 3-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to the principal London offices of leading banks in the London interbank market; provided that, if the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be LIBOR as determined on the previous LIBOR Determination Date. (3) As used herein: "Reference Banks" means four major banks in the London interbank market selected by the Calculation Agent; and "LIBOR Business Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London. The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law. All percentages resulting from any calculations on the Preferred Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)). Except as otherwise described below, Distributions on the Preferred Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2003. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures by extending the interest payment period for up to 20 consecutive quarterly periods (each an "Extension Period") on the Debentures, subject to the conditions described below, although such interest would continue to accrue on the Debentures at an annual rate equal to the Coupon Rate compounded quarterly to the extent permitted by law during any Extension Period. No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date. Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records A-1-6 of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust's funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to and to the extent set forth in the Guarantee. The Preferred Securities shall be redeemable as provided in the Trust Agreement. A-1-7 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security Certificate to: _______________________________________________________________________ (Insert assignee's social security or tax identification number)_______ _______________________________________________________________________ _______________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints _______________________________________________________________________ agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date:___________________________ Signature:______________________ (Sign exactly as your name appears on the other side of this Preferred Security Certificate) Signature Guarantee:(1) - ------------------ (1) Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Security registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-1-8 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION. THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION 8.1 OF THE TRUST AGREEMENT. CERTIFICATE NUMBER C-1 217 COMMON SECURITIES SEPTEMBER 30, 2003 CERTIFICATE EVIDENCING FLOATING RATE COMMON SECURITIES OF BIC STATUTORY TRUST II BIC Statutory Trust II, a statutory trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Bancinsurance Corporation (the "Holder") is the registered owner of common securities of the Trust representing undivided beneficial interests in the assets of the Trust (the "Common Securities"). The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued pursuant to, and shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of September 30, 2003, among John Sokol, Si Sokol and Sally Cress, as Administrators, JPMorgan Chase Bank, as Property Trustee, Chase Manhattan Bank USA, National Association, as Delaware Trustee, Bancinsurance Corporation, as Sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Trust including the designation of the terms of the Common Securities as set forth in Annex I to such amended and restated declaration, as the same may be amended from time to time (the "Trust Agreement"). Capitalized terms used herein but not defined shall have the meaning given them in the Trust Agreement. The Sponsor will provide a copy of the Trust Agreement, the Guarantee and the Indenture to the Holder without charge upon written request to the Sponsor at its principal place of business. As set forth in the Trust Agreement, where an Event of Default has occurred and is continuing, the rights of Holders of Common Securities to payment in respect of Distributions and payments upon Liquidation, redemption or otherwise are subordinated to the rights of payment of Holders of the Preferred Securities. Upon receipt of this Certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. A-2-1 By acceptance of this Certificate, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of undivided beneficial ownership in the Debentures. This Common Security is governed by, and construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws. A-2-2 IN WITNESS WHEREOF, the Trust has duly executed this certificate. BIC STATUTORY TRUST II By: ___________________________________ Name: Title: Administrator A-2-3 [FORM OF REVERSE OF SECURITY] Distributions payable on each Common Security will be identical in amount to the Distributions payable on each Preferred Security, beginning on (and including) September 30, 2003 and ending on (but excluding) December 31, 2003 and for each successive period beginning on (and including) December 31, 2003, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each a "Distribution Period"), at a variable rate equal to 3-Month LIBOR, determined as described below, plus 4.05% (the "Coupon Rate"); applied to the stated liquidation amount of $1,000.00 per Common Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarterly period will bear interest thereon compounded at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes payments of Interest and any principal on the Debentures held by the Property Trustee unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds available therefor. In the event that any date on which a Distribution is payable on this Common Security is not a Business Day, then a payment of the Distribution payable on such date will be made on the next succeeding day which is a Business Day (and without any Distribution or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. The amount of interest payable for any Distribution Period will be calculated by applying the Coupon Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. "3-Month LIBOR" means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Calculation Agent in the following order of priority: (1) On the second LIBOR Business Day (as defined below) prior to an Interest Payment Date (except with respect to the first interest payment period, such date shall be September 26, 2003) (each such day, a "LIBOR Determination Date"), LIBOR for any given security shall for the following interest payment period equal the rate, as obtained by the Calculation Agent from Bloomberg Financial Markets Commodities News, for 3- month Eurodollar deposits that appears on Dow Jones Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency Exchange Definitions), or such other page as may replace such Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date. (2) If, on any LIBOR Determination Date, such rate does not appear on Dow Jones Telerate Page 3750 or such other page as may replace such Page 3750, the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London interbank market for 3-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such A-2-4 quotations, LIBOR shall equal such arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such quotations, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that leading banks in the City of New York selected by the Calculation Agent are quoting on the relevant LIBOR Determination Date for 3-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to the principal London offices of leading banks in the London interbank market; provided that, if the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be LIBOR as determined on the previous LIBOR Determination Date. (3) As used herein: "Reference Banks" means four major banks in the London interbank market selected by the Calculation Agent; and "LIBOR Business Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London. The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law. All percentages resulting from any calculations on the Common Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)). Except as otherwise described below, Distributions on the Common Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2003. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures by extending the interest payment period for up to 20 consecutive quarterly periods (each an "Extension Period") on the Debentures, subject to the conditions described below, although such interest would continue to accrue on the Debentures at an annual rate equal to the Coupon Rate compounded quarterly to the extent permitted by law during any Extension Period. No Extension Period may end on a date other than an Interest Payment Date. At the end of any such Extension Period the Sponsor shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date. Prior to the termination of any Extension Period, the Sponsor may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Sponsor may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date A-2-5 immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust's funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The Common Securities shall be redeemable as provided in the Trust Agreement. A-2-6 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: _______________________________________________________________________ (Insert assignee's social security or tax identification number) _______________________________________________________________________ _______________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints _______________________________________________________________________ ______________________________________________________________ agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date:_________________________________________________________ Signature:____________________________________________________ (Sign exactly as your name appears on the other side of this Common Security Certificate) Signature:____________________________________________________ (Sign exactly as your name appears on the other side of this Common Security Certificate) Signature Guarantee:(2) - ------------------ (2) Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union, meeting the requirements of the Security registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-2-7 EXHIBIT B SPECIMEN OF INITIAL DEBENTURE (See Tab No. 14) B-1 EXHIBIT C PURCHASE AGREEMENT (See Tab No. 1) C-1 EXHIBIT D FORM OF TRANSFEROR CERTIFICATE TO BE EXECUTED BY QIBS __________, [ ] Bancinsurance Corporation BIC Statutory Trust II 250 East Broad Street, 10th Floor Columbus, Ohio 43215 Re: Purchase of $________ stated liquidation amount of Floating Rate Preferred Securities (the "Preferred Securities") of BIC Statutory Trust II Reference is hereby made to the Amended and Restated Declaration of Trust of BIC Statutory Trust II, dated as of September 30, 2003 (the "Trust Agreement"), among John Sokol, Si Sokol, Sally Cress, as Administrators, Chase Manhattan Bank USA, National Association, as Delaware Trustee, JPMorgan Chase Bank, as Property Trustee, Bancinsurance Corporation as Sponsor, and the holders from time to time of undivided beneficial interests in the assets of BIC Statutory Trust II. Capitalized terms used but not defined herein shall have the meanings given them in the Trust Agreement. This letter relates to $________________________ aggregate liquidation amount of Preferred Securities which are held in the name of [name of transferor] (the "Transferor"). In accordance with Article VI of the Trust Agreement, the Transferor hereby certifies that such Preferred Securities are being transferred in accordance with (i) the transfer restrictions set forth in the Preferred Securities and (ii) Rule 144A under the Securities Act ("Rule 144A"), to a transferee that the Transferor reasonably believes is purchasing the Preferred Securities for its own account or an account with respect to which the transferee exercises sole investment discretion and the transferee and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with applicable securities laws of any state of the United States or any other jurisdiction. You are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. (Name of Transferor) By: ___________________________________ Name: Title: E-1 Date:________________________ EXHIBIT E FORM OF TRANSFEREE CERTIFICATE TO BE EXECUTED BY TRANSFEREES OTHER THAN QIBS __________, [ ] Bancinsurance Corporation BIC Statutory Trust II 250 East Broad Street, 10th Floor Columbus, Ohio 43215 Re: Purchase of $____________ stated liquidation amount of Floating Rate Preferred Securities (the "Preferred Securities") of BIC Statutory Trust II Ladies and Gentlemen: In connection with our purchase of the Preferred Securities we confirm that: 1. We understand that the Floating Rate Preferred Securities (the "Preferred Securities") of BIC Statutory Trust II (the "Trust") (including the guarantee agreement (the "Guarantee") of Bancinsurance Corporation (the "Company") executed in connection therewith) and the Floating Rate Junior Subordinated Debentures due 2033 of the Company (the "Subordinated Debentures") (the entire amount of the Trust's outstanding Preferred Securities, the Guarantee and the Subordinated Debentures together being referred to herein as the "Offered Securities"), have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing the Offered Securities that, if we decide to offer, sell or otherwise transfer any such Offered Securities, (i) such offer, sale or transfer will be made only (a) to the Trust, (b) to a person we reasonably believe is a "qualified institutional buyer" (a "QIB") (as defined in Rule 144 under the Securities Act) in a transaction meeting the requirements of Rule 144A, (c) to an institutional "accredited investor" within the meaning of subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the Securities Act that is acquiring Offered Securities for its own account, or for the account of such an "accredited investor," for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act, (d) pursuant to an effective registration statement under the Securities Act, or (e) pursuant to an exemption from the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction and, in the case of (c) or (e), subject to the right of the Trust and the depositor to require an opinion of counsel and other information satisfactory to each of them. The foregoing restrictions on resale will not apply subsequent to the date on which, in the written opinion of counsel, the Preferred Securities are not "restricted securities" within the meaning of Rule 144 under the Securities Act. If any resale or other transfer of the Offered Securities is proposed to be made pursuant to clause (c) or (e) above, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Property Trustee as Registrar, which shall provide as applicable, among other things, that the transferee is an "accredited investor" within the meaning of subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the Securities Act that is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. We acknowledge on our behalf and on behalf of any investor account for which we are purchasing Securities that the Trust and the Company reserve the right prior to any offer, sale or other transfer pursuant to clause (c) or (e) to require the delivery of any opinion of counsel, certifications and/or other information satisfactory to the Trust and the Company. We understand that the certificates for any Offered Security that we receive will bear a legend substantially to the effect of the foregoing. 2. We are an "accredited investor" within the meaning of subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the Securities Act purchasing for our own account or for the account of such an "accredited investor," and we are acquiring the Offered Securities for investment purposes and not with view to, or for offer or sale in connection with, any distribution in violation of the Securities Act, and we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Offered Securities, and we and any account for which we are acting are each able to bear the economic risks of our or its investment. 3. We are acquiring the Offered Securities purchased by us for our own account (or for one or more accounts as to each of which we exercise sole investment discretion and have authority to make, and do make, the statements contained in this letter) and not with a view to any distribution of the Offered Securities, subject, nevertheless, to the understanding that the disposition of our property will at all times be and remain within our control. 4. In the event that we purchase any Preferred Securities or any Subordinated Debentures, we will acquire such Preferred Securities having an aggregate stated liquidation amount of not less than $100,000 or such Subordinated Debentures having an aggregate principal amount not less than $100,000, for our own account and for each separate account for which we are acting. 5. We acknowledge that we are not a fiduciary of (i) an employee benefit, individual retirement account or other plan or arrangement subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") (each a "Plan"); or (ii) an entity whose underlying assets include "plan assets" by reason of any Plan's investment in the entity, and are not purchasing any of the Offered Securities on behalf of or with "plan assets" by reason of any Plan's investment in the entity. 6. We acknowledge that the Trust and the Company and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations, warranties and agreements and agree that if any of the acknowledgments, representations, warranties and agreements deemed to have been made by our purchase of any of the Offered Securities are no longer accurate, we shall promptly notify the Company. If we are acquiring any Offered Securities as a fiduciary or agent for one or more investor accounts, we represent that we have sole discretion with respect to each such investor account and that we have full power to make the foregoing acknowledgments, representations and agreement on behalf of each such investor account. _______________________________________ (Name of Purchaser) By: ___________________________________ Date: _________________________________ Upon transfer, the Preferred Securities (having a stated liquidation amount of $_____________) would be registered in the name of the new beneficial owner as follows. Name: ___________________________________ Address: ________________________________ Taxpayer ID Number: _____________________ EX-4.D 6 l03799aexv4wd.txt EXHIBIT 4(D) EXHIBIT 4(d) ================================================================================ GUARANTEE AGREEMENT BY AND BETWEEN BANCINSURANCE CORPORATION AND JPMORGAN CHASE BANK, AS GUARANTEE TRUSTEE DATED AS OF SEPTEMBER 30, 2003 ================================================================================ GUARANTEE AGREEMENT This GUARANTEE AGREEMENT (this "Guarantee"), dated as of September 30, 2003, is executed and delivered by Bancinsurance Corporation, an Ohio corporation (the "Guarantor"), and JPMorgan Chase Bank, a banking corporation, organized under the laws of the State of New York, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of BIC Statutory Trust II, a Delaware statutory trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Trust Agreement"), dated as of the date hereof among JPMorgan Chase Bank, not in its individual capacity but solely as Property Trustee, the Administrators of the Issuer named therein, the Guarantor, as Sponsor, and the Holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof those undivided beneficial interests, having an aggregate liquidation amount of $7,000,000 (the "Preferred Securities"); and WHEREAS, as incentive for the Holders to purchase the Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee, to pay to the Holders of Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the purchase by each Holder of the Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 DEFINITIONS AND INTERPRETATION. In this Guarantee, unless the context otherwise requires: (a) capitalized terms used in this Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Guarantee has the same meaning throughout; (c) all references to "the Guarantee" or "this Guarantee" are to this Guarantee as modified, supplemented or amended from time to time; (d) all references in this Guarantee to "Articles" or "Sections" are to Articles or Sections of this Guarantee, unless otherwise specified; 2 (e) terms defined in the Trust Agreement as at the date of execution of this Guarantee have the same meanings when used in this Guarantee, unless otherwise defined in this Guarantee or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "Beneficiaries" means any Person to whom the Issuer is or hereafter becomes indebted or liable. "Preferred Securities" has the meaning set forth in the recitals to this Guarantee. "Common Securities" means the common securities issued by the Issuer to the Guarantor pursuant to the Trust Agreement. "Corporate Trust Office" means the office of the Guarantee Trustee at which the corporate trust business of the Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Guarantee is located at 600 Travis, Suite 1150, Houston, Texas 77002, attention: Institutional Trust Services. "Covered Person" means any Holder of Preferred Securities. "Debentures" means the debt securities of the Guarantor designated the Floating Rate Junior Subordinated Deferrable Interest Debentures due 2033 held by the Property Trustee (as defined in the Trust Agreement) of the Issuer. "Trust Agreement Event of Default" means an "Event of Default" as defined in the Trust Agreement. "Event of Default" has the meaning set forth in Section 2.4(a). "Fee Letter" means the fee letter, dated as of the date hereof, between Bancinsurance Corporation and JPMorgan Chase Bank, in its capacity as trustee under various agreements, including this Guarantee Agreement. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Trust Agreement) which are required to be paid on such Preferred Securities to the extent the Issuer shall have funds available therefor, (ii) the Optional Redemption Price to the extent the Issuer has funds available therefor, with respect to any Preferred Securities called for redemption by the Issuer, (iii) the Special Redemption Price to the extent the Issuer has funds available therefor, with respect to Preferred Securities redeemed upon the occurrence of a Special Event, and (iv) upon a voluntary or involuntary liquidation, dissolution, winding-up or termination of the Issuer (other than in connection with the 3 distribution of Debentures to the Holders of the Preferred Securities in exchange therefor as provided in the Trust Agreement), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Preferred Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). "Guarantee Trustee" means JPMorgan Chase Bank, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee and thereafter means each such Successor Guarantee Trustee. "Guarantor" means Bancinsurance Corporation and each of its successors and assigns. "Holder" means any holder, as registered on the books and records of the Issuer, of any Preferred Securities; provided, however, that, in determining whether the Holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Guarantee Trustee. "Indenture" means the Indenture dated as of the date hereof between the Guarantor and JPMorgan Chase Bank, not in its individual capacity but solely as trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued to the institutional trustee of the Issuer. "Issuer" has the meaning set forth in the opening paragraph to this Guarantee. "Liquidation Distribution" has the meaning set forth in the definition of "Guarantee Payments" herein. "Majority in liquidation amount of the Preferred Securities" means Holder(s) of outstanding Preferred Securities, voting together as a class, but separately from the holders of Common Securities, of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Preferred Securities then outstanding. "Obligations" means any costs, expenses or liabilities (but not including liabilities related to taxes) of the Issuer other than obligations of the Issuer to pay to holders of any Trust Securities the amounts due such holders pursuant to the terms of the Trust Securities. 4 "Officer's Certificate" means, with respect to any Person, a certificate signed by one authorized officer of such Person. Any Officer's Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee shall include: (a) a statement that the officer signing the Officer's Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by the officer in rendering the Officer's Certificate; (c) a statement that the officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of the officer, such condition or covenant has been complied with. "Optional Redemption Price" has the meaning set forth in the Indenture. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Purchase Agreement" means that certain Purchase Agreement dated September 30, 2003, among the Company, the Trust, and Dekania CDO I, Ltd., pursuant to which Dekania CDO I, Ltd. has purchased $7,000,000 of the Preferred Securities. "Responsible Officer" means, with respect to the Guarantee Trustee, the officer in the Institutional Trust Services Department of the Guarantee Trustee having direct responsibility for the administration of this Guarantee Agreement. "Special Event" has the meaning set forth in the Indenture. "Special Redemption Price" has the meaning set forth in the Indenture. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 3.1. "Trust Securities" means the Common Securities and the Preferred Securities. ARTICLE II POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE SECTION 2.1 POWERS AND DUTIES OF THE GUARANTEE TRUSTEE. 5 (a) This Guarantee shall be held by the Guarantee Trustee for the benefit of the Holders of the Preferred Securities, and the Guarantee Trustee shall not transfer this Guarantee to any Person except a Holder of Preferred Securities exercising his or her rights pursuant to Section 4.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If an Event of Default actually known to a Responsible Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders of the Preferred Securities. (c) The Guarantee Trustee, before the occurrence of any Event of Default and after curing all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee, and no implied covenants shall be read into this Guarantee against the Guarantee Trustee. In case an Event of Default has occurred (that has not been waived pursuant to Section 2.4) and is actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Guarantee shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee, and no implied covenants or obligations shall be read into this Guarantee against the Guarantee Trustee; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee; 6 (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that such Responsible Officer of the Guarantee Trustee or the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the written direction of the Holders of not less than a Majority in liquidation amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or relating to the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; and (iv) no provision of this Guarantee shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds is not reasonably assured to it under the terms of this Guarantee or security and indemnity, reasonably satisfactory to the Guarantee Trustee, against such risk or liability is not reasonably assured to it. SECTION 2.2 CERTAIN RIGHTS OF GUARANTEE TRUSTEE. (a) Subject to the provisions of Section 2.1: (i) The Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Guarantee shall be sufficiently evidenced by an Officer's Certificate. (iii) Whenever, in the administration of this Guarantee, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officer's Certificate of the Guarantor which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any re-recording, refiling or re-registration thereof). 7 (v) The Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee from any court of competent jurisdiction. (vi) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such security and indemnity, reasonably satisfactory to the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided, however, that nothing contained in this Section 2.2(a)(vi) shall relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee; provided, further, that nothing contained in this Section 2.2(a)(vi) shall prevent the Guarantee Trustee from exercising its rights under Section 3.2. (vii) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders of the Preferred Securities, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Guarantee, both of which shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking such action. (x) Whenever in the administration of this Guarantee the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee 8 (i) may request instructions from the Holders of a Majority in liquidation amount of the Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions. (xi) The Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Guarantee. (b) No provision of this Guarantee shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty. SECTION 2.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee. SECTION 2.4 EVENTS OF DEFAULT; WAIVER. (a) An Event of Default under this Guarantee will occur upon the failure of the Guarantor to perform any of its payment or other obligations hereunder. (b) The Holders of a Majority in liquidation amount of the Preferred Securities may, voting or consenting as a class, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and shall be deemed to have been cured, for every purpose of this Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.5 EVENTS OF DEFAULT; NOTICE. (a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Preferred Securities and the Guarantor, notices of all Events of Default actually known to a Responsible Officer of the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, however, that the Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Preferred Securities. 9 (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice from the Guarantor or a Holder of the Preferred Securities (except in the case of a payment default), or a Responsible Officer of the Guarantee Trustee charged with the administration of this Guarantee shall have obtained actual knowledge thereof. ARTICLE III GUARANTEE TRUSTEE SECTION 3.1 GUARANTEE TRUSTEE; ELIGIBILITY. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor, and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or Person authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least U.S. $50 million ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 3.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 3.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 3.2(c). (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee shall either eliminate such interest or resign to the extent and in the manner provided by, and subject to this Guarantee. SECTION 3.2 APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE TRUSTEE. (a) Subject to Section 3.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default. (b) The Guarantee Trustee shall not be removed in accordance with Section 3.2(a) until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. 10 (c) The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by an instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 3.2 within 30 days after delivery of an instrument of removal or resignation, the Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. (e) No Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Guarantee Trustee. (f) Upon termination of this Guarantee or removal or resignation of the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay to the Guarantee Trustee all amounts owing to the Guarantee Trustee under Sections 7.2 and 7.3 accrued to the date of such termination, removal or resignation. ARTICLE IV GUARANTEE SECTION 4.1 GUARANTEE. (a) The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense (except the defense of payment by the Issuer), right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. (b) The Guarantor hereby also agrees to assume any and all Obligations of the Issuer and in the event any such Obligation is not so assumed, subject to the terms and conditions hereof, the Guarantor hereby irrevocably and unconditionally guarantees to each Beneficiary the full payment, when and as due, of any and all Obligations to such Beneficiaries. This Guarantee is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof. SECTION 4.2 WAIVER OF NOTICE AND DEMAND. 11 The Guarantor hereby waives notice of acceptance of this Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 4.3 OBLIGATIONS NOT AFFECTED. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Optional Redemption Price, Special Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions, Optional Redemption Price, Special Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 4.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. 12 SECTION 4.4 RIGHTS OF HOLDERS. (a) The Holders of a Majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; provided, however, that (subject to Section 2.1) the Guarantee Trustee shall have the right to decline to follow any such direction if the Guarantee Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if the Guarantee Trustee in good faith by its board of directors or trustees, executive committees or a trust committee of directors or trustees and/or Responsible Officers shall determine that the action or proceedings so directed would involve the Guarantee Trustee in personal liability. (b) Any Holder of Preferred Securities may institute a legal proceeding directly against the Guarantor to enforce the Guarantee Trustee's rights under this Guarantee, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person. The Guarantor waives any right or remedy to require that any such action be brought first against the Issuer, the Guarantee Trustee or any other Person before so proceeding directly against the Guarantor. SECTION 4.5 GUARANTEE OF PAYMENT. This Guarantee creates a guarantee of payment and not of collection. SECTION 4.6 SUBROGATION. The Guarantor shall be subrogated to all (if any) rights of the Holders of Preferred Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if, after giving effect to any such payment, any amounts are due and unpaid under this Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 4.7 INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 4.3 hereof. SECTION 4.8 ENFORCEMENT BY A BENEFICIARY. 13 A Beneficiary may enforce the obligations of the Guarantor contained in Section 4.1(b) directly against the Guarantor, and the Guarantor waives any right or remedy to require that any action be brought against the Issuer or any other person or entity before proceeding against the Guarantor. The Guarantor shall be subrogated to all rights (if any) of any Beneficiary against the Issuer in respect of any amounts paid to the Beneficiaries by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if at the time of any such payment, and after giving effect to such payment, any amounts are due and unpaid under this Guarantee. ARTICLE V LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 5.1 LIMITATION OF TRANSACTIONS. So long as any Preferred Securities remain outstanding, if (a) there shall have occurred and be continuing an Event of Default or a Trust Agreement Event of Default or (b) the Guarantor shall have selected an Extension Period as provided in the Trust Agreement and such period, or any extension thereof, shall have commenced and be continuing, then the Guarantor shall not and shall not permit any Affiliate to (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Guarantor's or such Affiliate's capital stock (other than payments of dividends or distributions to the Guarantor) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Guarantor or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (i) repurchases, redemptions or other acquisitions of shares of capital stock of the Guarantor in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Guarantor (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the occurrence of the Event of Default, Trust Agreement Event of Default or Extension Period, as applicable, (ii) as a result of any reclassification, exchange or conversion of any class or series of the Guarantor's capital stock (or any capital stock of a subsidiary of the Guarantor) for any class or series of the Guarantor's capital stock or of any class or series of the Guarantor's indebtedness for any class or series of the Guarantor's capital stock, (iii) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, or pursuant to a merger, consolidation or other business combination, (iv) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights 14 pursuant thereto, (v) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (vi) payments under this Guarantee). SECTION 5.2 RANKING. This Guarantee will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined in the Indenture) of the Guarantor. By their acceptance thereof, each Holder of Preferred Securities agrees to the foregoing provisions of this Guarantee and the other terms set forth herein. The right of the Guarantor to participate in any distribution of assets of any of its subsidiaries upon any such subsidiary's liquidation or reorganization or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent the Guarantor may itself be recognized as a creditor of that subsidiary. Accordingly, the Guarantor's obligations under this Guarantee will be effectively subordinated to all existing and future liabilities of the Guarantor's subsidiaries, and claimants should look only to the assets of the Guarantor for payments hereunder. This Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Guarantor, including Senior Indebtedness of the Guarantor, under any indenture that the Guarantor may enter into in the future or otherwise. ARTICLE VI TERMINATION SECTION 6.1 TERMINATION. This Guarantee shall terminate as to the Preferred Securities upon the earliest to occur of (i) full payment of the Optional Redemption Price or Special Redemption Price of all Preferred Securities then outstanding, (ii) the distribution of all of the Debentures to the Holders of all of the Preferred Securities or (iii) full payment of the amounts payable in accordance with the Trust Agreement upon dissolution of the Issuer. This Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Preferred Securities must restore payment of any sums paid under the Preferred Securities or under this Guarantee. ARTICLE VII INDEMNIFICATION SECTION 7.1 EXCULPATION. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or 15 claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Issuer or the Guarantor and upon such information, opinions, reports or statements presented to the Issuer or the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who, if selected by such Indemnified Person, has been selected with reasonable care by such Indemnified Person, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Preferred Securities might properly be paid. SECTION 7.2 INDEMNIFICATION. (a) The Guarantor agrees to indemnify and hold harmless each Indemnified Person from and against any loss, damage, liability, tax (other than income, franchise or other taxes imposed on amounts paid pursuant to Section 7.3), penalty, expense or claim of any kind or nature whatsoever incurred without negligence, bad faith or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this Guarantee, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Guarantee Trustee will not claim or exact any lien or charge on any Guarantee Payments as a result of any amount due to it under this Guarantee. This indemnity shall survive the termination of this Guarantee or the resignation or removal of the Guarantee Trustee. (b) Promptly after receipt by an Indemnified Person under this Section 7.2 of notice of the commencement of any action, such Indemnified Person will, if a claim in respect thereof is to be made against the Guarantor under this Section 7.2, notify the Guarantor in writing of the commencement thereof; but the failure so to notify the Guarantor (i) will not relieve the Guarantor from liability under paragraph (a) above unless and to the extent that the Guarantor did not otherwise learn of such action and such failure results in the forfeiture by the Guarantor of substantial rights and defenses and (ii) will not, in any event, relieve the Guarantor from any obligations to any Indemnified Person other than the indemnification obligation provided in paragraph (a) above. The Guarantor shall be entitled to appoint counsel of the Guarantor's choice at the Guarantor's expense to represent the Indemnified Person in any action for which indemnification is sought (in which case the Guarantor shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person or Persons except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the Indemnified Person. Notwithstanding the Guarantor's 16 election to appoint counsel to represent the Guarantor in an action, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Guarantor shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the Guarantor to represent the Indemnified Person would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the Indemnified Person and the Guarantor and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it and/or other Indemnified Person(s) which are different from or additional to those available to the Guarantor, (iii) the Guarantor shall not have employed counsel satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action or (iv) the Guarantor shall authorize the Indemnified Person to employ separate counsel at the expense of the Guarantor. The Guarantor will not, without the prior written consent of the Indemnified Persons, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Persons are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Person from all liability arising out of such claim, action, suit or proceeding. (c) In no event shall the Guarantee Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its reasonable control, including, but not limited to, acts of God, flood, war (declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Guarantee. SECTION 7.3 COMPENSATION; REIMBURSEMENT OF EXPENSES. The Guarantor agrees: (a) subject to the Fee Letter, to pay to the Guarantee Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree to from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (b) except as otherwise expressly provided herein and subject to the Fee Agreement, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by it in accordance with any provision of this Guarantee (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct. The provisions of this Section 7.3 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee. 17 ARTICLE VIII MISCELLANEOUS SECTION 8.1 SUCCESSORS AND ASSIGNS. All guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. Except in connection with any merger or consolidation of the Guarantor with or into another entity or any sale, transfer or lease of the Guarantor's assets to another entity, in each case, to the extent permitted under the Indenture, the Guarantor may not assign its rights or delegate its obligations under this Guarantee without the prior approval of the Holders of at least a Majority in liquidation amount of the Preferred Securities. SECTION 8.2 AMENDMENTS. Except with respect to any changes that do not adversely affect the rights of Holders of the Preferred Securities in any material respect (in which case no consent of Holders will be required), this Guarantee may be amended only with the prior approval of the Holders of not less than a Majority in liquidation amount of the Preferred Securities and the Guarantor. The provisions of the Trust Agreement with respect to amendments thereof apply to the giving of such approval. SECTION 8.3 NOTICES. All notices provided for in this Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders of the Preferred Securities and the Guarantor): JPMorgan Chase Bank 600 Travis, Suite 1150 Houston, Texas 77002 Attention: Institutional Trust Services Facsimile: 713-577-5200 (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Preferred Securities and to the Guarantee Trustee): Bancinsurance Corporation 250 East Broad Street, 10th Floor Columbus, Ohio 43215 18 Attention: John S. Sokol Telecopy: 614-228-5552 (c) If given to any Holder of the Preferred Securities, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 8.4 BENEFIT. This Guarantee is solely for the benefit of the Beneficiaries and, subject to Section 2.1(a), is not separately transferable from the Preferred Securities. SECTION 8.5 GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). SECTION 8.6 COUNTERPARTS. This Guarantee may be executed in one or more counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same instrument. SECTION 8.7 SEPARABILITY. In case one or more of the provisions contained in this Guarantee shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Guarantee, but this Guarantee shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Signatures appear on the following page 19 THIS GUARANTEE is executed as of the day and year first above written. BANCINSURANCE CORPORATION, AS GUARANTOR By: /s/John Sokol ----------------------------------- Name: John Sokol Title: President JPMORGAN CHASE BANK, AS GUARANTEE TRUSTEE By: /s/Rebecca A. Newman ---------------------------------- Name: Rebecca A. Newman Title: Vice President EX-31.1 7 l03799aexv31w1.txt EXHIBIT 31.1 EXHIBIT 31.1 SECTION 302 CERTIFICATION I, Si Sokol, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Bancinsurance Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules l3a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2003 /s/ Si Sokol --------------------------------------- Si Sokol Chairman and Chief Executive Officer (Principal Executive Officer) EX-31.2 8 l03799aexv31w2.txt EXHIBIT 31.2 EXHIBIT 31.2 SECTION 302 CERTIFICATION I, Sally Cress, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Bancinsurance Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules l3a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2003 /s/ Sally J. Cress --------------------------------------- Sally J. Cress Treasurer and Secretary (Principal Financial and Accounting Officer) EX-32.1 9 l03799aexv32w1.txt EXHIBIT 32.1 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Bancinsurance Corporation (the "Company") on Form 10-Q for the period ending September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Si Sokol, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Si Sokol Si Sokol Chief Executive Officer November 13, 2003 EX-32.2 10 l03799aexv32w2.txt EXHIBIT 32.2 EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Bancinsurance Corporation (the "Company") on Form 10-Q for the period ending September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Sally Cress, Treasurer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Sally J. Cress Sally J. Cress Treasurer and Principal Financial Officer November 13, 2003 -----END PRIVACY-ENHANCED MESSAGE-----